GOVERNING VIDEO GAMES IN SOUTH KOREA By JONGMIN YANG A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY UNIVERSI TY OF FLORIDA 2018
2018 Jongmin Yang
To my family
4 ACKNOWLEDGMENTS My interest in video games may seem not to fit with political science. However, I experienced the history of South Korean video game s. When I was young, I was eager to frequent to the amusement rooms. The place was a whole new world for me to escape from any pressures in my real life temporarily. My parents worried much about me. They scolded, warned, and even once kicked me of the hom e. Nonetheless, I could not stop playing arcade games in the amusement room. For this reason, my parents bought Zemmix and a latest PC for me. I played in the Seoul National University in 1998, I was obsessed with online games. There seemed to be no way out from the virtual online gaming world. I barely quitted playing online games due to studying abroad. Even now in my iPhone, there are two or three mobile games. The se games are always tempting me to play whenever I am not busy. This dissertation basically reflects my experience with the South Korean video gaming sector. My dissertation was an agonizing journey that I could not have finish without the precious support I received. During this journey, I had just one priority: FINISH IT. This priority was sustainable thanks to the kindness and care I have been fortunately surrounded by. Thus, I would like to apologize first to each and every one to whom I have not been a ble to show my gratitude. Starting from expressing my thanks to my advisor would be a clich, but I have to. My advisor, Dr. Aida A. Hozic, made me to grow up from a toddler to a child. Of course, it is well known among graduate students that our relation ship with our advisors has ups and downs. As an international student, I had an exceptional experience with her. Since the day I started my Ph.D program here in Gainesville, I realized I was actually experiencing her. Her book, Hollyworld, provided me an i
5 University. I hesitated to approach to her, since I was used to the hierarchical relationship between a professor and a student in South Korea. However, thankfully, she approached me. As my advisor, she always teaches me how to fish, without giving me a fish. Unless she guided me, I would not even have started this project. I will always be thankful not only for her support for my dissertation, but also for her being a great role model as a professor. I also appreciated to my committee members, Dr. Ido Oren, Dr. Leann Brown, Dr. Laura Sjoberg, Dr. Badredine Arfi, and Dr. Terry Harpold. They all supported me both in this dissertation and in other obstacles I had to go through. Especially, D r. Leann Brown is always welcoming to the students, provides emotional and academic advices to me, whenever I personally am stuck, and I encountered certain barriers. I am very indebted for her help. arkable. Even though my mom and dad will never read this dissertation since neither of them knows English, they always knew how important this study was to me. They have always provided me with home during those times that I felt lonely in the United State s. My sister and brother in law have always been with me as well. They continuously found a way to help me refresh from the stress I had to go through for eight years. Helen Hyeryeon Jang, Dragana Svraka Saskia van Wees, Eyup Civelek and Brian Park all offered support both inside and outside of my academic endeavors. Their generosity is without parallel and what makes our little graduate community a true family. My true best friends, Yeosang Jang, Jaehwan Park and Seyoung Kang, always have been a source of good energy for me. Their trust and friendship always be a great source of support. I thank Lennie Jones Alison Gaines, and Dr. Kendra Patterson for their invaluable helps during the time that I struggled to work on this project.
6 I am sure there are m any others whose names I am not mentioning unintendedly. I thank each of them who was a part of my life, my academic career, and of my dissertation. This work is dedicated to everyone who shares my life. And lastly, I am thankful to the God for everything.
