There is more to gaming in South Korea than StarCraft.

JULY 23 , 2007 • Most people that follow the game industry are aware that South Korea is a nation that loves their games. DFC estimates that there are over 22 million game-playing consumers in South Korea. This is a remarkable number in a country that has only about 49 million people. No wonder the large video game manufacturers are all focusing their attention on the Korean market.

CLICK HERE for the DFC Intelligence report The Game Market in Korea

The general stereotype is that consumers in Korea play PC online games like StarCraft and Lineage at the local cybercafé (PC Bang). However, this is only partially true. South Korea now has the highest level of broadband penetration in the world, reaching over 80% of households. This has resulted in a boom in at-home game playing. Nevertheless, what does hold true is that Koreans still play most of their games on the computer, due in part on the government’s past import restrictions on Japanese consoles on cultural/political grounds. As a result, the video game console systems have had minimal impact on the market. But that’s changing. Sony, Nintendo and Microsoft are all trying hard to make inroads and the next few years could see a boom in the South Korean video game market.

Earlier this year DFC analyst David Cole had a chance to visit Korea and get a closer look at the market.The Korea Game Development and Promotion Institute and Sony Computer Entertainment Korea Marketing Manager Hee-Won Kang were very available at providing an overview of the history and current status of the Korean console market.

Sony was an early pioneer in Korea. Sony Computer Entertainment Korea (SCEK) was launched in lat 2001, two months before the February 2002 launch of the PlayStation 2 (PS2). By the end of 2004, the PlayStation 2 had passed the 1 million unit sales mark in Korea and with an estimated 1.27 million units sold by early 2007, the PS2 is far and away the most successful console system in Korea. In mid-2005 Sony launched the portable PSP in Korea. It had some strong initial success, but sales slowed considerably in 2006. By early 2007, the PSP had sold 300,000 units in Korea,

Microsoft has not been as successful in Korea. The original Xbox launched in late 2002, but was only able to sell 150,000 units. This was a disappointment because Microsoft had placed a big emphasis on online games, with Xbox Live getting a big Korean rollout in late 2003. The Xbox 360 launched in early 2006 and sold an estimated 70,000 units in its first year on the market. The Xbox 360’s price since launch has been ₩ 339,000 for the core system and ₩ 419,000 for the full system The exchange rate is constantly fluctuating, but perhaps the easiest way to quickly convert Wons to dollars is to use 1 USD = 1,000 KRW.

With slower than expected sales of the Xbox 360 and the PSP, 2006 saw the Korean console game market shrink from over $200 million in 2005 to only about $120 million in 2006. It is important not to read too much into the decline of the Korea console market in 2006. This is a market that is really just getting started and much of the decline can be attributed to traditional console transition issues. The big news in 2006 was actually the launch of Nintendo Korea in July. This was to ramp up for major launch of the DS Lite in January 2007. Nintendo unveiled a major marketing campaign featuring a leading Korean celebrity. They have also invested in several Korean game development studios. The initial 2007 buzz on the DS was extremely strong. 2007 saw the launch of the Sony PlayStation 3 (PS3) in June, with the Wii scheduled for late 2007. Korean electronics giants LG and Samsung both support Blu-ray and it will be interesting to see if that proves an important driver.

In forecasting the Korean console market, DFC Intelligence has taken a very conservative approach. We feel this market has a great deal of potential, but it is still unproven. The overall Korean game market has been rather stagnant, there is increasing push for government regulation of “game addiction,” and software piracy is still a major problem. It is still easy to buy pirated versions of hit console games in Korea for a fraction of the price of the legitimate products.

For more info see the DFC Intelligence report The Game Market in Korea