Asia Business Channel

South Korean game firms look to China for 2019 growth

South Korean game companies, which have been suffering from falling sales, are looking for growth in 2019, now that the Chinese government has resumed the approval process of new games. Once the Chinese authorities issue permits for the release of new games, it will pave the way for South Korean firms to cash in on the world's largest game market.

The game industry expectations rose after Feng Shixin, Deputy Head of the State Administration of Press and Publications, said on December 21 that: "The first batch of games has been reviewed. We will hurry up to issue licenses. There is a big stockpile of games for review, so it takes a while. We will continue to work hard. We hope everyone can be patient."

In China, both domestic and international game companies must obtain licenses from the government for new games. South Korean firms have been blocked from exporting games to China since March 2017 when the Chinese government stopped issuing licenses as part of its protest against South Korea's deployment of a U.S. military system.

The Chinese government also suspended permits necessary for games produced by domestic and international game companies in March as it underwent a major reshuffle to place the country's media regulators under the direct control of the propaganda department.

The freeze on approvals has slowed Korean companies revenue growth and the operating profits of game companies have fallen dramatically. As an example, In the third quarter of this year, NCSOFT, which have $1.8 billion USD of revenue in 2017, said that their operating profit had fallen 57.6% year-on-year. Another game company, Netmarble, which had $1.1 billion of revenue in 2017 said that their operating profit is expected to plunge 40% in 2018.

Although Feng, of the State Administration of Press and Publications did not specify when the licenses would be awarded and which companies would receive approvals, it is widely believed that South Korean game companies will be among those that receive approval to export games to China.

Feng’s statement has excited the South Korean game industry and investors. Immediately after the announcement on Dec 21st, Wemade Entertainment, best known in China for the multimedia online role-playing game "Legend of Mir" saw their shares surge 11.76%. Pearl Abyss, which is preparing to export a mobile version of its popular online role-playing game "Black Desert," also saw their shares increase 6.79% on Dec. 21st.

While Korean companies have had difficulties doing business in China, a growing number of Chinese games are making inroads into Korea. In 2017, 136 Chinese games were released on the Google Play app store, a 19% increase from 2016.

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