Original author: Ponyo, Xangle
Edited by Zen, PANews
In the 1990s, Nexon led the online gaming revolution with Korea's first online game, Kingdom of the Winds, at a time when the gaming industry was still dominated by single-player CD-ROM games. In 2000, Nexon developed the Free to Play (F2P) model that is the basis of today's online gaming revenue model, and acquired Korea's largest game IPs, MapleStory and Dungeon Fighter. It can be said that Nexon has always been at the forefront of major changes in the gaming industry.
Recently, Nexon announced that it has developed a major blockchain game using its biggest IP, MapleStory. What potential do they see in blockchain games? This report aims to explore the specific value that blockchain technology brings to the gaming industry.
Nexon continues to grow, but some concerns remain about sustainability and scalability
29 years of growth track achieved through a keen understanding of gaming industry trends
Since its founding in 1994, Nexon has overcome numerous challenges and continued to achieve impressive growth. Over the past decade, Nexon has achieved a compound annual growth rate (CAGR) of 12.5%, increasing its revenue from KRW 940 billion in 2012 to KRW 3.5 trillion in 2022. To put this into context, in 2022, Netmarble, NCSoft, and Krafton had revenues of KRW 2.7 trillion, KRW 2.5 trillion, and KRW 1.8 trillion, respectively (77%, 71%, and 51% of Nexon's revenue, respectively).
As of 2022, Nexon's revenue by region will come from South Korea, 60%, China, 24%, Japan, 3%, North America and Europe, 6%, and other regions, 7%. Different games have become the key drivers of growth in different regions.
In South Korea, it was MapleStory and FC Online; in China, it was Dungeon Fighter; in Japan, it was Blue Archive; and in North America, Europe and other regions, the newly released Dave the Diver in June contributed to revenue growth.
Over the past five years, Nexon's mobile gaming segment has grown from 475 billion won to 950 billion won, accounting for about 31% of total revenue. This growth is even more remarkable considering that Nexon was relatively cautious about entering the mobile market during the mobile gaming boom from 2013 to 2014. Nexon's main mobile game lineup includes "FC Online Mobile", "MapleStory M", "HIT2", "Dungeon & Fighter M", "Dave the Diver" and "The Kingdom of the Winds: Yeon".
Nexon's continued growth is due to its ability to innovate, launch popular games, and actively acquire high-potential IPs. In 1996, Nexon released Korea's first online game, The Kingdom of the Winds, which revolutionized the gaming industry and solidified its position in the Korean gaming market. After the failure of the subscription model QuizQuiz (Qplay) in 2000, Nexon launched the first and now fundamental free-to-play (F2P) model, which led to the birth of Crazy Arcade: BnB and KartRider. In 2001, Nexon launched Mabinogi, the first massively multiplayer online role-playing game (MMORPG) to use cartoon shading technology.
In 2004, Nexon invested all its cash reserves to acquire Wizet's MapleStory for 40 billion won. This bet has been a huge success, with MapleStory alone generating over $5 billion in revenue to date (cumulative revenue as of 2022) and continuing to set all-time revenue records in South Korea. Similarly, Nexon acquired Dungeon Fighter for 300 billion won in 2008 before Neople acquired the Chinese license. Dungeon Fighter has been a huge success in China, with cumulative revenue exceeding $22 billion as of 2022.
Based on successful operation and "big and small" strategy with Live Service as the core
Nexon has several important IPs that are not only evergreen, but also their cash cow. 20 years after its launch, MapleStory is still Nexon's core game and has set the highest revenue ever. Dungeon & Fighter, Sudden Assault, FC Online and KartRider are also enduring and still have strong support from loyal fan groups, and the diversity of these IPs across multiple game genres is also noteworthy. Nexon plans to continue to operate these core Live Service games stably to achieve continued growth. (Live Service Games, LSG for short, are games designed to keep players immersed in the game for as long as possible. They repeatedly attract players to return to the game and pay for the micro-transaction system in the game by launching subsequent downloadable content DLC, new game modes and other new content)
So, what enables Nexon to operate these Live Service games stably for such a long time? The answer lies in a deep understanding of the community. Although there are many advantages worth mentioning about Nexon, such as excellent IP, development capabilities, and experienced service operations, the fundamental reason for developing these capabilities is Nexon's deep understanding of its community.
