[비즈한국] NCSoft036570, which posted a quarterly loss for the first time in 12 years, is embarking on massive layoffs. It is also pushing for a reorganization from its traditional in-house development strategy to an independent studio system. This is a result of declining sales for its flagship Lineage series and a lack of performance from new titles. The current turnaround plan, which aims to reduce the headquarters headcount to the 3,000 range by next year, offers the highest level of voluntary retirement compensation in the industry. As the post-COVID boom fades and many game companies recently move to trim their size, attention is focused on whether this will impact future industry-wide restructuring.
Long-term Employees Expected to Receive Six-Figure Severance Pay
NCSoft announced its voluntary retirement program on the 23rd of last month and has been accepting applications until the 8th. Unlike the recommendation-based resignations that targeted development support organizations in the first half of this year, this restructuring includes game development and operation teams. According to the voluntary retirement program, even employees with less than one year of service are eligible for severance pay equivalent to 20 months of salary, while those with 3 to 6 years of service receive up to two years' worth of annual salary. Employees with 15 or more years of service are offered severance pay equivalent to 30 months of salary, or two and a half years.
Considering the challenging atmosphere of the gaming industry and NCSoft's management situation, the scale of the severance pay is evaluated as extraordinary. This voluntary retirement is part of the intensive management efficiency drive led by Co-CEO Park Byung-moo, who took office early this year. NCSoft is known to have the highest starting salaries in the IT and gaming industry, guaranteeing a minimum salary of 55 million won and having no upper limit on starting pay. Even in non-development roles, starting salaries are close to 50 million won. With high salaries combined with a severance standard of around two years, some long-term or high-earning employees are expected to receive severance packages reaching hundreds of millions of won.
The gaming industry has mixed feelings about NCSoft's compensation plan. While it serves as proof that the game industry has grown enough to rival the "record-breaking" retirement packages of KT030200 (up to 430 million won) or the increased programs at SK Telecom017670 (up to 300 million won), few game companies can currently afford to offer such rewards. As the "lean period" drags on, game companies are agonized over workforce reductions. An industry official said, "It is positive for a company to provide fair compensation, but it seems unlikely that other companies besides NC can offer similar severance packages. While NC's plan is surprising, it is true that it puts pressure on other game companies facing restructuring."
NCSoft is also implementing organizational changes, such as spinning off its AI research and development organization and three new game development teams. Previously, it closed its subsidiary Ntreev Soft in January and conducted recommendation-based resignations for non-development and support staff starting in April.
Continuous Layoff Trends Among Domestic and Foreign Game Companies
The backdrop for the large-scale voluntary retirement—the first in 12 years—is the company's first quarterly loss in 12 years. NCSoft's revenue last year was 1.7798 trillion won, a 30.8% decrease from the previous year, and operating profit plummeted by 75.4% to 137.3 billion won. Furthermore, this year's revenue has decreased by 5% compared to the same period last year, and it has turned to an operating loss of 14.3 billion won.
Although one-time costs from severance pay are expected to be significant, this appears to be an opportunity to clear out massive personnel expenses. According to the semi-annual report, NCSoft's labor costs (including unregistered executives) are 266.8 billion won (4,886 employees), estimated to be the highest among major game companies. Krafton259960 (1,719 employees) and Netmarble251270 (794 employees) spent 105.6 billion won and 31.1 billion won, respectively. Nexon Korea (3,699 employees) does not disclose its total salary expenses. Hong Won-jun, NCSoft's CFO, said during the Q3 earnings call on the 4th, "Our headquarters headcount is currently over the mid-4,000s. Once processes like spin-offs, voluntary retirements, and project closures are complete, I believe we can reduce it to the 3,000 range next year," adding, "If we don't finish this in the fourth quarter, we could face disappointing results through next year."
The situation of rising costs while key IP performance declines is not a problem exclusive to NCSoft. The game industry is desperate to cut fixed costs. An industry official explained, "As the game industry grew, competitive hiring of developers and other personnel took place. This is a matter of securing efficiency to match the market conditions." Another official anticipated, "In the game industry, where operations move by project according to new releases, business restructuring and personnel reorganization are common. As the market environment has changed, various strategies to cope with it will emerge."
It is uncertain whether cases with conditions like NCSoft's will appear again. Few companies of a similar scale are undergoing large-scale personnel adjustments, and this reorganization is considered extraordinary even within the industry. Recently, domestic mid-sized game company CookApps laid off all its internship-to-hire employees after their contract period and downsized its development organization by about half. Domestic game developer Hagin decided to lay off about 10 employees from its new baseball game development team. Previously, Com2uS, Devsisters, and Netmarble implemented double-digit headcount reductions, and Riot Games, the developer of 'League of Legends,' also laid off 11% of its global staff early this year, showing that aggressive restructuring is occurring regardless of domestic or international status.
Kim Jung-tae, a professor of the Department of Game at Dongyang University, pointed out, "It is a positive signal that they are attempting to trim the fat under the Park Byung-moo regime," adding, "(The unprecedented voluntary retirement conditions) can be seen as a rite of passage as games become a 20 trillion won industry and companies grow in size. NCSoft is the first to take the lead, and this compensation is only possible because it is a company of this scale."