South Korean PC Gaming Firms Look to Penetrate U.S. Market

The nation whose people are probably the most rabid online-gamers in the world – South Korea – is looking to make major inroads into the U.S. market.

Webzen Games and NCSoft have been quite successful outside of the U.S. NCSoft is South Korea’s largest gaming company, and Webzen is not far behind. So far, though, penetrating the U.S. market has proven difficult.

U.S. consumers spent about 8 billion dollars on video games in 2004, but only 10% of their expenditures were on online games. By contrast, 30% of all South Koreans are registered to play online games. It is predicted that the U.S. online game market will increase 600% by in the next three years, making online gaming the fastest-growing video game market in the United States.

Cindy Armstrong, CEO of Webzen America, plans to change the way Asian companies operate in the United States. “We don’t just plan to bring in Asian games,” Armstrong said. “We’re planning to bring in a product that’s developed from the ground up with this market in mind.”

All well and good, but how will they reach a market that prefers console games and individual shooters? Webzen is betting on Huxley, an individual shooter that can also be played on the Xbox 360.

NCSoft also sees content designed specifically for Americans as key to the US market. NCSoft also has five years of experience operating in the United States. CEO Robert Garriott is interested  in reaching out to the casual gamers that make up most  of the North American online gaming community. He recalls, “(Five years ago) we started designing games that were more casual in nature, meaning more consolelike in their interface, where the ease of use was better.”

The result was a series of games in which novices don’t worry about being killed off by more experienced players – like City of Heroes, the No. 2 MMOG in the U.S.

Because of the tremendous time, effort and money involved in bringing MMOGs to market, there is always an element of risk. Because of this, NCSoft and Webzen have an advantage with South Korean parent companies – substantial financial backing. Most North American online game developers have comparatively limited resources.

“We’re not going to be successful at everything we do,” Garriott said. “We’re going to have failures just like everybody else. But in many ways, we can afford the failures where other companies can’t.”

Another advantage is Webzen’s ability to reap the benefits of reduced production costs by outsourcing development process through South Korea, where labor costs are lower – and, while profiting from doing business in the U.S., they can avoid paying U.S. taxes, reaping the benefits while escaping the responsibilities of U.S. corporate citizenship.

In order to bolster profits in the U.S., the K2 Network, may provide a new subscription model which will do away with monthly subscription fees.  With the “Free2Play” model, profits come from in-game “microtransactions,” where  players purchase add-ons such as a power boost for his/her character or a new level to explore.

NCSoft may use different approaches, from free-to-play (as with Guild Wars, which has 1 million users who pay no monthly fee) to “bundled subscriptions.” For the moment, however, they’ll be happy to get American gamers to try one game.

The nation whose people are probably the most rabid online-gamers in the world – South Korea – is looking to make major inroads into the U.S. market.

Webzen Games and NCSoft have been quite successful outside of the U.S. NCSoft is South Korea’s largest gaming company, and Webzen is not far behind. So far, though, penetrating the U.S. market has proven difficult.

U.S. consumers spent about 8 billion dollars on video games in 2004, but only 10% of their expenditures were on online games. By contrast, 30% of all South Koreans are registered to play online games. It is predicted that the U.S. online game market will increase 600% by in the next three years, making online gaming the fastest-growing video game market in the United States.

Cindy Armstrong, CEO of Webzen America, plans to change the way Asian companies operate in the United States. “We don’t just plan to bring in Asian games,” Armstrong said. “We’re planning to bring in a product that’s developed from the ground up with this market in mind.”

All well and good, but how will they reach a market that prefers console games and individual shooters? Webzen is betting on Huxley, an individual shooter that can also be played on the Xbox 360.

NCSoft also sees content designed specifically for Americans as key to the US market. NCSoft also has five years of experience operating in the United States. CEO Robert Garriott is interested  in reaching out to the casual gamers that make up most  of the North American online gaming community. He recalls, “(Five years ago) we started designing games that were more casual in nature, meaning more consolelike in their interface, where the ease of use was better.”

The result was a series of games in which novices don’t worry about being killed off by more experienced players – like City of Heroes, the No. 2 MMOG in the U.S.

Because of the tremendous time, effort and money involved in bringing MMOGs to market, there is always an element of risk. Because of this, NCSoft and Webzen have an advantage with South Korean parent companies – substantial financial backing. Most North American online game developers have comparatively limited resources.

“We’re not going to be successful at everything we do,” Garriott said. “We’re going to have failures just like everybody else. But in many ways, we can afford the failures where other companies can’t.”

Another advantage is Webzen’s ability to reap the benefits of reduced production costs by outsourcing development process through South Korea, where labor costs are lower – and, while profiting from doing business in the U.S., they can avoid paying U.S. taxes, reaping the benefits while escaping the responsibilities of U.S. corporate citizenship.

In order to bolster profits in the U.S., the K2 Network, may provide a new subscription model which will do away with monthly subscription fees.  With the “Free2Play” model, profits come from in-game “microtransactions,” where  players purchase add-ons such as a power boost for his/her character or a new level to explore.

NCSoft may use different approaches, from free-to-play (as with Guild Wars, which has 1 million users who pay no monthly fee) to “bundled subscriptions.” For the moment, however, they’ll be happy to get American gamers to try one game.