Focus On Korea: Nexon's Lee Addresses Console, Online Divide

Author: by Staff

With the rise of microtransactions and MapleStory, South Korean gaming has been growing in respect and relevance in the west. There's a lot to learn from this rich, constantly evolving market, which grew up along lines so different from the U.S., Japan and Europe that it's difficult to compare -- and compete with. To that end, Gamasutra has compiled five complete interviews with a variety of members of top companies in the market, conducted principally at the annual Gstar trade show, to offer their perspective on the industry in 2007 and going forward. This time, Gamasutra speaks to Stephen Lee, manager of international business development at Nexon, about the big schism between rapid Korean development in a thriving online game business versus the much smaller, slower retail box and console-focused market. Now that Nexon is creating versions of its hit casual PC MMO Maple Story for DS and Xbox 360 with Nintendo, Lee reveals some interesting implications. From your perspective how is the expansion into the U.S. market going, from the Korean side? Stephen Lee: We launched the MapleStory PC online game service back in late 2005, and it was the first time we actually started off by just putting our service there, without conducting any marketing activities or anything. We just launched our server there, and managed it remotely from Korea. We found out that... actually, the users were coming in without any marketing activity or anything. We thought that the market might now be mature enough. In fact, we tried to service our game back in early 2000 -- I think it was 2001 or something like that -- and we haven't actually quite succeeded. We had that experience. But because of the success of MapleStory, we really saw how the market was going and how people were becoming more adoptive of the online experience. Obviously, through our studies, we saw that infrastructure and necessary surrounding environment for our online gaming was becoming more and more mature. We think that the U.S. market, as a market, it's big enough for gaming, but mainly until now, it was focused on the console game side. I think it has a lot of potential and still has to grow. What do you think of the results so far? Obviously you're trying to get in there before everyone else with microtransactions and that sort of business model. Are you pleased with the results so far, or is there a long way to go, you think? SL: We are very much satisfied as of now. We have seen pretty good numbers for our game service, and we have actually received a lot of spotlight from all of the gaming industry. We have closed a deal with some major companies in the States as well. You mean like the ad deals? SL: Yeah, like the Viacom deal [and other deals which are] not necessarily for the North American market. Again, we have a lot of interest. Considering the market size and the existing number of gamers, I think we have a long way to go. We think in a couple of years, the situation will dramatically change. Nexon was, I guess, really at the forefront of the microtransactions, even in Korea here. I heard that the first largely successful game that used that as a business model was QuizQuiz [released by Nexon in 1999]. I don't actually know -- at the time, was it a pioneering thing to go that route, or had there been some other models already? SL: Actually, the way that we discovered our new business model was somewhat incidental. We didn't actually plan to switch to this model. First, it started off as a subscription model, but then we discovered that we had been losing users dramatically. We tried to fix the problem and figure out how we could re-attract the users that were leaving the game. As a way of that, we created a system where we could allow users to decorate avatars and things. They could purchase their decorative items through microtransactions. Surprisingly, users started to gather back, and we thought this could actually be a business model for the future market. It seems like now microtransactions have started, they'll never stop. I don't think there's any going back to subscription from here. What do you think? SL: I can't rule out the merits of the subscription model. These days, almost all games adopt the microtransaction model, but games like World of Warcraft are successful. It's one of the most successful games in the world. It depends on content, actually, not necessarily the trend. We could have both models combined, just like Mabinogi service in Korea. It's actually a combination of microtransaction and subscription-based model. Do you think console will ever be important in the Korean market? Will it ever be something where people can actually make a profit? The console market in Korea is so small right now. SL: Nintendo actually expanded their branch into Korea early last year. They're performing pretty aggressive marketing activities throughout the year. It's not as expected, compared to what Nintendo has been achieving in other markets, but it's doing fairly well, from what I've heard, and it's a good relationship with them as well. We'll have to see, but there has been piracy in most of the Asian territories, and that had been one of the main hindrances for the console market from growing. If gamers become aware of the fact that the copyright issue will eventually deprive them of their entertainment, and if the market... we hope that the gaming market as a whole will grow together. We'll eventually have to see how it goes, because we're also developing console games. Do you think that the existing consoles are set up now, or if they will be for the near future, for a microtransaction-type model? SL: Yeah, I think that's possible. Microsoft, from my understanding, that's what they actually are pursuing. There's no reason why they can't do it. Nexon is doing MapleStory DS. How far into development is that, if you know? SL: We're planning to launch it by the middle of this year. We're aggressively developing it, and we're in very good shape. I've seen videos of it. I talked to Calvin Yoo at the Austin Game Developer's Conference, and he was very surprised to learn that there were already videos of it out on the Internet. Will it actually be an MMO-type thing? SL: You mean MapleStory DS? It's not an MMORPG kind of game. It's a typical kind of action role-playing game. It will have fairly different gameplay compared to the original version. It will be specifically adapted to the platform itself. So more local play than networked play? SL: Right. Single-player. We have some features that support multiplayer, but the main feature will focus on single player. I was actually talking to Gravity yesterday as well. They're bringing Ragnarok to DS, and you're bringing MapleStory to DS. And your target launches are somewhat similar. But I don't think they're as far along as you. It will be very interesting to see, because I feel like those will be the two rivals, in terms of... also, can you say who the developer is? SL: You mean for MapleStory? We're developing in-house, in cooperation with Nintendo. I see. Yeah, because a number of companies have said to me that in Korea, there's still not many developers used to making full, boxed end products. That kind of workflow and making complete products from the very beginning is very difficult. How have you tackled that? SL: To be honest, we also don't have that much experience with the complete, packaged kind of game. Most of the developers have grown up playing the famous console games and things. The basic idea is that we