Nexon is one of the largest online game companies in Korea, and has made significant inroads to the Western markets with the microtransaction business model.
Most of the popular Korean game companies today have in one way or another been touched by Nexon, calling to mind Origin Systems’ influence in Austin, TX, when the company raised up developers that formed companies like id Software, Digital Anvil, Looking Glass Studios, and Destination Games, which was eventually acquired by NCSoft. Indeed, partially because of Nexon, almost every online game company in Korea has a name beginning with N.
In this wide-ranging interview with Nexon chief marketing officer Jae Yong Min, conducted in Seoul in recent months, we discuss the difficulties inherent in the microtransaction model’s long tail, the development of Maple Story DS and Mabinogi for Xbox 360, working with Nintendo, Korea’s lack of design-led studios, and the future of the online industry.
Lately I've been hearing about market saturation being really high. It's been really difficult for new titles to gain a foothold in the domestic Korean market. You announced five titles at Gstar, is there any kind of concern about that?
Jae Yong Min: What you said is correct. I think that the Korean online market is saturated. The market has been tougher compared to five or ten years ago. We still believe that the market is growing, but that the rate is a little bit slower. We think that the reason is because it is an online [service], it's not a product, so people keep on playing the game for a long time.
For example, we have a game called Nexus: The Kingdom of the Winds, and we've been in service for this game for 12 years. People still play it. I mean, this kind of structure is really good for a company that already has successful games, but because of that it kind of blocks the new games from gaining new users.
With this kind of environment it's impossible for us to expect a greater quantity of users. It's impossible for us to develop in quantity, so we decided to develop in quality. The market is segmented, and we develop games for the specific segments, for specific targets. And then, through twelve years of experience we have developed micro transaction models. So, through those development models we were able to grow more ARPU, more revenues from one user. So, that's our first strategy.
If we explain in a different angle, platform wise, I believe that online games are somewhere between console and web-based online games. Right now most online games are in the middle here. Our strategy is to make more games that appeal to the web-based online users and then to develop games that will appeal more to console taste.
Nexon has been very successful at, as you said, dominating different niche markets, finding some kind of hole and filling that. Like KartRider, FPS titles, and MapleStory – it's all targeting a specific demographic and then maximizing the users there. That's one of the reasons why it's difficult for new games to come out because people are still playing those free to play games that they've invested so much time in. So to me the question is, is it difficult to launch a new product when you're almost competing with yourself?
JYM: That's very difficult to answer in one word, so we have to look at the situation from many angles. From the development stage we try not to make games [for markets that we already dominate]. But game development is not that controllable, so that eventually we'll have some games that will actually compete within the company.
When that happens we just look at it in this way, like some other companies are developing the games outside the company. When that happens and we decide that that game, even though it might cannibalize the already existing game, if we think it's valuable we'll just make the game. And then two games do compete with each other.
But because this is an online game, this is not a product – like I said before – it's a service. So with already existing games, even through patches we can't make the games go in significantly different directions. Plus, almost 50 percent of our revenue is from the global market, so we don't only focus on the Korean market. So even though they may cannibalize some of the Korean market, you know, we have different markets like Japan, America, and China.
If I understand correctly, it sounds like most Nexon games have sort of been in the middle in terms of hardcore vs. casual.
How will you be able to take on the higher level area? It feels like in Korea more people are competing for the mid-level, but world-wide more people are trying to compete on the high level. So at that level Aion just came out, World of Warcraft exists, but then at the same time there is a game like Tabula Rasa, millions and millions of dollars and well, we all know what happens. How do you take the Nexon style and bring it on that kind of level?
JYM: I’ll answer your question in the way of Nexon’s strategy for the U.S. markets, because we believe that the U.S. market is more of the hardcore base. I believe that unlike Asia the casual games boom hasn't been fully exploited in the U.S. markets.
So, our goal for the U.S. market would be to start those kinds of sensations that already happened in the Asian market, through our lineup like MapleStory or KartRider or other games. That's gonna be our first strategy. Through that I think some of the console gamers, even the hardcore gamers, will play our games.
Secondly, more to your question, we're already developing a game called Mabinogi: Heroes and also Dragon Nest. There’s also one more unannounced game that is specifically targeting the hardcore gamers. But we have to admit that this is kind of new for us, so we've been learning a lot through developing this kind of game.
Working with Nintendo, Consoles
Talking about consoles; last year I was talking to some people about the experience of making MapleStory DS. They were mentioning that Nintendo in Japan, Kyoto, was helping to create it because of the lack of experience making package games in Korea. I'm just curious, now that we're a year past that stage, how was that experience? Creating a package game, was it rewarding?
JYM: The main problem that we had while developing the Nintendo DS MapleStory was that our two companies had different goals when we started. For example, for Nexon, we wanted the Nintendo users to, through the MapleStory DS experience, go to the online platform; and Nintendo wanted MapleStory DS to be the bridge for online gamers to come to the Nintendo platform.
So, as we developed the product I believe that Nexon learned a little bit more than Nintendo. Package game development is so much different than online game development. We focus on the service, so we plan more long term based and we focus on the user interactions and stuff like that. We actually tried a lot of stuff, we tried to do many new things for the Nintendo platform but it was not easy to implement, actually.
Finally we decided to make it more of a normal packaged game. That's why we invited the Japanese staff to come into the Korean office. When we developed the product we focused more on the intensive fun and it's just something typical for the Nintendo platform.
I believe Nintendo MapleStory has potential in the Korean market, because of the successful MapleStory online, and because a lot of people who play MapleStory online have already a Nintendo DS. So, for Nintendo DS MapleStory, it will sell. But for the Korean package market, I still believe the it doesn't exist.
