Game Industry's Widening Performance Gap Fuels 'Negative' Fourth-Quarter Outlook

CBI Outlook at 99.2; Revenue Only Positive Category
New Releases from Midsize Firms Like Kakao Games and Com2uS Key to Outlook
"Government Support, Including Tax Benefits, Must Be Put in Place"

As the performance gap between large and small and midsize companies in South Korea's game industry widens, pessimism about business conditions in the industry in the fourth quarter of this year is spreading.

According to the “Content Industry Trends and Business Sentiment Index (CBI) Analysis” report published by the Korea Creative Content Agency on October 12, the CBI outlook for South Korea's game industry in the fourth quarter of this year stood at 99.2, down slightly from 100.0 in the previous quarter. The CBI is an index that measures content companies' perceptions of and outlook for business conditions, assessing business conditions in each sector on a seven-point scale. A score below 100 means that more companies expect business conditions to worsen than in the previous quarter.

By category, revenue was the only measure to exceed the benchmark, at 100.5, pointing to an improvement from the third quarter. By contrast, exports and investment both stood at 97.8, the lowest readings among all categories, extending their gloomy outlooks from the third quarter.

The main reason cited for the negative outlook is the stark performance gap among game companies. Large companies are driving the industry's growth in scale with globally successful titles. KRAFTON posted revenue of KRW 1.2902 trillion and operating profit of KRW 410.9 billion in the second quarter of this year, setting a new record, buoyed by the success of new titles such as “Subnautica 2.” NC also posted operating profit of KRW 173.9 billion, supported by strong PC game performance and an expanded share of overseas revenue (52%). NHN, meanwhile, achieved its highest-ever quarterly operating profit of KRW 57.9 billion as its game and payment businesses both grew.

The situation is different for midsize and small game companies. Kakao Games posted an operating loss of KRW 23 billion in the second quarter of this year amid a lack of major new titles, marking its seventh consecutive quarter in the red. Wemade also swung to an operating loss of KRW 21 billion in the second quarter. These midsize companies are focused on reducing losses through “cost efficiency measures,” including cuts to labor and advertising expenses, leaving sentiment about investment and employment conditions across the industry significantly weaker. As a result, whether midsize companies seeking a second-half rebound can produce hit titles is expected to be a key factor shaping the industry's future.

Industry representatives say companies' expectations are falling as government support measures have yet to materialize. The CBI outlook for the game industry was positive at 102.4 in the first quarter of this year, but it has continued to decline as tangible measures to promote the industry, such as tax benefits, have failed to materialize.

The “2026 Tax Reform Proposal” announced by the government in August once again excluded tax credits for game production costs. Films, dramas, online video services (OTT), and webtoons currently qualify for tax credits of up to 30% of production costs for each project. However, games, which account for about 60% of Korean content exports, are excluded from the support program, fueling strong criticism within the industry over what it sees as discriminatory treatment. In addition, an amendment to the Game Industry Promotion Act, which includes plans to establish a Game Promotion Agency, has been stalled in the National Assembly for more than a year.

“To restore vitality across the industry, the government needs to quickly put in place concrete support measures, such as meaningful tax benefits to encourage new game development and steps to stimulate investment,” an industry representative said.

This content was produced with the assistance of AI translation services.