South Korea: Underrated Leaders in Web3 Gaming
The country has pioneered some of the biggest movements in gaming history. Now, it's right at the forefront of another one.
South Korea, a relatively tiny island nation with less than 1% of the world's population, wields a disproportionately large influence on some of the world's most important sectors. South Korean companies, products, and culture have ingrained themselves into the lives of billions across the world, spanning consumer electronics, automobiles, mobile phones, music, and pop culture.
Given their first-rate infrastructure and lightning-fast internet speeds, it's no surprise that South Koreans have been at the forefront of some of the largest movements in tech over the past few decades. Firstly, they've made a significant impact on the global gaming industry for years. Additionally, some of the most extreme (and unfortunate) experiments in the blockchain space have emerged from South Korea.
Naturally, one would assume that South Korea would also lead the sector where gaming and blockchain intersect: the always-interesting world of crypto gaming. While this is true, surprisingly, it is not widely discussed.
In this article, we aim to change that. We delve into the emerging crypto gaming movement in South Korea, examining how incumbent and new players are incorporating blockchain technology into their games. We also analyze the regulatory landscape and explore how all of this could potentially propel South Korea to capture yet another industry.
Gaming History South Korea
South Korea takes gaming more seriously than most other countries, making it an integral part of their culture that is embraced by all, from gamers to the government. This unique societal acceptance towards gaming has placed South Korea at the forefront of most major paradigm shifts in the gaming industry.
We highlight some important milestones and developments in Korea’s history of gaming. More detailed breakdowns can be found here, here, or here.
The 80s and 90s: Console Gaming and PC Gaming
South Koreans were first introduced to gaming via small scale imports of Japanese and American consoles into the country from companies like Atari and Nintendo.
Despite initial success, foreign companies like Nintendo and Sega found it hard to scale in Korea. Thus, they licensed out their consoles to Korean companies like Samsung and Hyundai (!!) for distribution. By the early 90s, consoles began losing popularity and there was a huge decline in sales.
Personal computers, which were in prohibitively expensive, became affordable. Koreans developers embraced PC game development and the first locally developed Korean gaming hit, Lineage by NCSoft, set the stage for a remarkable period in Korean (and global) gaming history.
The 2000s: Online Gaming, PC Bangs, and Esports
The government makes massive investments to bring broadband internet to every corner of the country. This, with the increasing popularity of home PCs, sets the stage for online gaming to become viral in the country.
PC bangs, LAN gaming centers where gamers gather and pay an hourly fee to play games, pop up across the country. Offering better computers, food and drinks, and smoking sections, PC bangs became social hang out spots for gamers, increasing the amount of time they spent within games. Games recognized this and incentivized players to play from PC bangs rather than from home.
The Korean e-Sports Association (KeSPA), a government committee, was established in 2000 to regulate and promote esports in South Korea.
Korean developers started making world class games like Lineage II (sequel to Lineage and winner of a Presidential award!), Ragnarok Online (25 million subscribers), and MapleStory (a free to play game in the early 2000s!)
A combination of fast internet, the rise of PC bangs, government involvement, and top games make South Korea the first true esports powerhouse, years ahead of other countries. Some believe that the term “esports” was actually coined by folks at KeSPA!
Esports, fuelled by television broadcasting and the rise of gaming celebrities, becomes a media and cultural phenomenon in South Korea. Korea’s Ministry of Culture and Tourism sponsors the World Cyber Games alongside Samsung and Microsoft.
Starcraft, released in 1998 by Blizzard, is the epitome of the Korean esports movement. Its popularity led to media companies spinning off dedicated channels to the game, corporate behemoths like Samsung sponsoring tournaments, and massive screenings of tournaments at the country’s most popular stadiums and beaches.
The 2010s: Mobile Gaming and Free to Play
Mobile gaming rose to sudden prominence post the launch of the iPhone. The rise of free to play mobile games was met with a lot of resistance amongst traditional game developers and players. South Korea, on the other hand, embraced the paradigm shift.
Major companies like Com2Us, Netmarble, Nexon, and Kakao, all entered the mobile market early and delivered successful games.
Historic PC hits like Lineage got mobile versions that became very popular and lucrative.
Koreans, along with neighbors Japan, become pioneers of the “gatcha” (loot box) monetization mechanic now a staple of thousands of successful mobile games.
Krafton releases PubG in 2018, ushering in the era of battle royale games. At its peak, 65 million people around the world played the game daily and it became one of the highest grossing games of all time.
