KB News Desk
Wemade’s planned sale marks shift from minority investments to management control, raising fresh questions over future of Korea’s game industry
For years, Chinese investment in South Korea’s gaming industry followed a familiar formula. Chinese technology giants provided capital, secured publishing partnerships and accumulated minority stakes in leading game makers, while Korean founders of each game developer retained management control. This pattern, however, recently took a vigilant turn, putting stakeholders on notice.
Wemade — a Korean game developer best known for its massively multiplayer online role-playing game, or MMORPG, franchise the Legend of Mir — announced on June 30 that its founder Park Kwan-ho had agreed to sell his entire 39.33 percent stake in the firm to NeoPulse, a Korean subsidiary of Hong Kong-based investment company Shengsong Investment in a deal worth about 920 billion won ($617 million). According to Wemade, NeoPulse has close ties with Alibaba and China’s major gaming companies.
Once the transaction is completed in October, NeoPulse will become Wemade’s largest shareholder with a 40.25 percent stake, marking the first case in which a China-linked investor has taken management control of a listed Korean game company since Actoz Soft was taken over by then-Shanda Games, which has changed its name to Shengqu Games, in 2004.
Some gaming industry stakeholders point out that the Wemade buyout could be the start of a new trend for Tencent, which already holds minority stakes in Korea’s major game companies.
Tencent, a Chinese multinational technology-to-entertainment conglomerate also known as the world’s largest video game publisher, held a 14.4 percent stake in Krafton, a 34.48 percent stake in Shift Up and an 18.38 percent in Netmarble through its investment arms as the second-largest shareholder of the three Korean firms at the end of the first quarter this year.
As Krafton Chair and founder Chang Byung-gyu owns a 15.6 percent stake, Tencent trails him by just about 1.2 percentage points in ownership of the game developer with its megahit battle royale-shooter PUBG: Battlegrounds.
On top of acquiring shares in Korean game firms, Tencent reportedly ran for the potential bid to acquire the stock of NXC, Nexon’s holding company in 2019 after the passing of Nexon founder Kim Jung-ju. The deal was never made.
Although Tencent has largely refrained from intervening in day-to-day management after investing in Korean companies, experts point out that the Wemade acquisition involves the transfer of management rights alongside ownership and its Legend of Mir franchise remains one of the most successful video game intellectual properties in China.
“Blatantly speaking, (the Wemade buyout) is usurpation of (Korea’s) game sovereignty,” said Kim Jong-tae, a professor at the School of Game at Dongyang University.
“It’s that serious right now and I think we should all feel that urgency. … It’s not just about (Wemade’s) IP but the operational experiences and log data of its users. The new (Chinese ownership) can dig deep into the past data and cater to their taste.”
Chinese game company Ourpalm is the second-largest shareholder of Webzen, a Korean game developer known for its MMORPG MU being one of Korea’s top hit IPs in China, with a 20.66 percent stake.
“It might not be possible, but I think we should suspend or delay the Wemade deal,” Kim said. “In order to prevent such a takeover, we must designate gaming as a national strategic industry and the government should look into a sizable buyout.”
In spite of the various perspectives on the Wemade deal, officials at Korean game developers note that the immense size of China’s gaming sector and its strong financial backing offer an attractive option for local companies seeking to expand their global presence.
“The number of younger Koreans who enjoy domestically developed games has been declining over the past several years,” an employee at a Korean game company said.
“The Chinese market is difficult to enter but once you can get in, it opens up a whole new window of possibilities, especially for mid- to small-sized game developers. … As the (Korean) government and politicians do not seem to care much about the domestic gaming industry, game firms face survival on their own and Chinese capital is certainly a way to do that.”
