In South Korea, online gaming is practically a national pastime.  The most popular game, Lineage, is a massive multiplayer online role-playing game (MMORPG) that allows thousands of players to fight, chat, and trade with each other in a fantasy world.  Nearly two million people (4 percent of the total population) play the game each month, sometimes with as many as 120,000 people playing at the same time.  South Korean telecommunications providers have benefited from the popularity of gaming because it has spurred broadband adoption and helped the country achieve the highest broadband penetration rate in the world (over 70 percent of all households).  Likewise, NC Soft, the developer of Lineage, posted over U.S. $100 million in domestic sales last year. 

Online gaming in the U.S., by comparison, is still not in the premiere league.  Most Internet subscribers never play online games (see figure 1), and those that do typically play simple card and trivia games that are available for free.  Games that generate recurring revenues appeal only to a niche market.  For example, the most popular MMORPG in the U.S., Sony’s Everquest, has only 500,000 total subscribers, despite being offered in a substantially larger consumer market than South Korea.  The industry has tried to break out of this niche through high-profile games based on Star Wars and The SIMs, a popular computer game.  To date, however, it has not succeeded.  The SIMs Online has only 100,000 paying subscribers, while Star Wars Galaxies was quietly launched last month.

Figure 1: Internet access service and online multiplayer gaming in the USA

The symbiosis between the business of gaming and the business of broadband adoption in South Korea has served to accelerate consumer demand for both services.  Game developers such as NC Soft offer Internet cafés unlimited access to a list of gaming titles for a price of $30-$50 per PC.  The cafés, in turn, charge players just a few dollars per hour to play.  This arrangement makes online gaming very inexpensive for first-time players.  Should these players become habitual gamers, they can purchase their own account for around $25 per month.  Broadband service providers ultimately benefit as well, because gamers, now addicted to the high-speed experience found in Internet cafés, often want a broadband connection at home.

Luring subscribers via Internet cafés has been central to NC Soft’s success, and its revenue base has steadily shifted as a result (see figure 2).  Conversely, the inability of online gaming to break into the mainstream market in the U.S. reflects a uniquely American revenue model.  In the U.S., gamers are first required to purchase software for roughly $50 but then charged a lower monthly fee for the online gaming service ($10-$15).  Therefore, a first-time taste of a new MMORPG in the U.S. is around $65, as opposed to $1-$2 in Korea. Gaming software is free in Korea.

Figure 2: NC Soft revenues 2000–2002 

The success of online gaming in South Korea highlights the potential for profitable partnerships between broadband access providers and game developers.  Providing online games at public Internet points such as PC cafés, video-game arcades, and Wi-Fi hot spots can generate access revenues for telcos and gaming revenues for developers.  Likewise, a low-cost introduction to broadband and online gaming encourages long-term adoption of both.  Broadband service providers and game developers alike should therefore take a close look at the South Korean model and consider its international potential to develop gaming and broadband markets.