Nexon sees its community as the cornerstone of its IP and network effects. The company views games as community services and has invested accordingly. Nexon's focus is not just on incorporating user feedback and producing new game content, they also hold showcases for major updates, set up temporary stores with IP merchandise, and hold symphony concerts with game BGM, all of which demonstrate their commitment to user ecosystem management. Similarly, using a deep understanding of the community to develop games in a way that matches user preferences and needs is also seen as a key factor in Nexon's longevity.
Another factor that contributes to success is an excellent Reward Experience (RX). Nexon defines the core of RX as the excitement of obtaining items. In other words, the success of the game depends on the excitement and thrill felt in the process of overcoming numerous challenges, achieving goals, and receiving rewards.
Nexon has successfully managed the usage and rarity of items to provide a rich and rewarding experience. The scope of item usage depends on the diversity of the items, which ultimately correlates to the amount of content. In the 20 years of operating MapleStory, Nexon has continuously updated a large number of professions, boss monsters, six continents, and more than 60 regions, expanding the world of item usage. Hundreds of developers have produced a large amount of content in 20 years and are still working hard to continue to expand the content. In terms of rarity, Nexon expertly manages the item drop rate and reinforcement system.
In addition, in terms of new game development, Nexon divides its strategy into different categories of leading the market with large-scale "big" projects and focusing on creativity with innovative "small" projects, thus establishing a diversified pipeline for continued growth. Projects from the fourth quarter of 2023 to the fourth quarter of 2024 include "The Finals", "ARC Raiders", "Warhaven", "Dungeon Fighter Mobile" and "Mabinogi Mobile". Among them, "The Finals" is considered the most anticipated game of next year, gaining 260,000 concurrent online users and a total of 7.5 million connections during its public beta.
Sustainability challenges arise from the structural limitations of existing business models
Despite its significant growth, Nexon faces ongoing challenges, especially when it comes to scalability. Over the past 29 years, Nexon has successfully managed the core Live Service and launched successful new games based on a unique understanding of community dynamics, building a strong ecosystem. However, ensuring sustainability over the next 30 years requires overcoming the structural challenges inherent in the traditional gaming industry.
An important issue is the limitation of content diversity. Games in the past were mainly about consuming content provided by developers, while modern games need to constantly provide new content to players. Despite developers' efforts to add fresh content, the speed of content creation inevitably lags behind the speed of consumption. Even the most capable companies can only produce content at a rate limited by their own development capabilities, and the rate at which players consume content is beyond the control of game developers. This phenomenon is particularly evident in South Korea. A striking example is that a Korean player cleared the normal difficulty of "Diablo 3" within 6 hours after the server was launched, while Blizzard had previously stated that it would take about six months.
The second challenge is the limitations of community engagement. As mentioned earlier, the community is a key factor in determining the fate of a game. While Nexon is known for its deep understanding of community dynamics, it remains a challenge to directly manage or more deeply engage with the community, just like other game developers. The structure of the traditional game industry limits the ways in which game companies can formally encourage community activities, and the risk of such activities infringing copyrights always exists (because the game IP is owned by the company and users have no real control over it). Finally, there are limitations to expanding customer loyalty, and traditional games lack mechanisms to leverage the loyalty and connections that users build through services.
Finding solutions through blockchain
MapleStory Universe: Nexon's main IP project for entering blockchain games
Nexon decided to adopt blockchain technology to solve these problems and ensure sustainability. The company's first blockchain service plan is MapleStory Universe. As Nexon's flagship IP, MapleStory has accumulated 180 million users and accumulated revenue of more than 5 trillion won. The decision to get involved in blockchain with its most important IP shows that Nexon highly values the potential of blockchain. This is not the first time Nexon has tried to launch a new game using the MapleStory IP. In 2015, Nexon released MapleStory 2, a 3D MMORPG, and launched MapleStory World in September 2022.
The standout feature of MapleStory World is that it creates a platform that enables individuals to create, share, and immerse themselves in unique worlds (content) using MapleStory and other IP. Those who create these worlds have the opportunity to receive a portion of the revenue from user purchases. Although no clear figures are available, the revenue sharing model is expected to be similar to that of Roblox developers (see the figure below).
