The pandemic has been robust on Nexon‘s core markets in South Korea and China, but the Tokyo-based online game publisher has been preparing for a permanent shift to digital entertainment for decades. Nexon CEO Owen Mahoney believes that online games will make gains during the pandemic as isolated people socialize through games, and those gains won’t evaporate when issues return to “normal.”

I spoke with Mahoney final week after the corporate reported its earnings for the primary quarter that ended on March 31. The on-line sport firm benefited from shelter-in-place guidelines in late March, however it additionally noticed its enterprise in China drop 42%. After some preliminary challenges, Nexon has transitioned to work-from-home guidelines, and it isn’t in as dangerous form as industries akin to films, which have stalled their manufacturing.

Nexon’s bigger missions are nonetheless in place. Nexon began in South Korea in 1994. Its first title was Nexus: The Kingdom of the Winds, a web based fantasy role-playing sport. Nexon is a pioneer of online-only free-to-play video games, the place gamers can begin taking part in without cost after which buy digital gadgets within the sport for actual cash. This enterprise mannequin propelled it to very large success, producing billions in income for sport like Dungeon Fighter Online (also called Dungeon&Fighter in some territories).

In 2005, it moved its headquarters to Tokyo. Today, the corporate generates about $2.5 billion in revenues a yr from titles like Dungeon Fighter Online, Kart Rider, and MapleStory. These franchises are as priceless as Star Wars, however most individuals don’t notice that.

VB Transform 2020 Online – July 15-17. Join main AI executives: Register for the free livestream.

The core markets are South Korea, China, and Japan, however the firm has been increasing within the West beneath Mahoney. In 2016, Nexon acquired Big Huge Games, maker of DomiNations. And in 2019, it purchased Patrick Söderlund’s Embark Studios in Stockholm, Sweden, as a part of its quest to turn out to be as well-known within the West as it’s within the East.

Here’s an edited transcript of our interview.

GamesBeat: If we get caught on this state of affairs for some time, does this transformation the way in which you concentrate on making video games?

Owen Mahoney: I don’t know if it adjustments the way in which we make video games. You and I’ve talked about this earlier than. My view on all that is we’re within the midst of a secular shift within the leisure trade. This secular shift goes from the assumption, though not correct, that Hollywood and flicks and sports activities and music kind the middle of the leisure trade, to folks realizing that it’s video video games. And particularly on-line video games. That’s the middle of the middle of the leisure trade. We’re going to look again in 20 years and see this because the a-ha second the place we realized that secular shift to on-line video games and digital worlds. It took COVID to try this, however that’s what occurred.

Did you see the film 1917? It’s attention-grabbing. I’ve requested a few folks in the event that they’ve seen it and no one appears to have seen it. I assumed it was an enormous blockbuster. I simply downloaded it on iTunes. But it was attention-grabbing, as a result of within the early 20th century, we knew machine weapons existed, and we knew that there was this new explosive ordnance know-how. Cannonballs had been simply big BBs that may shoot at folks. Then you had explosive ordnance that may explode on impression. All this and mustard fuel. We knew this existed. But initially of World War I folks nonetheless began the struggle with swords within the air and cavalry fees. It took World War I to disabuse everybody of this concept that they may win a struggle that means. It took one machine gun nest to mow down a complete bunch of individuals.

It’s a darkish mind-set about it, however you get confronted with a state of affairs that assessments your assumptions and mode of pondering. The assumptions and mode of pondering we’ve been going via for the final 20 years is that we’re nonetheless within the 20th century when it comes to leisure. We’re not. We’ve recognized for a very long time that video video games are larger than Hollywood, larger than linear leisure, when it comes to gross income. We comprehend it’s rising loads quicker, triple the speed. You have a look at the P&Ls of corporations like Nexon or different massive online game corporations. We printed a billion {dollars} final yr in money circulate. If you speak to Andrew or Bobby or the opposite CEOs of massive online game corporations, they’re printing billions of {dollars} a yr as effectively.

GamesBeat: The remainder of leisure may be very completely different.

