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Nexon, Smilegate's reliance on Tencent raising eyebrows

Seen is an image of Nexon's new mobile game
Seen is an image of Nexon's new mobile game "Dungeon and Fighter." The mobile game will be released in China on Aug. 12 via Chinese publisher Tencent. / Courtesy of Nexon

By Baek Byung-yeul

Nexon, Smilegate and other Korean game companies' woes are deepening as their reliance on Chinese game company Tencent is growing, putting local game firms under control of the world's largest game developer and publisher and inviting fallout on the industry, analysts said Monday.

Korean game companies have been selling their products in China indirectly through Chinese game companies due to the Chinese ban on overseas companies selling titles directly in China, the largest game market in the world.

In China, game companies are required to obtain licenses from the government for new games. However, Korean game companies have been blocked from exporting their products to the mainland since March 2017 when Beijing stopped issuing licenses as part of a retaliation against Korea's deployment of a U.S. THAAD missile defense system.

Given there is no suitable alternative other than selling their games through the Chinese publisher, concerns are raising against Tencent's growing influence here, as the company can weaken competitiveness of the local game industry.

"Tencent is increasingly growing its presence in the Korean game market. The move could damage the local game industry because there could be serious issues such as labor restructuring," said Hwang Sung-ik, president of the Korea Mobile Game Association. "Korean game companies may be pressured to import more Chinese games Tencent is developing. This may make local firms restructure their workforce, which would hurt local game producers."

Currently Nexon and Smilegate are distributing their flagship online games "Dungeon and Fighter" and "Crossfire" in China via Tencent. The Chinese company is also distributing an online shooting game "Game for Peace," a Chinese version of Krafton's popular online game "PlayerUnknown's Battlegrounds."

These games are the main sources of income for the three companies. Tencent will also take a distributor role of Nexon's mobile version of "Dungeon and Fighter," which will be launched there on Aug. 12.

Acquiring shares of local game companies is another way for the Chinese game giant to expand its presence in the Korean games market.

Tencent currently holds 17.55 percent stake in Netmarble, one of the major game firms here, 13.2 percent stake in Krafton and 5.6 percent in KakaoGames. It also holds 6.49 percent stake in Kakao, Korea's largest messenger app operator, through its subsidiary firm MAXIMO PTE. The company was also mentioned as a potential buyer of Nexon when the latter was up for sale in the early 2019.


Seen is an image of Nexon's new mobile game
Seen is an image of Nexon's new mobile game "Dungeon and Fighter." The mobile game will be released in China on Aug. 12 via Chinese publisher Tencent. / Courtesy of Nexon

By Baek Byung-yeul

Nexon, Smilegate and other Korean game companies' woes are deepening as their reliance on Chinese game company Tencent is growing, putting local game firms under control of the world's largest game developer and publisher and inviting fallout on the industry, analysts said Monday.

Korean game companies have been selling their products in China indirectly through Chinese game companies due to the Chinese ban on overseas companies selling titles directly in China, the largest game market in the world.

In China, game companies are required to obtain licenses from the government for new games. However, Korean game companies have been blocked from exporting their products to the mainland since March 2017 when Beijing stopped issuing licenses as part of a retaliation against Korea's deployment of a U.S. THAAD missile defense system.

Given there is no suitable alternative other than selling their games through the Chinese publisher, concerns are raising against Tencent's growing influence here, as the company can weaken competitiveness of the local game industry.

"Tencent is increasingly growing its presence in the Korean game market. The move could damage the local game industry because there could be serious issues such as labor restructuring," said Hwang Sung-ik, president of the Korea Mobile Game Association. "Korean game companies may be pressured to import more Chinese games Tencent is developing. This may make local firms restructure their workforce, which would hurt local game producers."

Currently Nexon and Smilegate are distributing their flagship online games "Dungeon and Fighter" and "Crossfire" in China via Tencent. The Chinese company is also distributing an online shooting game "Game for Peace," a Chinese version of Krafton's popular online game "PlayerUnknown's Battlegrounds."

These games are the main sources of income for the three companies. Tencent will also take a distributor role of Nexon's mobile version of "Dungeon and Fighter," which will be launched there on Aug. 12.

Acquiring shares of local game companies is another way for the Chinese game giant to expand its presence in the Korean games market.

Tencent currently holds 17.55 percent stake in Netmarble, one of the major game firms here, 13.2 percent stake in Krafton and 5.6 percent in KakaoGames. It also holds 6.49 percent stake in Kakao, Korea's largest messenger app operator, through its subsidiary firm MAXIMO PTE. The company was also mentioned as a potential buyer of Nexon when the latter was up for sale in the early 2019.


Baek Byung-yeul baekby@koreatimes.co.kr

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