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Nexon's Joonmo Kwon

The Korean publisher's influential CEO on the development of the Asian market, and bringing online titles to the West

While Japan has traditionally dominated the videogames sector in Asia, the emergence of online has spurred a gaming revolution in Korea, making it one of the key markets in the continent today. That boom has enabled Nexon Corporation to become one of the most influential companies in Asia, and its online title MapleStory has launched with some success in both North America and Europe as well.

Here GamesIndustry.biz talks to CEO Joonmo Kwon in the build-up to his keynote speech at this year's Games Convention Asia to find out more about Asia's growth as a gaming force, and how he sees the challenge of bringing the company's titles to the Western markets.

GamesIndustry.biz What is it about GC Asia Conference that makes it something you're keen to be involved with?
Joonmo Kwon

As an affiliate of Leipzig's Games Convention - one of the world's top three games shows - Games Convention Asia is a highly influential event in which more than 300 game companies participated last year, and is expected to be another great opportunity to take a look into the future game industry. It was a pleasant surprise to receive an offer a few months ago to participate and give a keynote speech in such meaningful event.

I truly hope the conference will act as the platform for sharing extensive knowledge of not only the rapidly growing Asian game market, but also the global game industry as a whole, and that it can be a place to have creative discussions on the vision - as well as future strategy - for the games industry.

GamesIndustry.biz Asia as a region is growing fast - what's the biggest driver of growth, do you think?
Joonmo Kwon

According to a report called "Online Gaming in Asia: Strong Potential for Growth" by IN-Stat (an IT market research institute) the Asia-Pacific online game market is expected to grow rapidly from 2008 to 2013, with the revenue estimated to increase from USD 5.8 billion in 2007 to USD 21.1 billion in 2013 - an average annual growth rate of 20.6 per cent.

I think there are a number of reasons for such growth. First of all, the improvement of the IT infrastructure in the region, which also includes the increase of PC penetration, not to mention that of Internet and broadband as well.

Secondly, the development of technology-oriented information and the financial industry, and limits in traditional copyright concepts allows for innovative business models that can support the creative demand without such restrictions.

And third - the continuous growth of and stabilisation in social economy.

GamesIndustry.biz How fragmented is Asia, and how much of a problem is it?
Joonmo Kwon

Asia, like Europe, is a region where diverse languages and cultures co-exist. The difference however is that Europe, unlike Asia, already has an established economic community, which from a business point of view, means that each Asian country is a separate market - and therefore Asia can't be considered as a single market.

Currently Korea, Japan, China, and Taiwan are the largest markets, followed by the South-East Asian countries such as Singapore, Thailand and Vietnam which are rapidly growing. Since each market has its unique market situation and characteristics in terms of its online industry maturity level, user preferences and business risk, profound research and sufficient preparation is required for any successful, local service.

GamesIndustry.biz Do you see the individual countries growing closer together over time, and if so what benefits will that bring?
Joonmo Kwon

As for each market's online game industry maturity level, there has been a consistent upward trend and levelling, and I believe such a trend will accelerate further as more and more markets reach their saturation point - rather like Korea.

Improvements in the infrastructures of surrounding countries, as well as an increase in user purchasing power due to economic development and better general understanding and knowledge of the online game market, all combine to offer online game developers and operators more opportunities to pursue - but on the other hand, it also means that they need to be much more creative in order to survive in the highly competitive market.

GamesIndustry.biz The emergence of online has been crucial to the development of Korea - how much more growth is there to come for Korea?
Joonmo Kwon

The proportion of online games in the Korean game market is around 43.5 per cent, while the revenue share is about 95.5 per cent of a total game export revenue which as much as USD 780 million. So clearly that shows just how important online games are in the Korean market, and with an increase of 25 per cent in the combined total revenue of the top five online game companies in 2007, the industry is still growing.

A good number of promising new game titles are expected to be released in Korea in Q4, 2008, which will surely boost the market further, and the achievements of these game companies in overseas markets - as well as business diversification - will grow the market even more

That in turn is going to lead to an increase in development resources needed to compete against the major international game companies. Because of that, the goal of game companies - as well as the government - is to break into the top three globally, with a world market share of 10 per cent, domestic revenue of USD 10 billion and export revenue of USD 3.6 billion by 2010.

GamesIndustry.biz How do you evaluate the plight of the console market in Korea, and Asia in general?
Joonmo Kwon

Microsoft's Xbox 360, which boasts sales of 15 million units worldwide, has only sold 150,000 units in Korea in the past two years. Sony's PlayStation 3, which has sold 5.5 million units worldwide, has only sold 50,000 units during the past year in Korea. And the Nintendo Wii, which initially was expected to sell more than 100,000 units in the first month after it was released only sold about 40,000 units for almost two months - and the situation isn't much different in other parts of Asia, except of course for Japan.

However, despite those numbers, the results aren't all discouraging when you consider that these numbers indicate that there is at least a possibility of a console game market in Asia, where online games traditionally had been completely dominant.

