China’s Gaming Control in Korea

For years, the blueprint for Chinese investment in South Korea’s dynamic gaming industry was clear: Chinese tech giants injected capital, forged publishing alliances, and acquired minority stakes in leading game developers, while Korean founders maintained crucial management control. This established pattern, however, has recently undergone a significant transformation, prompting concern among industry stakeholders.

Wemade, a prominent Korean game developer renowned for its massively multiplayer online role-playing game (MMORPG) franchise, “The Legend of Mir,” announced on June 30 that its founder, Park Kwan-ho, had agreed to divest his entire 39.33 percent stake. The buyer, NeoPulse, a Korean subsidiary of Hong Kong-based Shengsong Investment, secured the deal worth approximately 920 billion won ($617 million). Wemade has indicated that NeoPulse maintains strong affiliations with Alibaba and other major Chinese gaming corporations.

Upon the transaction’s completion in October, NeoPulse is set to become Wemade’s largest shareholder with a 40.25 percent stake. This landmark event marks the first instance of a China-linked investor gaining management control of a publicly listed Korean game company since Actoz Soft was acquired by the then-Shanda Games (now Shengqu Games) in 2004.

Some analysts within the Korean gaming sector suggest that the Wemade buyout could herald a new strategic direction for Tencent, a Chinese multinational technology and entertainment conglomerate already holding substantial minority stakes in other key Korean game companies.

Tencent, recognized globally as the largest video game publisher, held significant interests through its investment arms at the end of the first quarter this year. These included a 14.4 percent stake in Krafton, 34.48 percent in Shift Up, and 18.38 percent in Netmarble, establishing it as the second-largest shareholder in all three prominent Korean firms.

Notably, Krafton Chair and founder Chang Byung-gyu currently owns a 15.6 percent stake, meaning Tencent trails him by a mere 1.2 percentage points in ownership of the game developer behind the blockbuster battle royale shooter, “PUBG: Battlegrounds.”

Beyond acquiring shares in Korean game developers, Tencent was also reportedly a contender in the potential bid to acquire stock in NXC, Nexon’s holding company, back in 2019 following the passing of Nexon founder Kim Jung-ju. However, that deal ultimately did not materialize.

While Tencent has historically largely avoided direct intervention in the daily management of Korean companies it invests in, experts highlight that the Wemade acquisition specifically involves the transfer of management rights alongside ownership. Furthermore, Wemade’s “Legend of Mir” franchise remains one of the most commercially successful video game intellectual properties in China.

“Frankly speaking, the Wemade buyout represents an usurpation of Korea’s game sovereignty,” stated Kim Jong-tae, a professor at the School of Game at Dongyang University.

“This situation is incredibly serious, and I believe we should all recognize its urgency. It’s not just about Wemade’s intellectual property, but also the operational experiences and vast log data of its users. The new Chinese ownership could delve deeply into this historical data to tailor future offerings to their preferences.”

In another example of significant Chinese involvement, Chinese game company Ourpalm holds a 20.66 percent stake, making it the second-largest shareholder of Webzen, a Korean game developer whose MMORPG “MU” is one of Korea’s top-performing IPs in China.

“While it might seem challenging, I believe we should consider suspending or delaying the Wemade deal,” Kim urged. “To prevent similar future takeovers, gaming must be designated as a national strategic industry, and the government should actively scrutinize any sizable buyouts.”

Despite these varying perspectives on the Wemade deal, officials within Korean game development firms acknowledge that the sheer scale of China’s gaming market and its robust financial backing present an appealing opportunity for local companies aiming to expand their global footprint.

“The number of younger Koreans who engage with domestically developed games has been on a decline for several years,” commented an employee at a Korean game company.

“The Chinese market, although challenging to penetrate, can unlock a wealth of new possibilities once access is secured, particularly for mid- to small-sized game developers. As the Korean government and politicians appear to show limited concern for the domestic gaming industry, these game firms are largely left to ensure their own survival, and Chinese capital certainly offers a viable path.”

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