Nexon: An Asian Pioneer of Free Games Aims for a Bigger Profile in the West

MARCH 19, 2014, 6:41 PM 1 Comments
An Asian Pioneer of Free Games Aims for a Bigger Profile in the West
By NICK WINGFIELD
SAN FRANCISCO — It could be argued that Nexon has changed how games are experienced more than almost any other company. Yet relatively few people in the United States even know it exists.

Founded 20 years ago in South Korea,Nexon pioneered a novel way for people to pay for its online games, letting them play free but giving them opportunities to spend small amounts of money here and there to decorate their avatars with new hairstyles, buy souped-up vehicles and so on.
Most people didn’t pay, but enough did that it became a successful business for Nexon (and a clever way of coping with high rates of software piracy in Asia). Nexon had more than $1.5 billion in revenue last year.
The “freemium” model that Nexon pioneered has now seeped into nearly every crevice of the games business, from Zynga; to Supercell, maker of Clash of Clans; to King.com, the company behind Candy Crush Saga, which has filed for an initial public offering. Tencent and other giant Chinese game companies are devotees of the freemium model.
Nexon has been taking steps to raise its profile in the United States in recent months, the most notable of which was the promotion of one of its executives, Owen Mahoney, to chief executive, a change that becomes effective next week.
With the move, Mr. Mahoney, a former top deal maker at Electronic Arts, will become one of the few examples of a Westerner who is promoted to lead an Asian company. (Howard Stringer, the former chief executive at Sony, was another.) Mr. Mahoney, a native of San Francisco, is fluent in Japanese, helpful because the company relocated its headquarters to Tokyo before listing its shares on the Japanese stock market a little over two years ago.
In an interview on the fringes of a game developer conference here, Mr. Mahoney said the company was developing new games with partners that it believed would expand its audience in this country. It has invested in several game development companies in the United States, including Rumble Entertainment, SecretNewCo and Shiver Entertainment, the latter two of which were formed by former Zynga executives.
Nexon has had “quiet success” in the United States already withMaple Story, Mr. Mahoney said. But it has also had misfires here, too, in the past.
Nearly 93 percent of the company’s revenue in the fourth quarter was from China, Korea and Japan — its biggest markets, in that order — with most of the remainder from Europe and North America.
Mr. Mahoney said Nexon did not believe it would need to alter its games radically to make them appealing to both Western and Asian audiences, though there will need to be subtle modifications to art and game play.
For example, Korean gamers have a higher tolerance than Westerners do for performing repetitive tasks within games, called “grinding,” without receiving rewards, he said. Westerners like their macho warriors to look a certain way, with tattoos on their necks and the rest of their bodies. Neck tattoos don’t work for Japanese game characters, unless they are yakuza, he said.
“We shouldn’t try to sell kimchi to people who just want to eat hamburgers,” Mr. Mahoney said, quoting Nexon’s previous chief executive.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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