Since the turn of the century, Korea has demonstrated a remarkable influence on the gaming industry, fueled by consistent innovation and a pure passion for gaming. Their forward-thinking approach has put them years ahead of other countries, constantly exploring and cherishing major industry shifts.
That finally brings us to web3.
Web3 Gaming in South Korea
Most of the gaming industry agrees that blockchain technology will play a significant role in the next generation of video games, particularly on mobile platforms. The gaming industry's growth is flatlining after the frenzied Covid-induced boom, and the lucrative monetization models of free-to-play gaming are on the decline due to regulators' increased emphasis on online privacy and Apple's tightening ecosystem support for ads.
For studios and publishers, NFTs and tokens offer a lifeline, providing new monetization opportunities previously impossible while also empowering gamers (in theory). However, Western studios have been slow to embrace this change, partly due to pushback from gamers who are quick to reject any game that integrates blockchain technology.
In contrast, South Korea's history of quickly embracing and leading paradigm shifts in the gaming industry makes it unsurprising that the country has been quick to embrace web3 games. However, the prominence, rapidity, and widespread nature of this movement is remarkable.
Web2 companies moving to web3
Here’s something truly astonishing: almost every single major incumbent Korean studio, publisher, or gaming company is publicly associated with blockchain games.
That level of adoption from legacy gaming studios is unlike any other country. In a world where gaming giants like Steam and Minecraft have very publically distanced themselves (and in some cases, outright banned) from the integration of blockchain technology in games, the Koreans are widely and openly embracing them.
Some of these forays, like Netmarble’s games King of Fighter Arena and Ni No Kuni or Kakao’s Birdie Shot, are arguably few of the best mobile web3 games currently available. Amid a dearth of quality games in the industry, Korean publishers are standing out for their legacy of delivering exceptional content.
Web3 Native Companies
A wave of fresh studios, publishers, and infrastructure providers have also entered the market. Among the most famous Korean web3 games is League of Kingdoms (LoK), an OG crypto game. LoK resembles successful web2 games such as Clash of Clans and was the first decentralized MMO strategy game. Three years after its launch, it remains popular and has a strong, dedicated player base.
Recently, web3 studios such as Epic League and Catze Labs have emerged, with the former developing accessible and enjoyable mobile games like Dark Throne, and the latter building hyper-casual games like Trouble Punk.
Web3 native ecosystems are also on the rise, providing not only their own games but also full-stack support for studios transitioning to web3, including infrastructure, NFT marketplaces, and marketing. PlayDapp and Iskra are two examples of such ecosystems.
Lastly, there are companies such as Klaytn that specialize in fundamental infrastructure - the blockchain itself - while also incubating and investing in projects that build upon it.
In it together
The collaborative nature of the Korean blockchain gaming revolution makes it an outlier compared to other countries. Korean companies, including those making their own games, actively invest in their peers, fostering tight connections within the ecosystem. VCs, legacy companies, new studios, and infrastructure providers are all working together to grow the ecosystem.
The unique ecosystem may be due to the government's restriction of crypto game promotion within Korea. As a purely export-driven market, it makes more sense for companies to collaborate and grow the sector together than to compete when it is so young and unproven. This approach is similar to that taken by Finnish studios like Rovio, who also operated in a majorly export driven environment.
Korean blockchain gaming companies face significant challenges, despite promising early signs of a mass shift to blockchain games. First, the industry is too early in its development. For blockchain games to be successful, they must offer a unique experience that traditional games cannot provide. This requires innovation in game modes, monetization, in-game asset management, and other areas. The first generation of Korean web3 games are innovative, but simply forcing web3 elements into tried-and-tested web2 mechanics is unlikely to work.
Secondly, the crypto industry moves astonishingly fast. Ideas and models become outdated within months, and trends come and go in a blink of an eye. Korean companies, especially legacy ones, have been slow to keep up with the pace. For example, some studios tried selling $200 NFTs months after it was evident that such a strategy would not work. Companies must learn from these mistakes and innovate rather than follow others.
We believe these challenges are not existential. Korean companies will learn from their mistakes and use their deep pockets and history of innovation to eventually create world-class blockchain games. However, it is still too early in the space to expect such games right away.
South Korea's gaming industry, the fourth largest globally, has always been ahead of the curve, spearheading massive movements in gaming. Now, the industry's established players, as well as several exciting new ones, are directing their attention towards blockchain games. More importantly, it is a collective effort - they’re all in it together.
Given their track record, it's likely that South Korea will be the birthplace of some of the first true blockbuster blockchain games. It's surprising that this significant anomaly in the crypto gaming space isn't being discussed enough.
It's time to take notice.
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