7 TABLE OF CONTENTS page ACKNOWLEDGMENTS ................................ ................................ ................................ ............... 4 LIST OF TABLES ................................ ................................ ................................ ......................... 11 LIST OF FIGURES ................................ ................................ ................................ ....................... 13 LIST OF OBJECTS ................................ ................................ ................................ ....................... 14 ABSTRACT ................................ ................................ ................................ ................................ ... 15 CHAPTER 1 THE SOUTH KOREAN VIDEO GAME INDUSTRY AND THE GOVERNMENT .......... 17 Video Game Research ................................ ................................ ................................ ............ 19 Video Games in International Relations ................................ ................................ .......... 19 Study on the South Korean Video Game Industry ................................ .......................... 24 Research Questions ................................ ................................ ................................ ................. 27 The Concept of Regulation ................................ ................................ ................................ ..... 31 Sources ................................ ................................ ................................ ................................ .... 36 Chapter Outlines ................................ ................................ ................................ ..................... 40 2 THE ARCADE GAME PLATFORM ................................ ................................ .................... 45 Introducing Arcade Games in South Korea and the Electronic Amusement Rooms ............. 46 ................................ .............. 48 Management of t he Arcade Game Platform in the Existing Legal System ..................... 49 Expansion of the Locational Management Framework on the Amusement Rooms ....... 50 Arcade Game Development without Constraints from the Government: Reverse Engineering ................................ ................................ ................................ ......................... 53 Expansion of Moral Regulation ................................ ................................ .............................. 55 Scan dals around the Amusement Rooms ................................ ................................ ............... 58 Corruption in the Self regulation ................................ ................................ ..................... 58 The Slot Machine Scandal ................................ ................................ ............................... 60 Resolution of Scandals ................................ ................................ ................................ ........... 62 The Restriction of Gambling: the Resolution of the Slot Machine Scandal ................... 62 The Termination of Self regulation: the Resolution of the Corruption ........................... 63 Relaxing Moral Regulations ................................ ................................ ................................ ... 65 Allowing Gift Cer tificates in Amusement Rooms ................................ .......................... 65 Sea Story Scandal ................................ ................................ ................................ ............ 68 Result of Regulation on the Arcade Game Platform ................................ .............................. 70 3 THE CONSOLE GAME PLATFORM ................................ ................................ .................. 73
8 Introducing Console Games ................................ ................................ ................................ ... 75 Console Game Development ................................ ................................ ................................ .. 78 Conglomerates: Localization ................................ ................................ ........................... 78 Plagiarism by Unlicensed Third party Developers: An Example of Saehan Trading Company ................................ ................................ ................................ ...................... 79 Imposing Moral Regulation ................................ ................................ ................................ .... 83 The Review Process on Console Games the Ministry of Culture and Sports .............. 83 Problems in the Moral Regulation ................................ ................................ ................... 84 Market Failure ................................ ................................ ................................ ........................ 87 Chaotic Console Game Market ................................ ................................ ....................... 87 Direct Distribution by Foreign Companies ................................ ................................ ..... 89 Result of Regulation on the Console Game Platform ................................ ............................. 92 4 THE PC PACKAGE GAME PLATFORM ................................ ................................ ............ 95 Introducing PCs and PC Package Games in South Korea ................................ ...................... 96 s Indirect Involvement in the Growth of the PC Package Game Platform ................................ ................................ ................................ ............................... 99 Emerging the PC Package Game Industry ................................ ................................ ............ 102 The Government 105 The Ministry of Posts and Telecommunications: Establishing Backgrounds to Support the Industry ................................ ................................ ................................ ... 105 The Ministry of Commerce, Industry, and Energy: Nurturing the PC Package Game Industry as the PC Software Industry ................................ ................................ ........ 107 Expansion of the PC Package Ga me Industry in South Korea ................................ ............. 109 Diversification of PC Game Genres ................................ ................................ .............. 109 Emergence of the Private Associations ................................ ................................ ......... 112 .. 114 Fierce Competition in the PC Game Sector ................................ ................................ .......... 116 Value Chain Structure ................................ ................................ ................................ ... 116 Free Bundle Games from Game Magazines ................................ ................................ .. 119 Overlapping Pol icies for the Growth of the PC Package Game Sector ................................ 121 The Ministry of Culture and Sports (later the Ministry of Culture and Tourism) ......... 121 Jurisdictional Competition between Three Ministries ................................ ................... 124 Result of Regulation on the PC Package Game Platform ................................ ..................... 126 5 THE ONLINE GAME PLATFORM ................................ ................................ .................... 130 Emergence of PC Communication Services and Online Games ................................ .......... 132 Internet Network Infrastructure ................................ ................................ ..................... 132 Introducing an Online Game in South Korea ................................ ................................ 133 Establishing Infrastructure: Nation wide Broadband Connection ................................ ........ 135 Emergence of Another Type of Online Games and PC Bang ................................ .............. 137 Graphic Based Multiplayer Online Games: The Kingdom of the Winds and Lineage .. 137 PC Bangs ................................ ................................ ................................ ....................... 139 The Government: Neo liberal Economics and the Cultural Industry ................................ ... 141 Emphasis on Venture Startups and Information Technology Sector ............................ 141
