Gravity Co (GD8A) Risk Analysis
Risk Overview Q4, 2021
Risk Change Over Time
No filing history is available.
- Accounting & Financial Operations - Risk 1Overview
Gravity is an online and mobile games developer and publisher based in Korea. We generate revenue from online games, mobile games and other sources (including character based merchandise and animation). Our historical principal product, Ragnarok Online, is an online game which is available in 91 markets. Revenues from Ragnarok Online decreased in 2021, representing 17.4% of our total revenues for the year ended December 31, 2021, compared to 20.8% of our total revenues in 2020. This decrease was primarily due to decreased revenue from Ragnarok Online in Thailand re-launched in May 2020. Our focus on mobile games has increased in recent years, and mobile games represented 77.3% of our total revenues for the year ended December 31, 2021. Our principal mobile games, Ragnarok X: Next Generation, Ragnarok M: Eternal Love and Ragnarok Origin accounted for 30.5%, 27.2% and 16.0%, respectively, of our total revenues for the year ended December 31, 2021. In 2020, Ragnarok M: Eternal Love accounted for 43.6% of our total revenues. We intend to continue to diversify our product offering by developing online and mobile games in house or through outsourcing as well as publishing additional games developed by third parties. Our main geographic markets in terms of revenues for the year ended December 31, 2021 were Thailand, Taiwan, Korea and Japan.
- Corporate Activity and Growth - Risk 2Publishing
We also seek opportunities to publish games developed by third parties if we determine such games have potential to become a commercial success. Our publishing and licensing processes include the following: - Preliminary screening. Our preliminary screening process for a game usually includes preliminary review and testing of the game and discussions with the game developer on technological and operational aspects;- In-depth examination, analysis and commercial negotiation. Once a game passes preliminary screening, we thoroughly review and test the game, conduct a cost analysis, develop operational and financial projections and formulate a preliminary game operating plan. We then begin commercial negotiations with the developer;- Game rating and regulatory registration and approval. Once a license agreement to publish and distribute a game is signed, we submit an application to the Game Rating and Administration Committee to obtain a game rating, except for mobile games, which are not required to be rated by the Game Rating and Administration Committee and may be rated by us as distributor. This process generally takes approximately 15 days. We also typically register our intellectual property rights in Korea under our license agreements, such as copyright and trademark, with the relevant Korean government agency. Our overseas subsidiaries or licensees follow similar procedures in their respective markets where the games we license are commercially offered; and - Testing and marketing. Once the required registration and approvals are obtained, we conduct closed beta testing and open beta testing of the new game and assist the licensor with the development of the game, in the case of online games. Our game business team takes the lead in conducting preliminary screenings to select games for potential distribution and the commercial negotiations process. The games initially screened by our game business team are additionally evaluated or tested by other teams, such as the marketing team and quality management team, for a second opinion. Once a license agreement is finalized, we generally create a specific team for the selected game within the marketing department to work with and guide the licensor through the beta testing and/or marketing process for a successful launch of the game.
- Corporate Activity and Growth - Risk 3Item 4.c. Organizational structure
The following is our organizational structure: Note: (1)On January 5, 2022, Gravity Game Vision Limited, a 100%-owned subsidiary in Hong Kong, was incorporated.
Risk Highlights Q4, 2021
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 28
- Competition - Risk 1AddedCompetition from other game platforms
We also compete against PC and console-based game developers that produce popular package games, such as Activision Blizzard, Inc. and Electronic Arts Inc. and game console manufacturers such as Microsoft Corporation, Sony Interactive Entertainment Inc. and Nintendo Co., Ltd., all of which also have their own console game development studios. All the current game consoles enable users to play games with other users online by connecting their console to a network over the Internet. Likewise, a number of PC-based game developers have also introduced online features to their PC-packaged games, such as team games or user-to-user combat. Competition in the gaming industry is expected to remain intense as established game companies with significant financial resources have various financial and strategic advantages over smaller game companies such as us. See ITEM 3.D. "RISK FACTORS-RISKS RELATING TO OUR BUSINESS-we operate in a highly competitive industry and compete against many large companies."
- Competition - Risk 2AddedCompetition in the mobile game industry
Compared with the online or console game genres, the mobile game market has a relatively low barrier to entry because development of a mobile game requires relatively less time and personnel due to the limitations of the devices on which mobile games are played such as screen size and processing power. Moreover, development tools for mobile games are easier to obtain and use and open marketplaces, such as the Google Play Store and Apple's App Store, enable developers to easily distribute mobile games to a large global audience. Therefore, we expect the number of mobile game developers to continually increase in the future and competition to become more intense. We compete with companies that specialize in developing and/or distributing mobile games including leading Korea-based publishers such as NCSoft Corporation, Nexon Co., Ltd., Netmarble Corp. and Kakao Games Corp. as well as foreign publishers such as Tencent Holdings Ltd., NetEase Inc., Playrix Holding Ltd., Activision Blizzard, Inc. and BANDAI NAMCO Entertainment. Honor of Kings, PlayerUnknown's Battlegrounds, Lineage M, Roblox, Coin Master and Pokemon Go are some of the most popular mobile games both in Korea and globally. Our current or potential future competitors for mobile games also include package game companies that have successfully expanded their business into mobile game development such as Electronic Arts Inc. In addition, we believe more companies that previously were or currently are dedicated to developing online or console games will allocate more resources toward developing mobile games because the number of mobile game users is rapidly increasing as the penetration of mobile devices, such as smartphones and tablet computers, continues to deepen.
- Competition - Risk 3AddedCompetition in the online game industry
Currently, the leading providers of online games globally, based on the number of peak concurrent users, include Korea-based companies such as NCSoft Corporation, Krafton, Inc., Nexon Co., Ltd. and Smilegate as well as foreign-based companies such as Epic Games, Inc., Riot Games, Inc., Activision Blizzard, Inc., Tencent and Mojang Studios according to data available from various public sources. Dungeon Fighter Online of Nexon, League of Legends of Riot Games, Inc., Crossfire of Smilegate, PlayerUnknown's Battlegrounds of PUBG Corporation, Minecraft of Mojang Studios and Fortnite Battle Royale of Epic Games, Inc. are some of the most popular online games both in Korea and globally. Our existing and any potential new competitors in the online games industry compete with us for talent, game player spending, time spent on game playing, marketing activities, quality of games and distribution network. As many of our competitors have significantly greater financial, marketing and game development resources than we have, we face intense competition in the online game industry. We expect competition will continue to be strong as new competitors enter the market and existing competitors allocate more resources to develop and market competing games, while the online game industry begins to consolidate into a small number of leading companies or groups of affiliated companies due to the high cost of game development, marketing and distribution networks, which is likely to drive unsuccessful online game providers to go out of business or be acquired by other successful game providers.
- Competition - Risk 4AddedCompetition
We compete primarily with other online and mobile game developers and distributors in each of our markets. In addition, we compete against providers of games on various platforms, such as console games, handheld games and arcade games. We compete primarily on the basis of the quality of the game experience offered by us to our users, which depends on a number of factors, including our ability to do the following: - hire and retain creative personnel to develop games that appeal to our users;- offer online and mobile game service that is stable and is not prone to server shutdowns, connection problems, or other technical difficulties;- provide timely and responsive customer service; and - establish payment systems that are secure and efficient.
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