April 26, 2024

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[THE INVESTOR] Korea’s game industry, which has been enjoying an unrivaled lead in the world market, is increasingly struggling against Chinese copycats.

But the developers mostly have themselves to blame for underestimating the importance of copyrights for so many years, according to a game business expert.

Korean game company Bluehole`s flagship game Playerunknown`s Battlegrounds

“Korea’s major players that have led the game industry boom in the late 1990s and early 2000s were too arrogant to face up to the potential threat of copyright abuses,” Wi Jong-hyun, professor of Chung-Ang University Business School, told The Korea Herald in an interview.

“Things may still look favorable in terms of sales volume and overall market size, but the industry is actually faced with a slowing momentum and may eventually yield the longtime top position to Chinese runner-ups.”

Wi, also serving as president of the Korea Academic Society of Games and of the Contents Management Institute, has long stressed that intellectual property infringement will act as a game changer in the industry map.

“Having been in the related field for 20 years, I could detect the lurking challenges in the copyright sector and have warned the Korean game industry since 2006. But it took years and years until companies eventually started to pay attention.”

South Korea’s export volume in online and mobile games was estimated at $3.8 billion or 4 trillion won last year, respectively, according to the state-run Korea Creative Content Agency. The Korea Association of Game Industry, a private organization of industry officials, claimed the amount to exceed 5 trillion won, accounting for 55 percent of the nation’s entire cultural content export.

“The export total is highly likely to leap over the 6 trillion won mark this year but we must refrain from taking a rosy-colored view,” Wi said.

The yearly growth rate of the game industry, which once peaked at 18.5 percent in its heyday, nosedived to the 2 percent range last year, according to KCCA statistics.

The biggest flaw for Korea’s once-prosperous game industry is its weak awareness of and control over intellectual property assets, the professor claimed.

“In order to create sustainable synergy with IP, business entities are required to create IP, maintain it in a continuous and coherent manner, and to put it to practical use,” he said.

“But for several years, Korean game companies have been preoccupied with commercial application only, neglecting the creation and maintenance phases which are in fact more essential in the long term.”

Rising through such loopholes were China’s emerging enterprises. An example is Shanda Games which published the mobile version of The Legend of Mir, plagiarizing the motif from the homonymous mega hit online game developed by Seoul’s Wemade Entertainment.

While a copyright legal battle is ongoing between the two game distributors, the Shanghai-based company has claimed in 2016 to be earning more than $100 million a month with the disputed game.

“The Korean company had no idea about the burgeoning copycat trend until the Chinese company came up with the completed product and suggested a royalty agreement,” Wi said.

Though it was obviously Wemade that first developed the game, Shanda claimed that it had administered the given content over the past 10 years and thus was entitled to the copyright.

“But throughout the years, Wemade has neither made conspicuous efforts to keep control of its copyright nor raised objections against the infringer, which is why it may be losing the game despite self-evident facts,” he added.

“It is now exerting efforts to straighten things out, but the huge business losses in the meantime cannot be recovered.”

Further weighing down on Korean game developers is the Chinese court‘s unfriendly tone against foreign copyright holders.

“China has made visible progress in IP protection over recent years, but when it comes to the game industry, there still is an invisible wall that blocks foreign from operating in the local market,” Wi said.

None of the Korean game publishers has succeeded in obtaining business license in China during the past year, especially after the Korea-China diplomatic relation took a downturn in March last year amid disputes concerning the deployment of a US missile defense system on the Korean Peninsula.

Even web giant Tencent has for months been waiting for government approval on its distribution rights of Battleground, an interval which allowed local copycats to sweep the market in the meanwhile, according to the professor.

“There is an undeniable extent of political leverage here. China has long strived to drive Korean players out of its game business and to win back initiative in the growing market sector,” Wi said.

Korean games accounted for over 90 percent of the Chinese market in the early 2000s and their market share continued to stay in the 40-50 percent range until the rise of major copycats in the early 2010s, he explained.

“We should learn from past examples how swiftly an innovative industry may be reorganized,” Wi said.

“Just a few decades ago, nobody could have imagined that South Korea would outrun Japan in the semiconductor business. The same kind of reversal may just as well happen between Korean game makers and Chinese rivals.”

There are nevertheless favorable factors for Korean game companies, such as the Moon Jae-in administration‘s focus on technological innovation in relation to the “fourth industrial revolution” and the US Donald Trump administration’s recent gestures to curb IP abuses in the Chinese market.

“The US government‘s emphasis on IP makes it easier for Korean companies to speak up against China’s copyright infringement practices,” Wi said.

But Korea‘s game industry must not settle for merely removing copycats, the professor added.

“The whole agenda eventually comes down to basics, which is the power of the content itself,“ he said, calling for a long-term, strategic approach towards IP issues.

”A valid solution would be to outsource popular copyright contents in overseas markets and to reproduce them into various forms.“

A model example of reprocessing cultural content is Oldboy, a Korean noir action movie by director Park Chan-wook which won the Grand Prize of the Jury at the Cannes Film Festival 2004. The scenario was based on a popular Japanese manga.

By Bae Hyun-jung/The Korea Herald (tellme@heraldcorp.com)