The MMO Investor #2 - A Look at Nexon

Nexon is one of the largest free to play game developers in the world with numerous iconic franchises including MapleStory and Dungeon Fighter Online. They were one of the first companies to launch free to play games in the West with the launch of “Global MapleStory” in 2005 and are considered market leaders in the free to play space, but exactly how big is Nexon? Big. Despite being a Korean company, Nexon has their headquarters in Tokyo, Japan and are publicly traded on the Japanese Stock Exchange. They generated ~$1.4 billion USD in revenues in 2014 and have a market capitalization of ~$5.5 billion (Market capitalization is a fancy way of saying “the company is worth” In this case, all of Nexon is worth $5.5 billion as of August 12, 2015. This can be calculated by multiplying the price of the stock by the number of outstanding shares). After all expenses, Nexon made a profit of $235.9 million in 2014. Not too shabby; Free to play is big bucks!

Ok, so Nexon made $1.4 billion in 2014. So where did that money come from? You might be surprised.

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According to the chart above (Pulled from Nexon's Q1 2015 investor presentation), most of Nexon's revenue comes from China and South Korea. The company's U.S. operations only make 3% of their revenues! Europe+others comes in at 3% too (so U.S.+EU is 6%). No wonder Global MapleStory (GMS) and European MapleStory (EMS) are slow to update! Given how tiny the U.S. and European markets are for Nexon, I'm surprised they focus on them as much as they do. Nexon has been trying to grow their Western operations for some time now, but it doesn't seem to be working. Dirty Bomb seems to be doing well and Nexon's pipeline looks quite good, so the perhaps the U.S. and Europe will contribute more meaningfully to Nexon's bottom line in the future. Ok. So now we know which regions bring in the big bucks (China and South Korea). But which games are the most profitable? Well. That one's easy. Dungeon Fighter Online is by far Nexon's most successful game; in 2014, it brought in ~$891M USD in revenue. That means Dungeon Fighter Alone makes up 63.6% of Nexon's revenues in 2014.

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Dungeon Fighter Online brings in the big bucks, but what does the future look like for Nexon? Surprisingly, only 6% of Nexon's revenues come from mobile as of Q1 2015, but this is expected to change dramatically in the coming years. A mobile version of Dungeon Fighter Online is set to launch later this year in Asia (and hopefully world-wide later). A quick glance at the Nexon's pipeline (pictured above) shows a huge emphasis on mobile gaming going forward. Another interesting tidbit from Nexon's investor presentation is that the company is focusing on growing their Western business.

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The chart above shows the company's expectations for revenue growth in the future. The blue section highlights revenue generated from Western countries; so clearly Nexon expects their Western business to grow significantly in the future.

Want to learn more about Nexon? You can look up at their stock here and see their investor relations page here. Most of these financial metrics are meaningless to us gamers, but it's interesting to see where the company sees itself in the future, because it can reveal what gamers should expect from the company. In the case of Nexon, I learned that the company will be making a huge push in the West by either launching new games or updating their older ones. Nexon already confirmed that Ghost in the Shell Online will be launching in the U.S. before it launches in South Korea, so clearly they're interested in appeasing their Western players.