Korean Game Companies Find Success in China Despite Market Risks

Image: Legend of Mir 3

Korean video game developers are seeing strong financial results from their operations in China, despite facing significant challenges in that market, including strict regulations and intellectual property concerns.

South Korean game developer Wemade, known for its Legend of Mir RPG series for the Chinese market, recently highlighted these risks when it called for "government-level attention" regarding unpaid royalties from a Chinese gaming company.

Despite such challenges, many Korean gaming companies continue to expand in China because of the substantial revenue potential.

The Chinese market is crucial for Korean game developers. According to Chosun reports, several major Korean companies, including Nexon, KRAFTON, and Smilegate, saw improved financials last year, largely due to their successful games in China.

Nexon became the first Korean gaming company to exceed 4 trillion won (approximately $2.8 billion) in annual revenue in 2024. Analysts point to the Chinese version of "Dungeon & Fighter Mobile" as a key factor in this growth. International sales made up 56% of Nexon's total revenue, with the Chinese market accounting for the largest portion at 42%.

The game was developed by Nexon's subsidiary Neople, which achieved record revenue of 1.3783 trillion won last year—a 56.4% increase from the previous year. Interestingly, 93% of this revenue came from royalties given by the Chinese local distributor Tencent.

KRAFTON also reached record performance figures last year with 2.7 trillion won in revenue and 1.2 trillion won in operating profit, boosted by the global popularity of "BattleGrounds." The mobile version for China, called "Peacekeeper Elite," has been consistently popular since its 2019 release. Industry experts noted a revenue surge following a major update during Chinese New Year celebrations in January.

Similarly, Smilegate recorded an operating profit of 500 billion won last year, with significant contributions from its flagship titles "Crossfire" and "Road Nine." Crossfire, in particular, saw its revenue increase by 7.6% to 718.1 billion won, representing nearly half of the group's total revenue.

While Korean gaming companies are diversifying into other regions like North America, Southeast Asia, Japan, and India, reducing dependence on China remains difficult because of its market size. The "2024 South Korea Game White Paper" published by the Ministry of Culture, Sports and Tourism shows that China's gaming market was worth approximately $43 billion in 2023, making it the second largest globally after the United States ($45 billion).

China is also the top export destination for Korean games, accounting for 25.5% of exports in 2023, followed by Southeast Asia (19.2%), Japan (13.6%), and North America (14.8%).

China presents a market full of opportunities, even though it comes with some notable risks like uncertainty in licensing and potential unpaid royalties. The revenue potential is truly impressive for games that find success! While gaming companies have diversified their strategies and don’t depend solely on the Chinese market anymore, its sheer size means that embracing a degree of risk can lead to great rewards.