9 Economic Support of the Cultural Industry ................................ ................................ ... 142 Integrate d Governing of the Online Game Sector ................................ ......................... 144 ............................... 146 Online Games and PC Bangs ................................ ................................ ........................ 146 Creation of a New Business Model ................................ ................................ ............... 147 Expansion of Regulation of the Online Game Sector ................................ ........................... 149 The Military Service Exemption Program ................................ ................................ .... 149 Arising Concerns about Online Games ................................ ................................ ......... 151 Imposin g a New Moral Regulation on Online Games: the Rating System ................... 153 Lineage ................................ ................................ ................................ ............ 155 An Inter ministerial Conflict and its Resolution by Coordination: Lineage 2 .............. 157 Failed Attempt to Implement Shut down System on Online Games ............................ 160 Preparing to Extend Economic Regulation ................................ ................................ ... 162 Strengthening the Moral Regulations ................................ ................................ ................... 163 The Sea Story Scandal ................................ ................................ ................................ ... 163 Setting the Game Review Board Permanent: Amendment of the Game Industry Promotion Act ................................ ................................ ................................ ............ 164 Indust rial Performances: Blockbusterization and Market Saturation ............................ 165 Intermingling Economic with Moral Regulations ................................ ................................ 168 Mid and Long t erm Plans for Nurturing the Industry ................................ ................... 168 The Shut down System ................................ ................................ ................................ .. 169 Problematizing Online Games ................................ ................................ ....................... 172 Negative Impact on the Online Game Market ................................ ............................... 174 Integrated Regulation from the Government ................................ ................................ ........ 175 Re sult of Regulation on the Online Game Platform ................................ ............................. 178 6 THE MOBILE GAME PLATFORM ................................ ................................ ................... 182 Emergence of Mobile Games in South Korea ................................ ................................ ...... 183 Mobile Telecommunication Market and the First Mobile Games ................................ 183 Difficulty for Developing Mobile Games ................................ ................................ ..... 185 Rapid Growth of the Industry ................................ ................................ ............................... 187 Establishment of the Local Standard: The Wireless Internet Platform for Interoperability (WIPI) ................................ ................................ .............................. 187 Empowered as Content Providers ................................ ................................ ................. 188 Challenges from the Global Market ................................ ................................ ..................... 190 Smartphon es ................................ ................................ ................................ .................. 190 The Open Market ................................ ................................ ................................ ........... 19 3 Revision of the Existing Game Review System ................................ ............................ 194 Expansion of the Shut down System to the Mobile Game Sector ................................ 196 Expansion of the Mobile Game Market ................................ ................................ ................ 200 Connecting Mo bile Games to Social Network Platforms ................................ ............. 200 The Stochastic Item Box ................................ ................................ ............................... 204 Result of Regulation on the Mobile Game Platform ................................ ............................ 208 7 CONCLUSIONS ................................ ................................ ................................ .................. 212
10 Summary of Arguments ................................ ................................ ................................ ........ 213 Regulation ................................ ................................ ................................ ...................... 214 Moral and Economic Regulation ................................ ................................ ................... 215 Challenges in Regulatory Implementations ................................ ................................ ... 218 Resistances from the Industry and the Consumers ................................ ........................ 220 External Factors ................................ ................................ ................................ ............. 223 Contributions and Implications ................................ ................................ ............................. 226 Contributions ................................ ................................ ................................ ................. 226 Limitations ................................ ................................ ................................ ..................... 228 Suggestions for Future Research ................................ ................................ .......................... 230 LIST OF REFERENCES ................................ ................................ ................................ ............. 232 BIOGRAPHICAL SKETCH ................................ ................................ ................................ ....... 253