However, both services are currently struggling with unfavorable user reviews. While MapleStory Worlds had tens of thousands of users on its launch day, its user base has gradually dwindled, with just 800 daily active users as of February of this year. In addition, MapleStory 2 suffered commercial setbacks and announced its closure on June 7, 2024. As a result, Nexon thoughtfully turned to Web3 for potential solutions, which ultimately led to the development of MapleStory Universe.
Maximizing user reward experience through UGC and MOD to ensure sustainability
Dae-hyun Kang, who was recently appointed as co-CEO of Nexon Korea, has identified key elements of sustainability, including continuous content production, controlling commodity inflation, cultivating intrinsic gameplay, and forming a derivative ecosystem. To meet these criteria, MapleStory Universe promotes the creation of user-generated content (UGC) and mod (MOD) games by empowering users and providing rewards. This strategy aims to cultivate a community-centric, voluntary derivative ecosystem that maximizes the user's reward experience (RX). The ultimate goal of the MapleStory Universe project is to build an ecosystem co-created by the community, breaking away from the model of game companies unilaterally providing content.
In short, MapleStory Universe is the Web3 version of MapleStory Worlds. However, MapleStory Universe integrates blockchain technology, which provides a more favorable structure in terms of creative freedom, sustainability, and scalability compared to MapleStory Worlds. For ease of understanding, the main features of MapleStory Universe are outlined below.
*UGC refers to content (maps) made directly by external creators using development tools provided by game companies, similar to StarCraft/Warcraft custom maps or building structures seen in Roblox/Minecraft.
Feature 1: Driving the UGC ecosystem through open IP and development kits, promoting fair cooperation between Nexon and the community
MapleStory Universe essentially retains the look, feel, and gameplay of the existing MapleStory. The difference, however, is that it does so by empowering users and creators to create game content, including items and DApps, leveraging MapleStory's IP. Users and creators are rewarded based on the consumption of the generated content, and the virtual world transcends the boundaries of gaming, promoting the convergence of ecosystems. In MapleStory Universe, users play the dual role of content consumers and producers (studios), expanding their participation. From this perspective, Nexon aims to achieve a transformation beyond the identity of a traditional gaming company, aspiring to become a content distributor and publisher.
So far, it is similar to MapleStory Worlds. However, MapleStory Universe goes a step further by fully opening up its IP, allowing creators to freely develop content, including items, DApps, and other derivative creations. In essence, users can now actively participate in creative activities without the worry of copyright infringement, and it is likely that many innovative works will emerge. In addition, Nexon aims to fairly distribute the revenue generated by the created content to incentivize the activities of creators. Nexon's own rewards will be based on contributions in a fair collaboration with the community, which represents a fundamentally different approach compared to traditional UGC-based games such as Roblox and Minecraft, which only share part of the revenue with creators (see the chart in Section 3-1). However, as of now, the specific details of the FT/NFT token economics and the exact reward distribution structure have not been disclosed.
On the other hand, if Nexon only relies on external creators for content production without providing content from the beginning, the possibility of users entering the ecosystem is almost non-existent. Therefore, Nexon plans to initially launch MapleStory N as a foundational service for MapleStory Universe to ensure that there is enough content for users to enjoy. However, Seon-young Hwang, the project leader in charge of the MapleStory Universe project, expressed his desire for the Universe ecosystem to revolve around UGC rather than just MapleStory N, emphasizing Nexon's top priority of nurturing a derivative ecosystem and working to promote the growth of the community.
Feature 2: Ensuring transparency through public disclosure of the rewards process
MapleStory Universe uses public blockchain technology to issue and manage goods, providing transparent access to tokens (FT, NFT) and item reward data. As a result, it is possible for users to observe various on-chain data in real time, including in-game transaction details, item distribution statistics, revenue distribution of specific creators, etc. Throughout the process, Nexon not only cultivates trust among users, but also foresees the flourishing of many third-party forums, data analysis tools, and information stations centered on on-chain game data. This phenomenon is similar to third-party tools for games such as EVE Online (for example, the EVE-SCOUT forum shown in the screenshot below is a real-time wormhole status analysis station created externally and operates entirely on donations).
