Korea's online marketplace: The new Asian tiger?

LOS ANGELES--Driving revenues of $3.8 billion right now, and charting 15 percent annual growth, Korea's game market possesses many features that distinguish it sharply from this market's. A panel that began with cocktails and canapes and culminated in a high-powered panel sought to address and explain these differences, in the hopes of eventually building stronger partnerships between US and Korean video game companies.

The panel itself--titled "Global Gaming: Korea Challenges the World"--was an E3 panel, but it did not occur at the convention center. It was instead held at the Wilshire Grand Hotel about half a mile away on Wednesday night of E3 week. It was sponsored by the Korea Game Development and Promotion Institute and the Korea Culture and Content Agency.

With an opening speech from Youn bok Lee (Korean Consul General), a welcoming speech by Young Jin Kwak (Director General of Korea's Cultural Industry Bureau), and an introductory speech by Jong Sik Woo (President of KGDI), attendees couldn't say that they weren't well prepared for the topics the panelists addressed later. All three men expressed their confidence and pride in the Korean technology market and painted the video game industry as the gem within that market, encouraging the construction of long-lasting and profitable business relationships with other global companies.

Following their brief speeches, a five-minute promotional video was shown--a pitch for "GStar 2005," essentially a Korean E3. The video promoted the expo/conference as a way for developers and publishers to showcase materials and form partnerships and facilitate business discussions. (This conference will be held in Seoul in November of this year.)

The tightly scripted event then moved on to the panel discussion, moderated by IGN editor-in-chief Richard Aihoshi. Panelists consisted of Robert Garriott, president of NCsoft USA; Richard Kim, CSO of Gravity Interactive; James Wee, executive vice president of SkyZone Entertainment; Kyu Chang Lee, general manager of GameVil Inc.; and U Gin Jeon, director of Mirinae Corporation.

Aihoshi asked questions that guided the panel into identifying the nuances between the Korean and US markets. On a fundamental level, they all highlighted Korea's enormous broadband penetration--about 70 percent of homes--and its success in being the first country to nationalize 2.5G wireless service.

With such a robust bandwidth, the nature of the Korean video game business is fundamentally different and almost entirely reliant on download sales rather than the more traditionally "American" retail sales. "In a sense," said Kim, "[Korean] Internet cafes are playing a role as a retailer, like EB Games here, if you will."

The technological infrastructure only partially explains the explosive success of the MMOG Lineage, though (and the popularity of subsequent MMOGs). The culture of Korea and other Asian countries allows for powerful word-of-mouth marketing. Said Wee, "If you really reflect on it and think about the regions in which [Korean online games] are successful, they're primarily homogenous cultures, which, I think, lends itself well to the phenomenon of viral marketing."

Kim agreed that the Korean society has a lot of herd mentality, albeit one with strong personal bonds between close-knit groups of friends. "You go to the same school," he said, "you hang out with the same guys, and you know exactly what your neighbor is eating tonight, and you're very afraid of being left out."

Online games also tend to be more of a time investment, and Garriott believed that American gaming culture had trained gamers to enjoy more visceral games, both because of the prevalence of consoles (which, until recently, were illegal in Korea) and because of the immediate-gratification gameplay that these console games often have to offer.

Garriott also believes that it was no coincidence that the popularity of casual Korean mobile games was growing at the same time that they've allowed consoles back in. Accordingly, said Garriott, he saw a more global game culture developing: "I think we're going to see sort of a leveling between the markets or a shift that will bring the markets closer together in a more homogenous way." In this way the two markets will "mature" together.

Garriott discussed the failure of Lineage to take hold in the US as a byproduct of marketing and distribution. Not packaging the game (as one to be sold and distributed via the retail channel), he said, had a detrimental effect, as doing so seems to add credibility to the game's design.

Furthermore, speaking to his earlier point about American twitch culture, he said that Lineage required a two- to three-hour learning curve for it to be fun, and since the game was a free download, players were unwilling to invest the time. "After every 20 minutes," he lamented, "we lose half our customers." Interestingly, Americans seem to need a monetary investment in order to also invest their time in a product.

Kim echoed Garriott's point that Lineage itself was a fine game. "The question should be 'What's wrong with the US and European market?' not 'What's wrong with the Korean game?'"

With an increasingly global games market catering to more-casual users, though, the question may soon be moot.