Regular FeaturesSpecial Report
Back to the Virtual WorldExamining the present and future of the gaming industry in Korea
Hong You-kyoung  |
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승인 2016.05.11  00:03:16
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SOUTH KOREA has one of the largest gaming industry markets in the world. Yet, due to strict regulations on gaming, the gaming industry in the nation has declined during the past several years. Fortunately, this year the government announced that it will relax some regulations that had discouraged game companies from expanding, and even pledged to increase support, as it started to acknowledge its dominant position in the global market. As the government took a step back and sought to remove several restrictions on gaming, the future of the gaming industry seems bright once again.
Development of the online gaming industry in South Korea
   According to the Oxford English Dictionary, an online game is defined as “a video game which is or can be played using a computer network, especially enabling two or more players from different locations to participate in the game simultaneously.” The evolution of online games stems from the technological development of computers and computer networking, as essential compositions in operating games improved their functions. The prototype of online games required that one or two players sit together or in front of another game player if they were to play the game. Nowadays, as the Internet has spread rapidly, anyone around the world can enjoy online games simultaneously without spatial restrictions.
   Types of online games vary from mini-games played through websites to those that require complex gaming skills. The most preferred and well known games in South Korea have changed from time to time, but the one that garnered the most attention worldwide was StarCraft. The game gathered fervent fans from around the world, particularly in South Korea. In fact, StarCraft even opened a new employment market as countless South Korean professional online game players emerged. They contributed to the development of domestic online gaming industries and popularization of online games by participating in international online game matches and winning many prizes. In 2007, approximately 9.5 million copies of StarCraft and its official expanded version called Brood War were sold worldwide. This demonstrated that South Korea was one of the largest customers in the global games market, as 4.5 million copies were sold in this country alone.
Besides StarCraft,South Koreans also enjoy playing other types of games. StarCraft is one example of Real Time Strategy (RTS) game, which, according to Techtopedia, is a time-based video game in which players aim to use architectural resources to build units and defeat an opponent. Another type is called the Role Playing Game (RPG). In RPG games, the game player controls a fictional character who undertakes a quest in an imaginary world. Maplestory is one of the most widely known examples of RPG games. Aeon on Strife (AOS) is also a popular type of online game that combines features of RTS and RPG. This means that the player can select one character, nurture it as he does when playing a RPG game, and fight against the opponent character. Another type of game is called the Web-board game, in which the players try to gain more territories on a board. Due to the development of Web-board games, some table-board games, such as poker and Go, can now be played anywhere at any time online.
As a matter of fact, South Korea has provided favorable conditions for the gaming industry to flourish. According to the paper “Analysis of the success of Korean games in the global market”, published by the Academy of Global culture and Contents (AAGCC), the infrastructure that is essential for extensive development of online games has long been established in South Korea. The well-organized communication system and an active online community are the reasons why Lineage, an RPG game developed by the South Korean game corporation NCsoft, enjoyed high popularity among South Koreans. Inside the game portal, various communities exist in Social Networking Sites (SNS), which facilitate active communication between users. This offers great appeal to game players, who seek pleasure through interaction with other users. Last but not least, the Segmenting, Targeting and Positioning (STP) marketing strategy identified new consumer groups of online games. This marketing strategy extended the scope of online game consumers to women and children, who were neglected in the past. Through this marketing strategy, game companies were able to address the particular needs of each consumer group and thus optimize their services.
Infographic 1: High profits of gaming industry (Source: 2015 White Paper on Korean Games)
Market size expansion rate: 2.6%. From \9.7197 trillion in 2013 to \9.9706 trillion in 2014
Market composition: Online games - 55.6% of the market with \5.5425 trillion, PC rooms – 12.3% with \1.2277 trillion
Position of South Korea in global game market: (As of 2014 sales revenue) the South Korean game market accounts for 6.7% of the global market of $123.445 billion
Regulations on gaming industry, doing more harm than good?
    Although South Korea is equipped with a stable infrastructure, several regulations were imposed to prevent people from becoming addicted to games. For the past several years, certain game players have become severely addicted to games and committed some appalling incidents. In 2010, a Korean teenager, who was addicted to games involving violence, failed to distinguish between reality and the virtual world, so that he murdered his mother thinking that it was part of the game. As more of those addicted to games committed such heinous crimes, the government and parents’ unions called for legislation that would impose restrictions on playing games.
   The first law that forced many South Korean game players to reduce their gaming time was the Shutdown Law. After the legislation was adopted, those aged under 16 were restricted from playing online games between midnight and 6 a.m. Despite intense opposition from South Korean gamers and civil rights advocates, the government officially passed the law in November, 2011. By putting in place an age restriction, the government intended to have teenagers maintain a regular sleeping cycle and prevent them from playing games at night. However, it turned out that the regulation was not as effective as was expected. As a matter of fact, after the law was enacted, the time playing games merely decreased by 18 minutes during weekdays and 20 minutes during weekends. However, as teenagers, who constituted a large part of the consumer group, were discouraged from playing games, the overall market demand for online games plummeted. In turn, the profits made by the gaming industry shrank by approximately \1.2 billion from 2013 to 2014, according to the Korea Economic Research Institute (KERI).
