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NFTs emerging as blue ocean for game companies

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Game stocks soar, but uncertainties and risks also prevail

By Kim Bo-eun

Non-fungible token (NFT)-related stocks are all the rage, with game developer stocks spiking in recent weeks after they unveiled plans to launch relevant businesses.

Korea's major game companies such as Pearl Abyss, Kakao Games and Wemade now are in the top ranks on the secondary KOSDAQ bourse in market capitalization. Even amid the upward trajectory of the stocks, analysts are making further upward revisions to game stock target prices.

NFTs are cryptographic assets recorded via blockchain technology with unique identification codes that are non-interchangeable. Companies are increasingly turning their eyes to NFT-related businesses as new sources of revenue. These are mainly firms in the entertainment sector, particularly games.

Local game developers faced growth limitations with their conventional pay-to-win model that makes users spend more to make more progress in games. The idea of incorporating NFTs into games is now an appealing new model, and many major companies are preparing to adopt this.

NFTs are incorporated into games when converting items or characters owned by players into digital assets. These assets can then be switched to cash, which is appealing for game players. The model is referred to as play to earn (P2E). Companies benefit from the influx of new players that the model is able to generate.

Wemade has already adopted this model. The company in August released its massive multiplayer online role-playing game (MMORPG) "Mir 4" in overseas markets, applying blockchain technology enabling players to convert in-game resources into tradable crypo-currency.

Meanwhile, Gamevil acquired 21.9 percent of local crypto currency exchange Coinone, becoming its second-largest shareholder. This appears as a move to use the crypto exchange to convert game items into digital currency.

Gamevil's subsidiary Com2us invested in the U.S. company Mythical Games, which is seeking to offer services via which users can create in-game NFTs and trade them.

Kakao Games is seeking via its subsidiary Friends Games to develop an NFT exchange. In May it merged Friends Games with Way2bit that issued Bora coins, as a prior step.

NCSOFT's stock plummeted this year due to controversy over its "pay-to-win" business model, but has recovered after unveiling plans on Nov. 11 in its third-quarter earnings call to release a new NFT-applied game next year. Nine brokerages raised their price target for NCSOFT the following day.

NCSOFT is expected to apply the P2E model. This model, however, cannot be launched in the local market due to regulations. This is why Wemade's Mir 4 is also available only in overseas markets. Given the scale of overseas markets is much greater, the game companies are first seeking to launch the model outside of Korea.

"A central part of MMORPGs is collecting in-game items, and game players have pride in the items they own, as can be seen on online community posts bragging about their new item. This aspect of MMORPG appears to fit well with NFTs, as rare in-game items are projected to have substantial value, as in the case of items relating to idol groups in the music industry," a game industry official said.

However, some say given this is a new business area, uncertainties and risks prevail.

"The local stock market is seeing a concentration on NFT, metaverse and eco-friendly stocks," Kiwoom Securities analyst Han Ji-young said. "It is true that the growth potential of these themes are apt in attracting market interest, but it is of concern that some companies that have not yet materialized related businesses have seen their stock price spike."



Kim Bo-eun bkim@koreatimes.co.kr


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