Mahoney: If you have a look at linear leisure, it’s not rising, or barely rising. It’s getting extra unprofitable yearly. Netflix burned via $Three billion in money final yr. The desk stakes of getting right into a linear leisure service is burning billions of {dollars}. That’s earlier than you get to all of the COVID stuff. There’s no cruise ship trade. There’s barely a lodge trade, barely a journey trade. All that’s getting shut down. Then you say, “What’s the center of the entertainment industry?” It’s not conventional leisure in any respect. It’s interactive leisure, and particularly digital worlds. We’re dwelling in a digital world right this moment in massive swathes of the economic system.

I get requested generally if that is all going to decelerate after COVID. I view this as a secular shift. It’s plain as day for everyone now what this leisure trade has modified to. For you, with a vested on this trade, and for me, and for everybody concerned in video video games, that is the watershed second the place on-line video games particularly step into the sunshine and no one will look again. I’d not wish to work in Hollywood. I’d not wish to work in linear leisure. I’d not wish to be in any kind of amusement park enterprise or reside sports activities or something like that. Those issues are going to see vital adjustments.

Nexon CEO Owen Mahoney sees online games making permanent gains

Above: Owen Mahoney, CEO of Nexon

Image Credit: Nexon

GamesBeat: I’d agree with that world view. How do you are taking that world view after which map it onto one thing, whether or not it’s Nexon’s technique or how quarterly efficiency goes to look within the sport trade, issues like that?

Mahoney: I’d say two issues. First, when it comes to what Nexon has been doing, over time now we have–I’m going to attract you one thing on a chunk of paper and also you’ll see it. This is a whiteboard we’ve usually drawn at Nexon. If you concentrate on the sport trade in two vertices, you could have offline video games and on-line video games. Then you could have deep or immersive video games and informal video games.

Old guys like me began out on this space right here. Games like Civilization and Railroad Tycoon. Those had been offline video games that had been fairly deep. Then the web allowed this space to occur. Companies like Nexon and different Korean corporations within the early days of the web pioneered this space. Then the iPhone and Facebook enabled informal video games. EA, after I was there, had an off-the-cuff video games enterprise, however it was all on PC. Facebook made the informal enterprise explode, after which the iPhone made it explode once more.

In phrases of the place Nexon is targeted, we’ve tried issues in every of those areas. We did some RPG-style story-driven video games in Japan. We did a bunch of informal stuff, various ranges of on-line and offline in informal. But we realized we stink in any respect that stuff. This is the realm the place our coronary heart actually is: deeply immersive on-line digital worlds. Last yr we bought actually critical about slicing off every thing else and stepping into this space. We suppose, additionally, that is the place the expansion is. If you concentrate on what’s occurring with the iPhone X and the consoles and cloud, it’s placing units that may play deep, immersive on-line video games within the palms of billions of individuals.

This market was solely addressable by PCs, of which about 300 million are gaming-capable PCs. The kinds of PCs that you just or I’d have. But there are Three billion-ish and rising iPhone X or higher cell units, both iOS or Android. It’s a rise of about 10X. The full Maple Story expertise is on a cell phone, and we’re not the one ones. Now that is with you always.

So what’s a deep on-line digital world? It’s like a digital amusement park. The finest analogy we are able to give you if now we have to consider this world of digital worlds, it’s like a Disneyland, a theme park. Now you don’t must get on a airplane and go keep in a lodge and cope with their miserable parking storage and take a practice and pay a bunch of cash on the door and cope with all of the stuff it’s important to do at Disneyland. You pull it out of your pocket, and in 5 seconds you’re taking part in on this digital world. In numerous methods it’s loads higher.

To get again to your query, that’s our departure level, our view of the longer term. All we wish to do is be sure we execute on this a part of the world very well. The first step is getting out of the opposite stuff, as a result of different folks do it higher than we do. We don’t suppose that’s the longer term.

GamesBeat: As far as what we should always begin seeing quarter by quarter, you simply had the quarterly outcomes are available in. Was this mirrored within the final two weeks of the quarter in a roundabout way? The complete notion that persons are locked inside, can’t do the rest, so that they’re going to play video games?

Mahoney: We had a robust quarter, particularly in Korea, however the tendencies had been already in place. This didn’t begin in March or February. It was occurring in January and effectively earlier than. Maple Story was up 137 % yr over yr in Korea. On cell it was up 185 %. I’ll must double-check these numbers, however it was only a phenomenal quarter. That was on high of Maple Story being up 69 % the yr earlier than. The quarter earlier than was means up. The tendencies had been already in place for what we’ve been seeing. It’s arduous to piece collectively what’s COVID.

