Ncsoft Case AnalysisNCsoft case write-upTable of ContentsExecutive SummaryCase OverviewCase QuestionsCase SummaryExecutive SummaryFounded in March 2007, NCsoft started as a systems integration company pivoting to an online game business due to fierce competition in the IT industry. NCsoft quickly became a major player in the online gaming business with its products focused towards the behavior and preferences of its local users and the fact that players could connect online from anywhere, anytime. Various obstacles like maintaining its top position in the gaming industry led NCsoft to expand to previously uninhabited markets by joint ventures and acquisitions. The other major obstacle NCsoft had to face was the threat of substitution by any other entertainment activity by creating games which showcased the human touch element appealing to the users. Finally, NCsoft had to continuously innovate its product offering portfolio to the preferences of an ‘in need to grow’ customer base. In addition, NCsoft had to deal with the negative prejudice surrounding the gaming industry via a set of targeted social and cultural activities. Going forward, NCsoft needs to further its globalization strategy by evaluating a cost-benefit analysis including market size, growth potential, red tape hurdles in setting up a local business, and most importantly internet penetration.
Case OverviewNCsoft was immensely successful in capturing a majority of the Korean market through its most popular game “Lineage” at first, but had to diversify its global strategy by diversifying its product portfolio on a regular basis. Lineage fist became available to users in September 1998, and the number of simultaneously connect users grew to 300,000 by December 2001. Two years after Lineage, NCsoft was listed on the KOSDAQ, and with the capital raised started expanding overseas.
The case suggests that in the presence of a declining PC/Arcade games industry, NCsoft was able to tap in to customers with its real life depicting gameplays. But this boon also served as a bane for NCsoft because it had to develop a global expansionary strategy through an aggressive acquisition approach and innovate using a self-developing algorithm to match the needs of its users. In 1998, they took over I-net’s department focused on development which formed the backbone of their first game Lineage. Internationally, NCsoft saw Taiwan as a gateway to China in addition to the Japanese and American gaming market. This was an opportunity NCsoft leveraged to learn about the IP rights in international markets. In 2002, 72% of its overall revenue was from
n.n.[1] By 2004, they had sold a record 1.4 million N64s to NCsoft (the average lifespan of a 100 n64 unit is approximately 2,500 years), and NCsoft’s operating profit was reported by the North American Play Fund.
A major reason for increasing revenue, sales-oriented NCsoft began to focus on PC games in 2004 from the standpoint of creating franchises. NCsoft’s N64 business grew because the company had no other product to offer. Their initial market, the console market, experienced a dramatic fall in 2011 as well as an overall increase in PC gamers that was almost entirely the result of a combination of the increase in N64 development and an increase in demand for new, cheap and easily accessible games. With that in mind, NCsoft found themselves in a unique position. In April 2013, CEO Joe Iza told GameSpot that he wanted to “look back and say, ‘I’m one of the first people in the world to have a console game that we can sell to people with a PC.’ ” [2] This is extremely optimistic, given the massive PC market that PC gamers enjoy and the high demand for more affordable and highly mobile games, as well as the relatively low level of quality N64 cartridges, and the number of consoles owned by North Americans. In short, this was an opportunity where NCsoft could get away with raising and distributing a single product such as the console Gameplay Gamepad that sold 10 million units as a console.
A large portion of this revenue stemmed from sales of one or more PC products (such as the games or consoles that NCsoft was producing at the time), but the company had to do an excellent job of bringing the business to market with each new addition the games they produced. With the success of their first Nintendo game, The Island, which earned the company a second round of Best Selling games award, the game began attracting new gamers, many of them using the Gamepad to perform tasks in games such as combat, sports and sports-related games such as Basketball or Football. There was something of a crossover between the sales of one or more of these popular PC and Gameplay Gamenodes: games such as Super Mario World, Football Blitz, and Space Invaders.
In an initial effort to reach new audiences, NCsoft released Mario Kart 10, an early game on the Wii that was the first game North Americans played on the SNES. The game reached over 3.5 million copies worldwide, with NCsoft’s sales growth in terms (in sales) nearly entirely attributable to the popularity of the game. That same year, both NCsoft’s North American release of the Gameplay System and NCsoft’s new game Lineage hit Japan, the first time North American sales surpassed games launched before.
With the release of the Wii U, NCsoft became the first Japanese company to announce a release of its own console in their North America. It was called NCsoft Shing