South Korea's mobile game publishing company gave an order for the first half of 2014. It showed a sharp increase in revenue, but a decrease in profits. What this implies is that channel costs continue to rise sharply, which has become a widespread source of serious profit losses in the industry.
Channel costs erode profits
As early as the first half of 2014, the company's sales successfully reached US$59 million, a significant increase of 61% compared with the same period last year. However, its operating profit was only US$5.7 million, a decrease compared with the same period last year. The financial report clearly states that the main reason for the decline in profits is the continuous increase in sharing fees paid to mobile communication platforms such as Kakao. This shows that even if the company's game business revenue is growing rapidly, high channel costs are seriously squeezing developers' profit margins.
In the Korean market, platforms such as Kakao Talk are key entrances to mobile game distribution, but their share ratios are as high as 20% or even higher, which puts pressure on many publishers. Under such a "channel is king" situation, the actual income of content creators has been significantly reduced. Finding ways to reduce reliance on a single channel became an extremely urgent strategic task for many Korean game companies at that time.
Record second quarter sales
Looking at single-quarter data, during the period from April to June 2014, the company's sales reached US$32 million, a 62% increase compared with the same period last year, thus setting a sales record for the company at that time. This significant growth is mainly due to the consistent excellent performance of its many popular games. The net profit for the quarter was US$3.2 million. When combined with the total net profit of US$6.7 million in the first half of the year, its profitability is still considerable.
The sales record has been refreshed, which proves that its products have strong appeal in the market, which is generally closely linked to successful marketing, stable game operations, and continuous content updates. In the highly competitive mobile game market, being able to achieve continuous revenue growth is itself an important positive signal.
Popular games support performance
At that time, there were two main games supporting the performance of the company at that time, namely "Dragon Flame" and "Baseball Star 2014 KBO". These two games were extremely popular in the local Korean market, and thus built a solid user base and revenue stream. "Dragon Flame" may be a role-playing game, while "Baseball Star" relied on Korea's local baseball league KBO to attract a large number of sports fans.
It is no accident that popular games are successful. It often lies in a deep understanding of local player culture and preferences, such as combining the national sport baseball with mobile games. This is a precise positioning. These successful products provide valuable cash flow and market confidence for the company's subsequent development and new game development.
New game product line intensive
It is expected that in the second half of 2014, the company plans to launch as many as 14 new games, including "Monster Selector", "Grandmaster Legend Online", "Titan Warrior" and "Dark Reborn 2". Such a compact product launch plan illustrates the company's strategy of using "quantity" and "category" to expand market coverage and find the next popular product.
In the mobile game industry, this kind of "casting a wide net" strategy is relatively common, because popular products show uncertain characteristics. It is necessary to explore different themes (such as fantasy, martial arts, science fiction, etc.) and gameplay to test the market response, and hope that a few of them can emerge and become new revenue supports. However, this generally places extremely high demands on the company's R&D resource management and marketing capabilities.
Strengthen global market layout
In addition to consolidating the local market in South Korea, the company also plans to push games such as "Dragon Flame" and "Legend of Zenonia" to the global market. This is a necessary choice when many successful Korean game companies have reached a certain stage of development. The purpose is to break through the population cap that limits the local market and find a larger scope for growth.
Global distribution encounters many challenges, such as localized operations, cultural differences, channel cooperation, and overseas marketing. The key to its long-term growth potential depends on whether it can successfully replicate domestic experience overseas. This move also showed the trend of outward expansion that the Korean mobile game industry as a whole showed at that time.
Self-built platform to deal with dependencies
The company said that in order to cope with the pressure brought by the high channel sharing, in the future it hopes to use the HIVE platform jointly built with partners to reduce related expenses. If game developers want to reduce their dependence on channels and gain more say, an important way is to build their own or jointly built distribution platforms. The HIVE platform may be intended to aggregate users to form its own distribution ecosystem.
Assuming that the self-built platform succeeds, it will not only save the cost of sharing, but also more directly reach players while accumulating precious user data, which is crucial for the long-term operation and iteration of the product. However, this requires huge initial investment and strong resource integration capabilities, and it will take time to verify its final results.
When facing an industry environment with high channel costs and increasingly fierce competition, do you think game companies should take the lead in creating a few high-quality products, or should they adopt a strategy of quickly launching multiple products to cope with market uncertainty? You are welcome to share your opinions in the comment area. If you feel that the analysis is enlightening, please also like and support it. Punctuation marks.