Nexon CEO Owen Mahoney sees online games making permanent gains

Above: Kart Rider is certainly one of Nexon’s largest titles.

Image Credit: Nexon

GamesBeat: There is that piece the place the web cafes vaporized.

Mahoney: Yeah, however that’s solely a small a part of our enterprise. Some folks requested about what’s taking place with PC cafes, however that’s by no means been an enormous a part of our enterprise. It’s a much bigger a part of the Korea enterprise, and our Korea enterprise has been, as I stated, in phenomenal form. PC cafes are a part of it, however we are able to go across the PC cafes and direct to folks’s houses, particularly as we get increasingly more cell going.

GamesBeat: If we noticed a sure sample within the first quarter, the second quarter goes to be a lot completely different. It’s the complete shelter in place.

Mahoney: For us, it affected us fairly early within the quarter. Here’s one other attention-grabbing factor. When you concentrate on us versus linear leisure–we noticed this entrance and heart at Nexon. We’ve been speaking in regards to the demand aspect. Are folks consuming extra video games? What’s taking place with the demand aspect of issues? Well, let’s have a look at the provision aspect. We don’t have a provide shock within the sport trade, at the least not at Nexon. I’ve 1000’s of workers who, as we converse, are creating content material of their pajamas. They’re in T-shirts. They’ve bought their youngsters there. They’re not lacking a beat. We’ve been targeted on this gorgeous closely to verify we don’t lose productiveness. You fear about productiveness in conditions like this. You additionally fear about safety. But these are solvable issues. They’re not straightforward issues, however they’re solvable.

Angelina Jolie is unemployed right this moment. She could also be writing, however she’s not filming something. All of Broadway is unemployed. Everybody who works for a theme park is unemployed. Athletes, any reside actor, they’ll’t make stuff. They’re caught. Even Netflix is speaking about this now. But that’s not an issue within the sport trade. Some folks discuss mocap and stuff like that, however we haven’t seen this in any respect. Not solely will we not have a requirement shock — if something now we have a requirement profit — however we’re not having provide shock both.

GamesBeat: Because you’re Asia-focused, there’s a special sample there versus the western corporations. If the Chinese are again to work and South Korea can also be again to work, does the consumption of video games begin to change in any respect? Does it return to the place it was earlier than COVID? Or is it lingering in some methods? Are they sticking with extra gameplay?

Mahoney: Two solutions to that query. One, we haven’t seen any adjustments. It’s more durable to select this aside, is the bigger meta-point. It’s arduous to tug aside what’s COVID and what’s not. But as I stated, all these tendencies had been effectively in place lengthy earlier than COVID occurred, at the least in our enterprise, which is the one factor we are able to converse to. We gave earnings steerage that we predict goes to be fairly good, and it’s not due to COVID. It’s simply because enterprise goes effectively.

The second meta-point that I’d make is, I do suppose we’ve turned a nook or handed a milestone the place folks take into consideration video games in a different way than they used to. We’ve definitely acquired new customers. We’ve acquired completely different play kinds. One of the opposite issues in regards to the sorts of video games we make is that they’re microtransactions, not macro. You get much more bang to your buck when it comes to hours performed for video video games, and particularly on-line video games of the kind we make. As extra folks regulate to this and affiliate this with their leisure, it’s arduous to wish to do–it’s going to be completely different once they return. They’ll have a special viewpoint about how they do leisure.

It’s a bit like–I don’t know the way outdated your youngsters are, however my youngsters are actually 16 and 14. I ask them loads about what it’s like doing college on Zoom. They say, “I miss seeing my friends,” however youngsters are versatile. They’ll roll with the punches numerous the time. As lengthy as they’ve the routine, they be taught as simply as they did with an enormous campus. I’m wondering what occurs to the training trade in the long run, once we notice that we are able to ship our youngsters to a Harvard that doesn’t require Harvard. Education might in all probability use its personal Uber second. But definitely within the sport trade we’ve turned a nook and gone to a special place than we had been earlier than.

1 2 3 View All