obviously have learned a lot from the development process, and we still have to learn more. Nintendo has been very helpful in that perspective. We obviously made a lot of mistakes as well, but we are very keen to... MapleStory is one of our representative IP, and if we're launching it, we have to make it successful. We're doing our best to make it a high-quality standalone type of game. And it's also very appealing to global markets, like the U.S. and Japan, because it's got the right kind of look. Are you going to launch that in other territories as well? SL: Yeah, we'll have to see. We'll first launch it in Korea, then try to expand it into other markets like the States, Australia, Europe, and so on, where Nintendo has their own existence and establishment. Actually, some other developers I spoke with said that Nintendo was not helpful at all. It's interesting to hear you say that. Their office is so new that maybe they just can't support as many people. SL: I think the function that Nintendo Korea... I think the first duty is allocation of function to different entities within Nintendo. All their developing resources at Nintendo are located in Kyoto, in Japan. We're actually talking to both sides. While gaining subsistence for the developing side, we talked to the people from Kyoto, and in terms of business, we're also talking to Nintendo Korea. That makes sense. So you're getting more of the actual hands-on help from the Kyoto side. SL: Right. Also the relationship with Nintendo... I can't disclose specific deals with them, but for us, it was a special kind of deal. It's pretty much different from a mere third-party kind of contract. It makes sense that they would want to. They're trying to make a big push in Korea, so it makes sense that they would try to partner up with someone and get a really good product out there from the Korean market, for the Korean market. How did the Counter-Strike deal come about? SL: Counter-Strike, as you know, was once the market-dominating product in Korea. But because of its commercialization policy for PC cafes and things, it sort of lost its power in the market. But there are still many core fans of the product, and a lot of potential. It was successful enough through the Steam platform in the States and Europe and western territories, but in Asia, it didn't do as well there. There were piracy issues, and compared to playing online games, people weren't used to purchasing packaged products and playing the game. I think the interest of both parties were sufficiently met with each other, and I think that resulted in closing the deal. Is it still developed by Valve? SL: No. It's actually in co-development with Valve. Interesting. So is the intent to launch in this market first? SL: Yeah. Actually, the service will cover Korea, China, Japan, and Taiwan -- four territories in the Far East. The first service launch will be Korea. That's interesting, because they have Counter-Strike in arcades now with Namco, I think, who is releasing it. They have their arcade Counter-Strike product, and then you'll launch your PC Counter-Strike product. It'll be interesting to see how that goes. I actually didn't even know that this was happening. SL: We made an announcement back in July 2007. I'm just out of the loop! So here at Gstar, you have a very huge presence. It's very impressive. I was surprised to see it. You have this whole space we're in now, and you have the biggest space on the show floor. Why is that? Do you think a lot of consumers will come that you can influence, or is it to just show your power? SL: We can't deny the fact that Gstar, in terms of the size of the show, is getting smaller and smaller year by year. That's what the market actually perceives. Since it's the biggest game show in Korea, and we're one of the largest online game companies in Korea, we have a lot to show, obviously. For gamers who would actually come to the show and have anticipation in terms of what new products will be released and how the market will turn out to be in the near future, I think it's worthwhile to let them know what we're doing and how dedicated we are to providing new entertainment to them. What is your perception of the Korean market right now? I've heard a lot of different ideas about how it's going. Some people say there are so many people bringing out MMOs right now, and there's going to be a big crash. I've heard some other people say that it's unstoppable, and the market will just keep growing. What do you think right now? SL: I would actually like to know that! (laughs) The market has actually been a pioneer kind of existence in the world. Before it even formed a decent console market, the market had been developed by the online gaming industry, and so the characteristics might be slightly different from existing western markets or in Japan. Apparently people usually say that it's pretty much saturated, and conditions are getting more severe year by year. Why do you think the market grew up so fast with online games before console was even fully developed? SL: There had been a lot of creative developers who had the talent, ideas, and creativity to develop competitive content and games. Since the console game market had not been mature enough for them to develop new titles and new game products inside Korea, I think that resulted in... not failure, necessarily, but slower growth of the console game market. As you know, we developed the world's first graphic MMORPG back in 1996, and also we had a huge boom in terms of the IT industry in the late 1990s. That had actually provided the perfect condition for modern game companies to grow, and we had been one of the leading companies in Korea. All those conditions combined, I think, provided sufficient condition for the market to grow. What do you think of that from the player's side? One thing I've heard is that a lot of people are using MMOs not so much as a fun thing to play, but as their job, by buying and selling items and things. SL: The core users are very loyal to a game, and we can't complain if that's their way of playing, right? Actually, MMORPGs these days are so sophisticated, and you can do a lot of things. It's not just playing a game. You can conduct missions and stuff like that. It's also effective means for socializing with people, and making new friends, and things like that. I think it's an interesting phenomenon. In terms of your console development, aside from the DS, is that with an eye on the Western market, then? You said that Nexon is now working on console development, so since the market doesn't exist much here, are you more focusing on that market? SL: First of all, referring back to my saying we're developing console games now, that doesn't necessarily mean that we are seriously focusing on that console gaming field. We're just trying to develop our games -- the DS version of MapleStory, and the 360 version. So there's a Xbox 360 version also of MapleStory? SL: Yeah, that's been announced here. That doesn't necessarily mean we're converting our business direction to the console gaming field. Since we have a lot of content that's been successful in the online gaming market, we're trying to figure out what possibilities we may have in other fields, such as console games, animation, merchandising, and all those related types of products. As a result of that, if it can actually help us expand our users in Western markets, then that would be a perfect result. [For many more insights into this vibrant and unique territory for gaming, the full transcripts of these interviews are now available on Gamasutra.]