The KOSPI index, which kicked off 2024 at 2,400, saw a staggering 72% climb to 4,129 by 2025. The KOSDAQ followed suit, rising from 678 to the 926 mark—a 36.5% gain, which, while not quite as meteoric, still paints a picture of a 2025 South Korean stock market enjoying a historic bull run.

Against this backdrop, it is high time we scrutinise the volatile stock performances of the domestic gaming sector. This year has been hailed as the golden age of 'K-Culture,' with dramas, K-POP, and culinary trends riding high. Given that the gaming industry generated over 22 trillion KRW in 2024—accounting for 66.5% of total cultural content exports—there was a pervasive sentiment that games would inevitably share in this broader market prosperity.

Reality, however, had other plans. A look at 35 domestic gaming and related firms shows a collective stock price decline of 10% to 11% compared to the end of 2024. If we break it down, giants like Krafton, Netmarble, NCSoft, Pearl Abyss, Kakao Games, Wemade, and Nexon Games saw shares drop by as much as 29%—with the notable exceptions of NCSoft and Pearl Abyss. Let us dig into why this downward spiral is occurring.

The COVID-19 pandemic, which blindsided the world in 2019, fundamentally altered our landscape. Physical contact became taboo, outdoor life was shunned, and businesses scrambled to adapt to remote work. Unlike other sectors that withered under these conditions, the gaming industry thrived. With outdoor leisure options off the table, people flocked to games, and the industry’s inherent ability to function remotely became a massive strategic advantage.

According to the 2020 Korea Creative Content Agency survey on game usage, the participation rate hit 70.5% (a 4.8% increase from 2019). Fueled by this boom, the industry bulked up. New studios were established, fresh projects were announced domestically and abroad, and the soaring market value of developers brought an electric energy to the entire sector.

Stock prices surged during the pandemic, with gaming-themed stocks climbing roughly 162% between 2020 and December 2021. However, this momentum began to wane as the end of the pandemic approached in late 2022. While other industries found their footing, the gaming industry's growth slowed to a crawl and eventually ground to a halt.

For the domestic gaming industry, 2024 and 2025 have been particularly icy. Major players like NCSoft, Kakao Games, and Krafton have resorted to voluntary retirement schemes or structural restructuring since 2024. Smaller firms are increasingly shuttering or shedding staff following project failures. As labour costs represent the lion's share of a game company's expenditure, it is the first place they tighten the belt when the squeeze is on.

Back when the industry was aggressively hiring, there was a persistent forecast that this growth would become the 'new normal.' Even the much-hyped metaverse was built on the foundation of the gaming industry. Many companies hired well beyond their capacity, and the hangover from that expansion has hit hard in the post-pandemic era.

The recent AI frenzy is also being cited as a catalyst for these layoffs. By leveraging AI to handle documentation and repetitive tasks, firms require fewer personnel to achieve the same output. It is a clear, if stark, signal that a stagnant gaming industry is being forced to pivot.

The outlook for 2025 remains gloomy. Post-COVID, the domestic game usage rate has been sliding for three years. From a peak of 71.3% in 2021, it has plummeted to 50.2% by 2025. It seems the domestic market, already limited in scope, is further contracting.

Of course, the industry is searching for an escape route. Many developers previously tethered to mobile and MMORPG projects are pivoting to PC and console titles. Following the success of Neowiz's 'Lies of P' in 2023 and Shift Up's 'Stellar Blade,' other developers are jumping on the bandwagon, aiming for international markets rather than just domestic success.

However, this pivot carries as much risk as it does potential reward. Recall the shift from PC/online to mobile in the 2010s; when firms saw the success of 'Anipang', 'Dragon Flight', and 'Cookie Run', they rushed to replicate it. Many that failed to adapt their existing development structures simply vanished into obscurity.

When you change your genre, you must change your organisation—and that transition typically demands a three to four-year shake-up period. The companies currently reorganising to build console and package games are smack in the middle of that turbulent transition.

Ultimately, the bedrock of this industry remains simple: you must produce a 'God tier game'. Interestingly, Neowiz (Holdings) saw the highest stock growth among mid-tier companies last year, thanks to the strategic shift in 'Brown Dust 2' and the surprise launch of the 'Lies of P' DLC, 'Prelude'. Exceptional games drive performance, which in turn drives stock valuation.