Beyond PUBG: Krafton Dreams of Ascending the World Stage

Walk into the topmost floor of Krafton's HQ — spread across eight floors of a 35-storey glass-and-steel building in Seoul's posh and trendy Gangnam neighbourhood — and you'll be greeted by a giant curved screen. On a breezy, overcast November morning, it's playing a loop of Krafton's latest collaborations, including a tie-up with K-pop girl group Blackpink for an in-game concert. But it's what lies behind that screen that defines the South Korean video game giant.

A row of awards and trophies is dominated by seven Guinness World Record plaques. They are all for the battle royale title PlayerUnknown's Battlegrounds — colloquially known as PUBG — Krafton's most famous game to date. Following its massive success on PC, Krafton designed a free-to-play mobile offshoot, PUBG Mobile, in partnership with Chinese tech behemoth Tencent. It was by far the most popular mobile game in India, until its highly controversial ban in 2020. At the time of its ouster, India was PUBG Mobile's biggest market, accounting for slightly less than a quarter of its global total downloads.

The PUBG and BGMI era

Citing national security concerns and privacy issues as the reason for the ban, the Indian government included PUBG Mobile in a list of apps 118 long, alongside suspect business card readers, flashlight apps, music and video players, apps for news, dating, photography, search, and a bunch of other games. But many, including CNN, CNBC, and Financial Times, noted that it came in the wake of Chinese incursions (via NDTV) on the Ladakh border region.

India said that the apps were “engaged in activities which [are] prejudicial to sovereignty and integrity of India, defense of India, security of state and public order.” China said India had “abused the concept of national security and adopted discriminatory restrictive measures against Chinese companies,” according to CNN. FT labelled it “tough economic action targeting the country's companies” — in PUBG Mobile's case, against Tencent. But as Inc42 pointed out, a South Korean firm had been “caught in the crossfire.”

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India was PUBG Mobile's biggest market at the time of its ban
Photo Credit: Tencent/Level Infinite

Kicked out of its biggest market, Krafton planned a comeback. It regained publishing rights from Tencent and in mid-2021, launched Battlegrounds Mobile India. This was billed as an “Indian-themed” version of PUBG Mobile, with India-only servers, green-coloured blood, and all mentions of “kills” removed. In actuality, BGMI was modelled on the Chinese version of PUBG. That irony was not lost on anyone.

The comeback worked. A year on from its launch, Krafton claimed that Battlegrounds Mobile India had 100 million registered users. But less than a month later, BGMI was gone from both Apple's App Store and Google's Play Store. The Indian Government had brought the axe down, once again citing national security concerns. In a statement issued shortly after, Krafton India CEO Sean Hyunil Sohn said it had “always been compliant with all [data protection] laws and regulations in India.”

In person, at Krafton's HQ in Seoul on that November day, Sohn was a lot more open about the environment in India that video game companies are dealing with.

“India doesn't have any official age rating [or] data security guidelines around gaming apps,” Sohn noted. “They have some broad concept [but from] my understanding, there is no clear guideline from Indian government. That's an issue — to be honest, that's a very tricky thing. If there is clear-cut [regulation], then you should just follow it. There is no reason not to follow the guidelines.”

“We expect that there will be some clear guidelines coming up next year,” Sohn added. “That's what I've heard from other gaming industry executives. But [it's unclear] whether those guidelines will cover every issue — or [if they] will only cover games of skill, games of chance, those kinds of stuff. [If the data security issues] are not really covered, then we've still a grey area there.”

Krafton: developer → publisher

To most, especially those in India, Krafton is essentially the PUBG company, and rightly so. But Krafton sees a bigger future for itself — one inspired by the likes of EA, Tencent, and Blizzard.

Until 2021, Krafton was a developer. Now, it's thinking bigger, and to that end, it's trying to become a publisher for smaller studios. In late September, the turn-based strategy Moonbreaker — from the developers of Subnautica, acquired by Krafton in late 2021 — was released in early access on PC. And this Friday, survival horror game The Callisto Protocol — directed by Dead Space co-creator Glen Schofield — launches on PC, PS4, PS5, Xbox One, and Xbox Series S/X.