   Another regulation is the Prevention, Management and Treatment of Addiction Law, which was proposed by a politician named Shin Eui-jin. Basically, the law was enacted to provide rehabilitation for game addicts and to help people enjoy a healthier gaming culture. He insisted that the issue of game addiction is as grave as alcohol, drug and gambling problems, and that it is the government’s responsibility to prevent citizens from becoming game addicts. Not only the game companies, such as Nexon and NHN Entertainment, but also the Head of Korea Internet & Digital Entertainment Association (K-IDEA) officially protested against the law. According to them, such regulations rapidly decreased the profits of gaming industries, which resulted in numerous enterprises losing their business.
   Yet another regulation that holds back the gaming industry is the restriction on web-board games. The Ministry of Culture, Sports and Tourism limits the amount of money the players can bet in the game by law. Ever since legislation in 2014, the maximum amount that a player can pay has been \30,000. Also, if more than \100,000 is lost in a day, a player cannot log on the game for the next 24 hours. The maximum limit on monthly payment to the site is \300,000. As a consequence, profits of the top three major web-board game companies in South Korea- NHN Entertainment, Netmarble and Neowizgames- have diminished by 70%.
   Additionally, these regulations hinder the development of the gaming industry, which directly contradicts the government’s pledge to construct a creative economy and induce employment by fully utilizing advanced scientific technology. Many startup companies in the gaming industry are discouraged from entering the market. As the nation continues to curb the gaming industry, there are rising concerns that it could be possible for the South Korean game companies to be taken over by Chinese corporations in the near future. Unlike the South Korean government, the Chinese government provides various means of support to foster the growth of gaming industries. The Chinese Ministry of Culture and the Ministry of Finance together have set up a plan to support financially and develop the Chinese animation and video game industries. As such, some Korean game companies may become economically dependent on Chinese corporates that receive far better subsidies from their government. In fact, the South Korean game company Neowiz Holdings relies on royalty payment from Tencent Holdings, a Chinese internet game service company, as its sole source of revenue.
Reinvigorating the gaming industry in South Korea
   Starting from this year, the government will loosen many of the restrictions on the gaming industry by implementing the “PICCASO Project”, which is a long-term plan to promote the gaming industry. In 2013, the gaming industry occupied 57% of South Korean contents industry exports and gained a profit of \2,500 million. To recover South Korea’s reputation as the world’s most lucrative games market, the Ministry of Culture, Sports and Tourism established three new strategies: create a new generation of the gaming industry, arrange a fund to restore the gaming industry, and rediscover the value of the gaming industry by improving public perception towards games. PICCASSO project is an acronym of Person, Innovation, Culture, Accompany, Start-up, Strategy, Over-seas, with the slogan “every imagination comes true.” According to the Ministry of Culture, Sports and Tourism, by 2019, \22 billion will be granted to game companies so that they will be able to create the next generation of games. Also, more than \55 billion will provided to corporations that develop a new growth engine for the gaming industry through a Fund of Funds (FOF).
   Moreover, practical efforts to improve public perception towards games are also part of the project. To begin with, a “game archive” will be constructed in South Korea. In this archive, information about games developed by South Korean companies would be provided. As such, the gap between the older and younger generations is expected to be narrowed, as the elderly would be able to understand that games need not always be viewed in a negative perspective. Also, by increasing support for serious game* production, the perspective towards games in society will become more positive. An education program on games called “game literacy” will also be provided and teenagers will be taught about the concept of a healthy game culture.
   Lastly, several regulations on games will be relaxed from 2016 onwards, as the Ministry of Culture, Sports and Tourism, and Ministry of Science, ICT and Future Planning has set a target goal to create a \1 billion market in the gaming industry by 2018. For instance, since the end of 2015, the Shutdown Law that was enacted in 2011 has been relaxed to some extent. Furthermore, teenagers who are aged 16 years old and below are allowed to play online games after midnight provided that they have approval from their parents. As the intended effect was minimal, while the loss to the gaming industry was huge, the government was motivated to loosen its rigid regulation.
   Furthermore, limits on the amount of money used in web-board games has become more lenient as a part of the government’s plan to relax regulations. Previously, the maximum amount that a player could bet was only \30,000. After the change, it increased by \20,000. Another noticeable change is the implementation of an age rating system in games. This system classifies games into age groups,so that the users who are in an inappropriate group are prevented from playing the game in the first place, while those in the appropriate age group can freely enjoy playing the games.
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   For the past few years, there were many regulations on the gaming industry due to the strong negative perception towards games in South Korea. This year, the gaming industry is expected to enjoy its heyday as regulations have been modified in a positive direction for game companies. The government is putting efforts in to eradicate the negative view that is deeply rooted in our society by providing subsidies and educating the public. Our country must acknowledge the huge contribution of the gaming industry to the South Korean economy and provide sufficient support to promote the South Korean gaming industry as a global trendsetter.
*Serious game: A game designed for a purpose besides mere entertainment. It is considered to be useful for those who wish to use simulation for training and education.
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