11 LIST OF TABLES Table page 2 1 Pong ................................ ................................ ................................ ................................ ... 46 2 2 Speed Race ................................ ................................ ................................ ......................... 48 2 3 Galaga ................................ ................................ ................................ ................................ 48 2 4 Speculative features and gambling ................................ ................................ .................... 57 2 5 Timeline ................................ ................................ ................................ ............................. 72 3 1 ................................ ................................ ................................ ...... 80 3 2 The Deliberate Committee and the Korea Public Performance Ethics Committee ........... 84 3 3 The Korea Public Performance Ethics Committee ................................ ............................ 84 3 4 Famicom ................................ ................................ ................................ ............................ 88 3 5 Timeline ................................ ................................ ................................ ............................. 94 4 1 8 bit and 16 bit personal com puters ................................ ................................ .................. 98 4 2 Arkanoid ................................ ................................ ................................ ............................. 99 4 3 Dream Traveler ................................ ................................ ................................ ................ 102 4 4 Fox Rang er ................................ ................................ ................................ ....................... 104 4 5 Iigimae: Manpasikjeokpyeon and Ilgimaejeon: Manmanpapasikjeok ........................... 106 4 6 The Secret of Monkey Island ................................ ................................ ............................ 110 4 7 Ultima ................................ ................................ ................................ .............................. 110 4 8 Astonishia Story ................................ ................................ ................................ ............... 110 4 9 Market scale of cultural indus tries in 1996 ................................ ................................ ...... 121 4 10 The Game Promotion Center ................................ ................................ ........................... 123 4 11 The policies from the government for the growth of the PC game indus try ................... 124 4 12 The ministries and corresponding private partners ................................ .......................... 125 4 13 Timeline ................................ ................................ ................................ ........................... 129
12 5 1 PC communication ................................ ................................ ................................ ........... 132 5 2 MUD ................................ ................................ ................................ ................................ 134 5 3 Diku MUD ................................ ................................ ................................ ........................ 134 5 4 MUG ................................ ................................ ................................ ................................ 137 5 5 Lineage ................................ ................................ ................................ ............................. 138 5 6 The Game Industry Fund in the Cultural Industry Promotion Fund ................................ 144 5 7 Starcraft ................................ ................................ ................................ .......................... 146 5 8 Primary revenue models for online games ................................ ................................ ....... 148 5 9 T he rating system by the GRAC and the GCRB ................................ ............................. 177 5 10 Timeline ................................ ................................ ................................ ........................... 180 6 1 Anipang ................................ ................................ ................................ ............................ 202 6 2 Timeline ................................ ................................ ................................ ........................... 211 7 1 Regulatory modes and agenda ................................ ................................ ......................... 216 7 2 Responses to regulation ................................ ................................ ................................ ... 221 7 3 Intentions and outcomes ................................ ................................ ................................ .. 225
13 LIST OF FIGURES Figure page 2 1 Game screen comparison Gallag with Gal aga ................................ ................................ .. 55 2 2 Arcade games in front of stationary stores ................................ ................................ ........ 56 2 3 A certificate that the Association issued ................................ ................................ ............ 60 2 4 Sea Story ................................ ................................ ................................ ............................ 69 3 1 P opular console games: Cabbage Patch Kids and Magic Tree ................................ ......... 75 3 2 Console hardware: Zemmix, Gam boy, and Com boy ................................ ....................... 77 3 3 Market shares of consoles in the South Korean market in 1993 ................................ ........ 88 3 4 The first console game by the South Korean company ................................ .................... 90 4 1 A PC game, Nibbles (developed with Q Basic of Microsoft) ................................ ........... 98 4 2 A PC package game, Dream Traveler and its package (released by Aproman) ............. 102 4 3 The game package and the diskettes of Fox Ranger ................................ ........................ 104 4 4 A password in the game package, and a game scene in Astonishia Story ....................... 112 4 5 Game magazines and free bundle games ................................ ................................ ......... 120 4 6 Street vendors selling illegally copied games ................................ ................................ .. 128 5 1 A terminal and PC communication service, HiTEL ................................ ........................ 133 5 2 The game sc ene of The Land of Dangoon ................................ ................................ ....... 134 5 3 The first popular online game in South Korea, Lineage ................................ .................. 138 5 4 PC Bang in Seoul, South Korea ................................ ................................ ....................... 140 5 5 The symbols of the rating system ................................ ................................ .................... 176 6 1 The number of active users of KakaoTalk ................................ ................................ ....... 200 6 2 A game scene of Anypang (developed by SundayToz) ................................ ................... 202 6 3 Disclosed information on the stochastic item b ox in a mobile game ............................. 207
14 LIST OF OBJECTS Object page 3 1 Comparison between original version and localized version ................................ ............ 79 3 2 Penguin Adventure (bootlegged by Zemina in 1987, originally developed by Konami in 1986) ................................ ................................ ................................ .............................. 81
