Promotion image of Nexon's upcoming titles / Courtesy of Nexon

Korea's game industry seems to be undergoing a shakeup, as Nexon and Krafton stand out among their peers with strong third-quarter earnings, while traditional industry giants NCSOFT and Netmarble are struggling amid a sector-wide downturn.

Nexon, which is listed on Tokyo Stock Exchange, on Tuesday reported an operating profit of 51.5 billion yen ($332.6 billion, or 467.2 billion won) for the July-to-September period, up 11 percent from a year earlier.

During the same period, its revenue increased by 13 percent to stand at 135.6 billion yen, setting a new high in its quarterly sales.

Nexon attributed its solid earnings to the stable revenue growth of its flagship game franchises — FC Online, Dungeon & Fighter and MapleStory. Of them, the Dungeon & Fighter franchise achieved a 143 percent year-on-year growth in sales, buoyed by the successful launch of Dungeon & Fighter Mobile in China in May.

The MapleStory franchise achieved a 23 percent year-on-year increase in overseas revenue in the third quarter, as the company's strategy to establish dedicated development teams for the Western and Japan markets paid off. The franchise achieved record-high quarterly sales in Japan, North America, Europe and across Southeast Asia, including Taiwan.

New title First Descendant is also contributing to the company's sales. Drawing favorable responses from North American and European gamers, 75 percent of the game's third-quarter sales was generated in those regions, pumping up Nexon's revenue in those regions by 93 percent year-on-year.

Krafton also posted handsome numbers in the third quarter, on the back of stable revenues from its flagship title, PUBG: Battlegrounds.

Last week, the game studio reported 719.3 billion won in sales and an operating profit of 324.4 billion won in a consolidated basis for the third quarter. It was the highest quarterly sales in the company's history, and the figures represent 59.7 percent and 71.4 percent year-on-year increases, respectively.

Despite meeting its eighth year in service, PUBG still excels in traffic and profitability, while its mobile versions are also showcasing notable performances in global markets including India. In the third quarter, Krafton's overseas sales accounted for 89.8 percent of its total revenue. By region, Asia, which includes India, represented 81.9 percent of this overseas revenue.

During its earnings call on Nov. 7, the company said PUBG showed an explosive growth in user traffic after it became a free-to-play game in 2022, and the decision was "based on a long-term perspective aimed at the PUBG intellectual property's growth by forgoing initial package sales."

The company said that it believes PUBG is showing structural growth, rather than short-term cyclical growth, and traffic will likely remain in an uptrend.

Promotion image of Krafton's game titles / Courtesy of Krafton

On the other hand, NCSOFT is undergoing restructuring after logging its first quarterly operating loss in 12 years in the third quarter.

NCSOFT, known for the Lineage franchise, reported an operating loss of 14.3 billion won, a significant drop from an operating profit of 16.5 billion won a year earlier. Due to the disappointing earnings, NCSOFT's Chief Financial Officer Hong Won-jun apologized to shareholders during an earnings conference call, assuring them of "grave scrutiny on the current situation and a subsequent overhaul."

NCSOFT has already implemented multiple payroll reduction programs this year to improve its profitability. As of the third quarter, labor accounted for 43 percent of its total operating costs, while those of its similar-sized game studios remained below 40 percent.

Last week, over 500 employees reportedly opted into a voluntary redundancy program. With over 4,000 employees currently, the company announced during its third-quarter earnings call that it plans to streamline its workforce down to 3,000.

Netmarble is seeking to restore its leading status with nine new titles that it will roll out next year.

After snapping its losing streak in the fourth quarter of last year, Netmarble posted operating profits for three consecutive quarters throughout this year. Its third-quarter sales grew 2.6 percent year-on-year to stand at 647.3 billion won, while operating profit stood at 65.5 billion won.

Netmarble was bullish in the second quarter, as Solo Leveling: Arise became a new cash cow for the company. However, the title's revenue quickly backpedaled in just three months, while the company is yet to roll out new titles.

"The ideal scenario would be maintaining revenue levels (of Solo Leveling) and releasing new blockbuster titles consistently each quarter to drive revenue and profit growth, but the company failed to do so," Korea Investment & Securities analyst Jung Ho-yoon said.

"Nine titles are slated for launch in 2025, including Game of Thrones: King's Road and Monster Tamer: STAR DIVE, but it is expected that the decline in sales from Solo Leveling will continue to impact earnings for another quarter or two."