The MMO Investor #4 – Many MMO Developers Are 1 Hit Wonders

This week we're going to take a look at the importance of legacy titles for MMO developers. At first glance it may seem like MMORPG companies like NCSoft and Nexon are diversified companies with vast portfolios of games. This is largely true, but most gamers don't realize that despite having numerous titles, most companies get the bulk of their profits from a single game, usually an older one. Let's take a look at some of the biggest studios to see what I mean:

NCSoft – Lineage 1 (42.5% of revenue)

Despite having a large portfolio of games from Wildstar to Aion to Guild Wars 2, Lineage 1 makes up a whopping 42.5% of the NCSoft's revenues. In fact, Lineage 1 earns more money than Wildstar, Guild Wars 2, Aion, and Lineage 2 combined. Take a look at the chart below to see just how important Lineage 1 is to NCSoft. Wildstar only represents a tiny fraction of the company's revenues, but this figure may change with the free to play launch of Wildstar later this year. It's amazing that a game released in 1998 still brings in so much cash for NCSoft.

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Nexon – Dungeon Fighter Online (62% of revenue)

Nexon is very well known in the West, but most people don't realize that North America makes up a tiny portion of Nexon's revenues; less than 5% of the company's revenues come from North America. Dungeon Fighter Online alone makes up ~62% of the entire company's revenues! Most of this revenue is derived from China, where the game peaked at over 3 million peak concurrent users a few years back (2012), but continues to maintain strong momentum in the region. Nexon has dozens of titles and is dabbling into mobile with games like DomiNations, Mabinogi Duel, and Legion of Heroes, but none of these titles come close to what Dungeon Fighter Online brings in. Since it's release in South Korea back in 2005, the game has been a money making machine for Nexon.

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SmiteGate – CrossFire (80% of revenue)

CrossFire is a game that most players in the West aren't too familiar with, but it's an absolute juggernaut in the free to play world. It's basically the Counter-Strike of Asia; as in, it's the most popular FPS in both China and South Korea.The game brought in ~$897M in 2014 according to SuperDataResearch, which is ~80% of SmileGate's revenue. SmileGate, the South Korean firm, develops a handful of other titles such as TalesRunner, Azera, Rusty Blood, Chrono Saga, and a bunch of other games.

Besides the studios mentioned above, companies like Blizzard Entertainment also heavily rely on older titles. World of Warcraft is over a decade old, but it's by far Blizzard's most profitable title, bringing in over $700m a year in revenue. Blizzard started to diversify their revenue stream recently with the launch of Hearthstone and Heroes of the Storm, so their reliance on WoW should decline in the years to come. It's remarkable that so many developers still rely on their older titles to bring in revenue. Will any new game from NCSoft replace Lineage as the company's biggest cash show? Maybe Lineage Eternal, but unlikely. I suspect Nexon will continue to rely on Dungeon Fighter Online, while SmileGate relies on CrossFire, and Blizzard on World of Warcraft.

Sources:
NCSoft Investor Presentation Q2 2015
SuperDataResearch 2014
SmileGate 2014 Earnings