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Krafton's (packed) booth at G-Star 2022
Photo Credit: Krafton

A day after our visit to the Seoul HQ, Gadgets 360 travelled to Korea's windy seaside city of Busan — the venue of this year's G-Star, the country's biggest video games convention. Think of it as Korea's version of E3 or Gamescom.

Krafton was the only Korean studio at G-Star 2022 with an international portfolio. Everything else was Korea / East Asia-centric, if you don't count Epic Games, the only American studio with a presence.

On the sidelines of G-Star 2022, Krafton VP and global publishing chief Rafael Lim promised that in 2023, Krafton will deliver more than the two titles that it shipped this year.

One of next year's titles is already known: a free-to-play mobile strategy game called Defense Derby. Lim and Sohn expect it to debut between April and June 2023. Borrowing heavily from Clash Royale and Random Dice, it's being developed by Korean studio Rising Wings — the product of the merger of developers PNIX and Delusion in 2020, which was subsequently acquired by Krafton. Though it's primarily a four-player game, Defense Derby will offer a variety of game modes, including a mix of PvP and PvE.

Krafton also has a AAA open-world third-person shooter in development at Neon Giant, a Swedish developer acquired by Krafton in November, best known for the 2021 cyberpunk action shooter RPG The Ascent. In video game terminology, “AAA” (pronounced triple A) refers to a game with a sizeable budget.

The Korean company has also just established a new studio in Montréal. It will work on what Lim billed a “quad-A” title, making it even bigger than Neon Giant's next. The next GTA game, currently known as Grand Theft Auto VI, is considered a AAAA title.

If you notice, none of these new titles fit Krafton's current forte. There's fierce competition in the battle royale genre, Lim admitted, which is why the Korean company is now venturing into other genres as it collaborates with other studios.

Beyond gaming

Krafton is looking beyond gaming too. In June, it introduced Ana, a virtual human crafted in Unreal Engine 5, with a voice built using AI and deep learning. Ana is at once an artist, model, actor, and social influencer.

Her face was designed based on computer models that drew on a mix of real people. An internal Krafton presentation, shown to Gadgets 360 in Seoul, featured the likes of Zendaya, Billie Eilish, Millie Bobby Brown, and Anya Taylor-Joy among dozens of other famous faces. What stood out was that Krafton's subset is overwhelmingly female and white.

Say hi to Ana
Photo Credit: Krafton

The reason Ana is a woman is that there are simply more brand opportunities for female avatars, Krafton creative marketing manager Nakyum Song noted. When pressed on the composition, Krafton's head of creative interactive department Jinwoo Ryu said they analysed the appearance of everyone in the world. It wasn't “about gathering all the beautiful faces,” Ryu claimed.

But the Korean company is unabashed about the bigger ambitions surrounding Ana — plainly stating that it will “make profit out of her.”

Ana has already released her first single (that voice you hear doesn't belong to a real-life singer), and starred in her own music video (a blend of CGI and live-action that seems to actively mock the uncanny valley).

And Ana is expected to feed directly into Krafton's metaverse ambitions, launching in 2023.

Virtual humans were a $10 billion (about Rs. 81,349 crore) market in 2020, according to a study cited by Krafton, and are expected to become a $527 billion (about Rs. 42,87,118 crore) market by 2030.

Betting on India

The Korean video game giant is investing millions into India too. Sohn said: “We have invested now in eight companies in India, including [esports organiser] Nodwin, [live streaming platform] Loco, [storytelling platform] Pratilipi, [audiobook app] Kuku FM, [audio dating app] Frnd, and [game developers] Lila Games and Nautilus Mobile.” The eighth company hasn't been publicly revealed yet.

“We normally invest 10–20 percent equity of those companies as a strategy,” Sohn added. Krafton's India investments are valued at $140 million (about Rs. 1,140 crore) currently, Sohn noted.

The support and nature of collaboration varies. Nautilus Mobile, best known for its mobile cricket game series Real Cricket, will make use of Krafton's motion capture studio in Seoul. With the help of Pratilipi, Krafton localised a series of three webtoons set in the PUBG–BGMI universe. Discussions are currently ongoing with Kuku FM to turn these webtoons into audiobooks.

“And potentially, from the novels Pratilipi [already has], we can develop games based on those IPs,” Sohn remarked, hinting at Krafton's vision. “But it's a very long-term thing.”