It gets more interesting to think about introducing MapleStory DS to maybe the Japanese or American market and then see what happens.
In the Korean market I imagine that the game will be popular but I wonder if people will buy it or download it, considering the fact that I've never seen anyone in Korea playing a legitimate copy of a game on DS.
JYM: [suppressed laugh] I believe that, compared to the market in Japan, we download more, but compared to the South Asian market, we download less.
But actually we're thinking about a way to prevent those kinds of downloads. Because we already have online games – this is just an idea – so, we've been thinking about a coupon that they can use in online games. So that people who buy the legitimate product – only those have the coupon. Because we think that most of the online MapleStory users would play the game.
That's an interesting idea because it's trying to incentivize you to buy a packaged thing in order to make sure that you get a virtual thing also. Anyway, a word about Mabinogi 360, how has that experience been?
JYM: I guess Mabinogi 360 is the study case. Our first try out. We've learned lots. The interface is so much different from the PC base. Yeah, interface, the fun factor, the game development process, the Microsoft certification process, through those kinds of processes we've learned a lot. We just got a taste of what to do to make a console title.
With this kind of experience I think, in the future, we'll still focus on the online platform but I believe that more of our titles should be translated to the other platforms too. So, Mabinogi 360 is a fresh case to go that way. That's why we’ve been trying out everything we can imagine there.
Actually we're still talking with Microsoft about distributing the product through the download service and stuff like that. But we're still in talks. We don't know if it's going to be on Live or not. But at least we've learned what the obstacles are to do those kinds of things.
Nexon’s Destiny – The “Origin Systems Of Seoul”
For some reason, this Korean trip I've been talking to a lot of ex-Nexon employees.
JYM: Like who?
Like Sang Won Chung and some other much more low level guys. And it seems a lot happened at Nexon in 2005. That was also when the U.S. company was originally launched, but then it didn't really work out as well. Can you kind of explain to me what was going on in Nexon at that time? I learned that a lot of the tiny companies that exist now are people that left Nexon around then and tried to start their own thing.
Jae Yong Min: I guess that's the destiny of Nexon staff members. Like Song Jae-kyeong [aka Jake Song], he's the designer of Lineage. He was originally a member of Nexon but he went out to go to NCsoft and develop Lineage. Since Nexon was the first [to make] online games in Korea, naturally that kind of thing happens. People leave the company and then make their own company. What happened in 2005 has to be explained along those lines.
In addition, MapleStory actually was developed by Wizet, and Wizet was a former member of Nexon. Then we finally bought the company, made the company a whole subsidiary. Ever Planet was also developed by former Nexon members. Yeah, like I said before, because we're the mother of the online gaming, we believe, people just come and go a lot. What happened in 2005 was probably nothing special. Actually, it's happening right now too.
And we're still in good relationship with them. Like the one who left recently was the guy who developed Ever Planet and the one who made Race City, he's also in good relationship with us. It's just that weird relationship, sometimes we get closer. But Korea is a lot smaller than America, so even though we get away, we get closer again.
I've definitely noticed. The game industry is very small as it is, and people kind of all know each other, but in Korea everybody really knows each other. I went out a couple of nights with some developers, and one of them knew my friend and then met this other guy and he know this other guy who already knew me from before. It's very like, everybody knows everybody. It's hard to do anything without anybody knowing.
JYM: No secrets!
Whither Art Thou, Designers?
One thing that I've been kind of speculating about and I'm curious to know what you think; the big problem in Japan is that they lack programmers. They're good at design and producing but programming and optimization is their weakness. Whereas in Korea, you’re very good at systems and service but seem to kind of lack designers. Perhaps management is not structured so that designers can lead a project. That's the feeling that I have been getting. I'm curious to know what you think about that.
JYM: Your view is correct. I believe that the Korean online gaming industry was actually started by programmers, so that's why naturally we're led by programmers. 90% of the past products were led by programmers. Right now, still about 50% of the products are led by programmers. But it's changing.
Out of five studios at Nexon, two of the studios are led by graphics designers and two studios are lead by programmers and then one studio is actually led by a pure designer. I guess Korean developers are also recognizing the need of the producing ability and designing ability. I don't know if you noticed or not, but because of that trend I think Korean games are more sophisticated than before, [getting better] fast.
The Future Korean Market
Certainly the sophistication and the level of detail or quality has been going up very quickly. My last question is a bit vague, but I want to know where you feel like the Korean domestic industry is going from here, from both the business model and market perspectives. Will microtransactions continue to dominate?
JYM: For the business model, well, the micro transaction model didn't come out because the subscription model failed. It was just a trial that proved to be more profitable, in a way. So that's why it’s currently more dominant than the subscription model.
But the reason why the subscription model is not as developed is because a lot of products are not suitable for the subscription model. You know, WoW was a huge success for the subscription model, so if those kind of games are going to come out more, then the subscription model will still exist.
The first market move that I've noticed in these days is the expansion of hardcore games and hardcore users. A lot of core developers are developing hardcore games and they're making the games more sophisticated and more user-friendly, so that because of that influence more of the middle core users are trying the hardcore games and actually like them. I've noticed that kind of trend.
Because of the expansion of the hardcore games, the middle core games have to find their way. I think they'll probably go down to casual users and then try to develop a way to attract more of the really light users. I believe that the market might be divided in two, with a big hardcore and a big middle core, and then, very small, casual games.
More specifically, I think that as the game industry develops the gamers' standards become higher. So, a lot of young kids, their standards will just get higher and higher and higher. So they'll all become middle core gamers in the near future. For the light casual market, the really light casual market, they'll have to go after non game using demographics. Really old people, someone who's never tried them or someone who only uses the internet for web surfing.