With the consistent popularity of handheld devices such as the Nintendo DS and PlayStation Portable, along with many new software titles offering a unique type of game play, you could even say that the situation is pretty much optimistic in general - the new trend has greatly contributed to the expansion of the game user demographics, capturing wider age ranges, not to mention female groups too.

GamesIndustry.biz Will piracy continue to deny videogame growth in some key regions?
Joonmo Kwon

It's true that the issue of piracy has had adverse effects on the development of the console game market in Asia to a certain extent. However, as you can see by the consistent growth of the music and movie industries in most Asian territories despite such intellectual property issues, you can't really blame the underdevelopment of the console market solely on piracy.

In almost all parts of Asia, excluding Japan, online games have been leading the market growth since the very early stages of the games industry, which is something that indicates users have a strong preference and attachment for the common characteristics and typical features of online games.

So for the console game industry to succeed in Asia, unlike in North America or Europe, it's extremely important to set strategies that are specifically suitable for the local market. Most Asian gamers are far more used to and attracted by interactive games via network connections, and they've long been enjoying the unique convenience that online games offer - such as being able to download and play a wide variety of games for free with a single account from any PC.

On the other hand, games which require specific consoles and extra hardware devices, or are stored in a cartridge or CD/DVD-ROM, are purchasable mostly at offline stores and a new boxed product needs to be purchased for each new game that a person wants to play - all of those things simply make console games less appealing to gamers in Asia.

GamesIndustry.biz Nexon has managed to establish a foothold in the US with MapleStory, but truly global products are tough - what are your insights into that process?
Joonmo Kwon

Well, statistics show that the current broadband penetration rate in North America is around 80 per cent and there are a lot of gamers who are familiar with PC games - so therefore there's a better chance for us to capture the online gaming market via the PC platform.

There are a vast number of users with a high degree of understanding of the hardcore RPG genre, which makes the situation easier for new MMOs entering the market. A lot of users are enjoying web or flash-based casual games, and I believe there's a high chance of success for any Asian-style casual games as well - depending on how these games present themselves to the local users.

Although traditional gamers may be at a stage where their exposure to online experiences are relatively new, we're very confident that we can leverage our expertise with our diverse portfolio of proven games in such a market place.

Nexon was the first game company in the world to adopt the micro-transaction business model in 2000, and like in many other markets where we've introduced a game optimised for such a model, we've been successfully pioneering the market through our creative and innovative efforts in the US, where PC and console games had been predominant.

Our cutting-edge, next-generation business model has now become something which even the major players in the entertainment space would like to learn from. Nexon's prepaid game cards are currently being distributed in all parts of North America through Target, BestBuy, 7-Eleven stores, and so on. It's actually the second best-selling prepaid card available in Target. Servicing games such as MapleStory and Audition, our revenues in the country were USD 29.3 million in 2007 - a 300 per cent increase compared to USD 8.5 million the year before.

In the US, socialising through online games has become a new trend, and Nexon - with our success in and experience in the Korean market - is strengthening its business with potential growth in the US game market.

In addition to localising games for the US market, Nexon is developing new game titles specifically targeted to the North American market with planning taking place in the North American R&D studio (Nexon Publishing North America) which we're expecting will help our market position in the region even further.

GamesIndustry.biz How happy are you with that progress you've made in the US?
Joonmo Kwon

The biggest problem an online game company faces during the process of entering foreign markets comes from the lack of understanding and information on the social, economic and cultural characteristics, an optimised billing system, legal restrictions, and general user preferences in that local market.

Since an online game is a service rather than a product, while preparing that service is important, the continuous development and support - not to mention technical stability - is crucial in meeting the expectations of the users, otherwise it's impossible to achieve sustained success.

Nexon has been establishing and expanding its global business since 1999 and we're currently servicing games in about 60 countries worldwide through both local offices and partners. Based on a stable global business infrastructure, we're planning to continue strengthening our businesses in our existing markets as well as expanding into new territories.

Nexon possesses the most diverse and largest game portfolio which anybody - whether male or female, young or old - can enjoy. Also, Nexon's know-how with innovative business models is not limited to simply selling items for free, but is rather focused on allowing more and more users to easily enjoy games - and this may have been one of the main factors when it comes to a successful global appeal.

GamesIndustry.biz What are your plans regarding Europe?
Joonmo Kwon

As a single market with many different cultures and languages, but active relationships between the different countries, Europe is not an easy market for the game business. Nevertheless, as a region with a high economic standard and large game user pool, there is great recognition and purchasing power for online game contents - helped by fast growth in broadband penetration - so Europe is definitely regarded as a having great potential for our online games.

We already have MapleStory Europe in five languages (English, French, German, Spanish and Dutch), with European-specific content including special events based on major European cultural festivals.

We'll continue to stabilise and strengthen our business there in order to achieve our next success story after the US, by bringing more diverse, fun games to the market, and offering gamers the very best innovative content that is focused specifically on Europe.

Joonmo Kwon is CEO of Nexon Corporation. Interview by Phil Elliott.