CFO Owen Mahoney talks to Develop about the publishing giant's plans for Western expansion, and what Europe and the US can learn from Asian developers
One of Asia’s largest games companies, Nexon has had has huge success in the free-to-play market, and the publisher is now looking to further increase its stake in the Western market.
The Japan-based firm has made a number of acquisitions in Europe and North America in recent times, making investments in the likes of Rumble Entertainment, Brian Reynolds’ SecretNewCo and John Schappert’s newly formed PC and mobile outfit Shiver Entertainment.
Despite having success in the East with its ten-year hit title MapleStory and Dungeon Fighter, the latter of which has generated over $2 billion in revenue for the company, Nexon is looking to create games better tailored for the Western market.
While the company’s combined business operations in the US and Europe total just over $100m, Nexon chief financial officer Owen Mahoney believes there is still room for growth.
A huge opportunity
Speaking to Develop, Mahoney says although the company has built up its publishing operations in the regions, the firm needs to invest in new IP created by Western developers, and with an increased understanding of three free-to-play markets and improvement in connection speeds, now is the perfect time to make its move.
“We know there’s a huge opportunity in the market, and there’s a much better understanding of free-to-play out there now. That’s number one," he says.
“Number two is, broadband speeds do not really favour free-to-play in the western markets until recently. My connection in San Francisco is probably 5mb to 8mb on a good day. My connection in Tokyo where I have an apartment is about 100mb. So we’re talking about an order of magnitude difference.”
The rise of free-to-play in the West, spearheaded by Zynga at the height of its powers, shows that the US and Europe haven’t been completely oblivious to the opportunities in free-to-play. The success of Boss Alien’s CSR Racing and Clash of Clans by Supercell – a company which just sold a 51 per cent stake in its business for $1.5 billion – shows developers are already tasting its successes.
But Mahoney says despite a few popular titles, there is a gap in the market for online, immersive free-to-play content, rather than the arguably saturated casual sector. He explains there is a paucity of free-to-play games targeted at immersive gamers who are after a longer, more involved experienced than the traditional Western-style short play cycles.
“Overall I’d say there is much more demand from players who want to play immersive, free-to-play content,” says Mahoney.
“There’s much more of a demand for that than there is a supply of great games, and we think the best way to approach it is the same way that we have in other completive markets like Korea and China, which is to bring extremely creative, fun, unique games to the market. If they’re fun and unique, they’ll find a market, they’ll find good players who want to play them, and then we just super-serve that market really, really hard. By serving players well then we’re going to do well as a company.”
Mahoney says this ‘super-serving’ of players is why Nexon has had such big success in the East, treating games as a service, rather than “fire and forget”.
Too much monetisation 'a fundamental mistake'
He says there are many other lessons US and European developers can learn from their Asian counterparts as well when it comes to designing free-to-play games.
The biggest mistake Western developers can make, he says, is to treat the freemium business model as a way to monetise your users all the time. Mahoney says through many years of trial and error, Nexon has learned it is important to look after the 90 per cent of consumers that aren’t paying, as well as the ten-to-11 per cent of paying users Nexon receives.
He adds these non-paying players help build a vibrant community, without which the game world would be a lot less fun for everyone.
“I think the fundamental mistake that a lot of people who look at free-to-play for the first time make is they try too hard to monetise the user too perfectly,” he says.
“What we’ve learned from a lot of experience in trial and error is actually what you need to do is take care of all the players, meaning very much including the 90 per cent who are not buying anything. You need to really super-serve those players as well.
“It’s a big mistake to try to monetise users all the time. I would posit that maybe that’s the single biggest mistake that companies who are new to free-to-play make, they look at it as an opportunity to monetise like crazy their customer.
“Customers are smart, and they recognise they are being pushed to buy stuff, and they can’t progress in the game unless they buy stuff, which means they can’t have fun in the game unless they buy things right away. This isn’t really a free-to-play game, this is a pay-to-play game, but you’re calling it a free-to-play game.
“I’ve seen even very recently from some very big publishers, the single biggest critique of some of those games is, why don’t you just make me pay up front for the game, I’d have more fun, than to put all this stuff behind little paywalls, because it’s not really free-to-play.”
Already on the investment trail, and backed by over a decade of experience already in the burgeoning free-to-play sector, you can expect to hear more from Nexon in future as it aims to break the Western market.