Korean Online Game's Platform Competition under Two-Sided Market Characteristic

Abstract

While the growth of total game market size slowed down and the arcade game industry started to shrink, the online game market keeps increasing, attaining 26.5% annual growth rate for the early 2010's. Korea's online game business is especially popular, so that the size is about US$ 4 billion, which is 64.2% of Korea's total game industry. In 2013, Game market size and online game market size were estimated to be about US$ 9 billion and US$ 7 billion, respectively. From a standpoint of sales, the game market in Korea (US$ 4.95 billion) accounts for 5.8% of the world game market and almost one third of the world online game market. Its growth rate is higher than that of the world game market. The online game markets in Korea and China have common characteristics that can be distinguished from other countries: two-sided market with very low switching costs. This paper is to study the important factors that affect Korean online game's platform competition. The authors empirically investigate network externalities by using various variables in online game industry in Korea. The authors found the number of games available in a platform positively affects its market share, while the diversity of games and generality of game rating had no significant impacts. The authors also found that multi-homing (or overlap of games) increases an online platform's market share when the platform is relatively new. However, multi-homing decreases market share when it becomes mature. Having done our empirical and academic analyses, the authors draw practical implications that may help decision makers in Korea's online game businesses.