Nexon America Continues To Bleed Money

We reported Nexon's Q4 and FY2016 earnings last week, but its worth revisiting the subject to take a closer look at their North American results.

Nexon helped introduce Western gamers to the Free to Play (F2P) model way back in 2005 with the release of MapleStory. The tsunami of F2P Korean and Chinese MMORPGs that followed not only upended the MMORPG genre, but the gaming industry as a whole.

Despite its massive impact on the Western market, Nexon's North American division has found it difficult to turn a profit. According to Nexon's 2016 Consolidated Financial Results, the North American segment reported losses of about $42,500,000* on revenue of $84,700,000. And 2016 wasn't a one-time disaster. The segment has reported loses through 2011-2015. The one exceptional year was 2010 when Nexon America managed to turn a cool profit of $1 million. Unfortunately, public records don't go further back since the parent company only went public (listed in Japan, oddly) in 2011.

Nexon's inability to engage with Western gamers (at least profitably) is not limited to North America. Their European division also posts consistent losses on low revenues. This is in stark contrast to Nexon's massive and growing revenues in East Asia. Dungeon Fighter Online serves as a good example of this dynamic. The game failed to catch on and was dumped by Nexon America in 2013 despite still beingthe #3 most profitable MMO in the world with nearly $1 billion of revenue in 2016 alone. Other Asian blockbusters like Kart Rider fizzled in the West as well.

To Nexon's credit, they have shown no sign of abandoning the Western market. They continue to bring their first-party games over while also investing in local studios. Hyper Universe, a 2D MOBA and MapleStory 2 are expected to release this year. The big name to watch in 2017 is LawBreakers, a sci-fi first person shooter developed by industry veteran Cliff Bleszinki and his new studio Boss Key Productions. Nexon is a minority owner of Boss Key Productions and the global distributor of LawBreakers. Nexon CEO Owen Mahoney has made it a priority to partner with Western studios to better serve American and European tastes. A previous venture of this nature fell apart when Dirty Bomb developer Splash Damage ditched Nexon and chose to self-publish. Time will tell whether Nexon can turn things around. As-is Western operations are losing money and the losses have been accelerating.

Nexon has as pretty busy year planned for North America, time will tell if their strategy bears fruit.

*All dollar amounts attributed to Nexon in this article were converted at current exchange rates from the originally reported Yen figures. These numbers should serve only as an estimate as the exchange rates have swung considerably during the 6 year period covered. For more information please see the charts below or visit Nexon's Investor Relations page.