Krafton is betting big on a market that isn't afforded level-A priority by most international game developers. Ubisoft, Zynga, Garena, and Kwalee are among the few that have set up bases in India, though most of their work ends up being outside of game development. The likes of EA and Rockstar Games also have local support studios. Krafton India currently employs about 40 people, Sohn said, though none of them are doing any game development yet.

The Korean company is bullish on India's potential because it has twice tasted success here — first with PUBG Mobile, and then BGMI (though if you were being cynical, you would see both as part of the same success story). That has given Krafton the confidence that it can pull it off again, Sohn told Gadgets 360.

The India gaming reality

Of course, there are reasons that India isn't high on most radars. Owing to low purchasing power, the cost of dedicated gaming hardware — be it a gaming PC, Nintendo Switch, PlayStation 5, Steam Deck, or Xbox Series S/X — is excruciating for most.

“The [Indian] PC and console market is a little too small,” Sohn said. For Krafton, India is all mobile. “100 percent, maybe 99 percent,” the Krafton CEO noted, “[to the point that] we don't separately track the Indian PC users.”

But Sohn also believes that Sony and Microsoft can do more to support publishers. “I think India is kind of neglected by those big platforms,” he added. The lack of support is evident from the fact that two of the aforementioned devices — the Switch and Steam Deck — aren't even officially available in India.

Owing to these factors, Krafton is focused on where the demand is, Sohn said: “We have, let's say, a $100 million revenue opportunity on mobile. On PC and console, we have maybe a one million, half-a-million revenue opportunity.”

India Smartphone Sales Drop Over Inflation, Rising Device Costs

Krafton has a dedicated game room at its Seoul HQ
Photo Credit: Krafton

Even on mobile, the same issues persist. Most smartphone users can only afford a Rs. 10–20,000 device, rather than a Rs. 40–50,000 handset that would be needed to run advanced games at ideal quality. On top of that, paying users in India make up only around 1–2 percent of the total, Sohn remarked, much lower than the 5–10 percent seen in markets such as China, the US, and Japan.

“India is still very small, but it's understandable. [There are] differences in disposable income [though] I feel even rich Indians don't want to spend money for something that's very new. There's a wait-and-see approach”, Sohn added.

And the problems don't stop there. Mobile gaming needs reliable Internet access — and that isn't always available in many areas.

“In India, 4G is not really 4G, it's like 3.5G or something like that,” Sohn said. “It's not fast enough, it's very patchy, and latency is [all over the place].”

And the Krafton India CEO doesn't think 5G will solve anything in the short term: “I don't think that we will see a big difference within a year. [...] From the telco perspective, I don't think that they have lots of pressure to invest in 5G networks very aggressively.”

“I heard from people in Qualcomm — who worked very closely with the telco and smartphone makers — that India cannot be solved right away because there are [hundreds of] millions of users, but you have a fixed amount of investment,” Sohn added.

That is partly down to the fact that data prices are staggeringly low. India has the fifth lowest mobile data prices in the world, according to a 2022 report. Naturally then, companies aren't willing to spend if they aren't making money.

Level up and out

For Krafton, that's a big difference in conditions. Mobile networks are quick, stable, and reliable in Korea; so much so that on a train from Seoul to Busan at speeds of over 130kmph, I saw locals comfortably duelling away on their gaming laptops.

Inside Krafton's Seoul HQ, where employees have lunch and host LAN parties
Photo Credit: Krafton

Gaming is a huge business for Korean companies — not just at home, but globally. In fact, gaming is bigger than all other forms of media combined.

According to Korean government statistics, video games account for 70 percent of the country's total overseas content business revenue. That means games dwarf K-pop, K-drama, and Korean movies put together. BTS might be a bigger cultural force, but gaming is raking in more money internationally. (Is it time to coin K-gaming as a term?)

Krafton is one of the industry's biggest names. It's also the second biggest globally in terms of investing in esports, after Riot Games, Lim remarked.

It now has a presence in 10 countries including Korea, Sohn noted, with its newest office in India. Although Krafton remains hopeful that Battlegrounds Mobile India will return to app stores, it's looking beyond that — from Ana to Kuku FM, and from a GTA 6-level game to The Callisto Protocol — in more ways than one.

Disclosure: Krafton sponsored the correspondent's trip to South Korea.

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