Feature 3: Establishing an interconnected ecosystem sharing economy
Popular games like MapleStory often spawn derivative ecosystems driven by community contributions that extend beyond the scope of existing services. This includes forums where players share game experiences, strategies, and information, as well as various information stations created through open APIs. Users consider all of this content to be part of the MapleStory experience. However, the inherent nature of the traditional game industry poses a challenge to achieving seamless integration between existing services and derivative ecosystems. For example, in MapleStory, items cannot transcend the boundaries of the game into the derivative ecosystem, limiting MapleStory's RX (reward experience) to existing services.
However, the emergence of NFT and tokenized data has made it possible to transform data "on-chain" that was previously impossible. For tokenized data such as NFT, users can now own and trade data (items) through a trusted network. MapleStory Universe uses blockchain technology to allow users to extend in-game assets beyond the game and circulate in all derivative ecosystems, creating a shared economy.
The advantage of this structure is that it greatly increases the use cases and has the potential to greatly enhance the RX (reward experience) of the game.
On the contrary, the shared economic structure shows that heavy gamers with a large number of high-value items can freely manipulate the derived ecosystem and may easily overwhelm new players who have just entered the game. If this phenomenon intensifies, it is inevitable to worry that the shared economic structure may destroy the ecological balance and transform the game into an environment focused on veteran players.
Feature 4: Enhanced reward experience (RX) and inflation management of game items through limited NFT issuance
Online games face the challenge of endless item generation, driven by 1) the number of users and their evolving play styles over time, and 2) the complexity of accurately predicting currency inflation due to a dynamic player population. The number of items is expected to continue to increase over time, making it nearly impossible to accurately predict inflation. In essence, traditional game systems are inherently difficult to address inflation, and MapleStory is no exception.
To solve this problem, Nexon chose to implement a structure that limits currency production using NFTs. Specifically, items in MapleStory Universe have a total cap across the entire server, regardless of the number of players, and are generated in fixed quantities at fixed intervals. For example, if Item A is limited to only 100 units across the entire server, players can only obtain 2 units per week, and whether there are 2 or 100 players defeating the monster, only 2 units of Item A will drop that week. If no one defeats the monster that week, the rewards will accumulate, providing players who defeat the monster the following week with the opportunity to obtain 4 units. After 50 weeks, all 100 units of Item A have been produced and will no longer spawn in the wild. At this point, users can only obtain Item A through peer-to-peer transactions.
By precisely limiting the number of items in this way, the user experience will undergo a substantial shift from traditional games. Item acquisition will no longer be limited to individual effort; instead, players will compete for popular items. In response, users may develop novel strategies that add new layers of fun to the game. Users will encounter moments where they must decide whether to pursue highly sought-after and competitive items or prioritize the stability of acquiring items in less-traveled areas. While requiring these new strategies and calculations, users will enjoy the excitement of successful looting, enhancing the reward experience (RX), a unique form of fun that is unique to the MapleStory Universe. Furthermore, by managing the total number of items in this way and maintaining scarcity within a stable range, the challenges previously associated with inflation issues can also be effectively addressed.
Components of MapleStory Universe: MapleStory N, Worlds, SDK
MapleStory Universe consists of four main components to implement the above systems: "MapleStory N", "MapleStory N Mobile", "MapleStory N Worlds" and "MapleStory N SDK".
MapleStory N: A blockchain-based PC MMORPG built on the original IP. In the initial stage of the service release, it will become the main content for users. As the amount of user-generated content (UGC) and modified content (MOD) gradually increases, its role and contribution are expected to decrease over time.
MapleStory N Mobile: The mobile version of MapleStory N.
MapleStory N Worlds: This component is a blockchain-based UGC gaming platform that provides a user-friendly interface. Its notable feature is the ease of creating content (NFTs and DApps) when using Worlds, making it easily accessible. However, due to the limitations of the tools provided and the degree of development freedom, its utility is relatively lower than that of the SDK.
MapleStory N SDK: An API-level development toolkit provided to developers. Creators using the SDK can build a variety of creative DApps and community activities, providing more diversity and creativity than Worlds.
Summary
Nexon found value in blockchain in the remnants of the P2E space. In pursuit of this, they developed their own solution, actively promoting the development of MapleStory Universe. To reflect the significance of this initiative, Nexon promoted the vice president in charge of the project to co-CEO, emphasizing the company's commitment to the venture. Given Nexon's track record in embracing open ecosystems, it is reasonable to assume that the company encountered little resistance in embracing and understanding the idea of blockchain.
