Comment: Aggressive and ambitious, the Korean tigers are here
It's probably been the worst-kept secret in the industry for several months now, but today NCSoft Europe's director of products, Thomas Bidaux, went on record to tell us that the Korean giant is close to striking deals with European studios to develop titles in this region, and may even announce the first fruits of these partnerships before E3 comes around in mid-May.
On the surface, it's a logical enough progression for the company, which several years ago stepped beyond the borders of its formidable development studio in Seoul to establish a presence in North America and now develops a significant amount of its content in the United States. The company's reasoning is entirely sensible; it wants to compete on a global stage, and recognises that the best way of doing this is to develop content locally in the major worldwide territories, in recognition of the fact that it's hard for someone sitting in Seoul to fathom what will be appealing to a consumer sitting in Manchester, Marseilles or Milan. It makes perfect sense.
However, logical or not, it's still an aggressive move which signals the ambitions not only of NCSoft, but of the Korean industry as a whole. If you step back for a moment from the NCSoft story and observe it in the context of the wider industry, it's astonishing just how quickly and boldly this publisher is expanding its worldwide operations, and just how effective it has been at sneaking in under the radar of the traditional publishing community thanks to being located in a market generally seen as "niche".
Some niche. Research published this week indicates that subscriptions from online games are worth in the region of $2 billion annually at the moment, and even if Europe in particular lags behind the rest of the world in terms of subscriber numbers - and the rest of the world lags behind the Tigers of the Far East like South Korea and Taiwan - it's still hard to ignore that Blizzard this week happily announced that they've hit a million World of Warcraft subscriptions in this region in their first year of operation. Even discounting the initial purchase price of the game (which is no cheaper than any other boxed game), that's over $15 million of revenue every month pouring in from across Europe - for just one game.
NCSoft has yet to create a game which reaches the popularity of World of Warcraft in the west, and perhaps it never will - but nonetheless, the company's strategy for success in the global market is formidable. It believes in building a portfolio of titles, developed locally in each of the major territories in which it operates, and experimenting widely with game styles and business models to ensure that one of its products will fit the needs of pretty much any consumer who fancies dabbling in online games - and many who would never have dreamed of it before.
Compared to the approach taken by some other firms in the MMOG space, NCSoft's strategy looks like a textbook example of how to do it right. A glance around the market shows that many companies are simply signing up lots of titles in the hope that one of them will be a success, risking seriously angering gamers who start playing titles that end up being dropped after a few months when they're deemed to be unsuccessful. Others are buying expensive media licenses to apply to MMOG worlds, a model which works brilliantly for the traditional console game publishing business but is littered with expensive failures in the MMOG space.
What does all of this mean for traditional console game publishers? It means they need to be looking over their shoulders. Although the transition period we're entering into the throes of at the moment tends to shake the complacency out of the publishing community, there's still a comfort zone for the industry's executives in the belief that the videogames sector will continue to grow overall - taking eyeballs away from television in a trend that sees advertisers scrambling to follow their core demographic and TV executives supposedly crying into their Starbucks iced lattes. To a large extent, this belief is probably quite well-founded, and there's certainly some foundation to the corollary belief that new styles of play, like MMOGs, will expand the industry rather than cannibalising the existing market.
However, that latter statement certainly isn't entirely true either. How many players of World of Warcraft are buying other games in the same numbers that they were before becoming hooked on Blizzard's seminal title? Even discounting the subscription fee question, if games such as NCSoft's Guild Wars become a standard business model - no monthly fee, but fairly regular optional content updates - then those games will also be competing for sales with existing titles. When MMOGs land on next-generation consoles en masse, as they almost certainly will in 2007 and 2008, the challenge will become even more direct. They're still videogames, but not videogames as traditional publishers know them, and publishers of console titles may rapidly find that an entire segment of the market, which is unquestionably cannibalising their market share, is completely closed off to them due to their ignorance of the business and development models involved, the high start-up costs of becoming a market player, and the glacially slow process of developing compelling MMOG content.
Meanwhile, a new wave of firms - many of them, it's tempting to say, from the South Korean market, and quite likely led by the trailblazing NCSoft - will control the market, having built their market share under the noses of the top publishers. NCSoft, whose movements in the market spark this line of thought, are the perfect example; they will shortly control a global network of development studios more diverse and numerous than many top-tier publishers, they have support operations across North America, Europe and East Asia, a portfolio of successful products and an impressive technology base that comes from years of experience in the market. Their South Korean rivals, such as Webzen, probably aren't far behind. Dipping their toes into the MMOG market is undoubtedly an expensive and risky proposition for traditional publishers - but with the new Asian Tigers snapping at their heels, it looks like staying out of the water might be the most risky proposition of all.