15 Abstract of Dissertation Presented to the Graduate School of the University of Florida in Partial Ful fillment of the Requirements for the Degree of Doctor of Philosophy GOVERNING VIDEO GAMES IN SOUTH KOREA By Jongmin Yang December 2018 Chair: Aida Afran Hozic Major: Political Science This dissertation examines the regulatory framework over video game s in South Korea from 1980 to 2016, focusing on the role of the government in developing video games in the industry, and in consuming video games in the market. Specifically, it addresses the interplay between the regulatory framework from the government and the industrial respons es as an important cause to ref orm the regulatory regimes across various video game platforms. This empirical case study of the South Korean video game industry aims to broaden debates about the role of the government in the marke t in international political economy, and the political economy of the South Korean video games in video game study. The empirical work of this study focuses on the history of South Korean video game industry consisted in five game platforms. This dissert ation argues that the South Korean government has played an active role in the development of South Korean video games by regulations and initiatives The regulation of South Korean video games can be broadly divided into two categories based on the nature of regulative activity: moral and economic regulation. However, there has been three challenges (lacuna in regulation, competition between ministries, and lack of monitoring) related to the regulator influence the effectiveness of regulation. These challe nges in regulatory implementations led to unintended outcomes, along with societal and
16 industrial resistances. Moreover, there were two identified external factors that impacted the effectiveness of government regulations. These factors around the video ga me regulations were intermingle d with each other to contribute to the failure of government regulation to achieve its intended goals. The study concludes with a summary of findings, limitations of this dissertation, and a few directions for future research
17 CHAPTER 1 THE SOUTH KOREAN VIDEO GAME INDUSTRY AND THE GOVERNMENT In 2002, the Ministry of Culture and Tourism in South Korea was the main authority for governing all video games. South Korean online games were burgeoning in the market, while the arca de game industry was struggling to grow due to regulations on gambling. The Ministry imposed a new regulation for South Korean arcade games that allowed for the use of gift certificates as payouts, while cash prizes were still strictly prohibited. The new regulation was expected to achieve two objectives. The first was to invigorate the profitability of the South Korean arcade game industry. The second was to nurture the local economy, as these gift certificates were designated to be used like cash to buy e veryday goods in the markets. This new regulation failed to achieve these objectives, instead fostering further gambling. A scandal erupted around a virtual slot machine called Sea Story. Arcade games in the South Korean market were based on virtual gambli ng game content. Sea Story was popular because it gave customers the fantasy that they could win a lot of money, feeding into gambling addiction. However, t he gift certificates that Sea Story paid out were nothing but casino chips, and small traders in the markets did not accept the gift certificates because of their lack of reliability as currency. Moreover, no customer was likely to make big money playing the game. Addicted customers abandoned their occupations and went bankrupt. Some of them were reporte d to have committed suicide because of their debts. In 2006, the then Prime Minster, Myeongsook Han officially acknowledged and apologized for the failure in policymaking. This episode encapsulates many issues and debates around the regulatory framework o ver industry in South Korea. Over the past four decades, the South Korean government has actively engaged in the development of video games, including arcade, c onsole, PC package, online, and
18 economic performance, achieving specific outcomes based on economic or moral principles, as discussed below. However, as seen in ab ove episode, regulations that the South Korean government has implemented over each game platform have failed to achieve its intended goals. This dissertation analyzes government regulation of game platforms in South Korea from 1980 to 2016 through a de tailed case study In so doing, it contributes to the broader scholarly and political debates about the relationship between the government and the market in international political economy. regulating the video game indu stry, providing an analysis of the regulatory framework and its effects on the development, operation and consumption of video games in South Korea. In order to understand the effects of government regulation on the development and consumption of video g ames in South Korea, this dissertation also traces the ways in which the industry responses to regulation varied by game platforms. The South Korean video game Each game platform experienced dif ferent regulations based on the different ways that video games were conceptualized by various actors including consumers, parents, video game companies, and public officials As I show in the following chapters, each type of platform has experienced a dis tinctive historical evolution in terms of government regulations and industrial responses. My dissertation analyzes the economic and regulatory trajectories of each distinctive vid eo game platform, pointing out the different ways the government and video g ame industry have interacted with each other. This di ssertation therefore focuses primarily on how strategic interactions between regulators and regulated industries produce distinctive economic outcomes, which often bear little resemblance to the initial policy goals.
19 Video Game Research This section presents current research on video games in International Relations as well as research by South Korean scholars that focuses on the South Korean video game sector in order to expose the need for understandin g the South Korean case, and it discusses how this dissertation addresses the limitations of the literature. In International Relations, video game lives, and little research has been done on the role of the government in regulating video games in South Korea. For the South Korean case, researchers have focused almost exclusively on the development and use of the online game platform, analyzing which factors cau economic success. Considering the fact that the experiences of other game sectors, such as arcade, console, and PC package game platforms, have also affected and continue to affect the online game industry, such research ignores the over all history of the South Korean video game industry. The government has played an important role in the development of the whole industry via intervention and regulation. Video Games in International Relations Existing literature about video games tend s to 1 of cultural studies (Kellner, 1997): textual analysis and critique of cultural artifacts, the study of audience reception and uses of cultural products, and the production and political economy of culture. Existing In ternational Relations studies about video games, as addressed below, focus 1 Kellner does not rank order these three dimensions as he considers them equally important. I label them as first, second, and third to emphasize why I select the third one i dimensions: textual analysis and critique of cultural artifacts (cultural representations), the study of audience reception and uses of cultural products (audiences), and the production and political econo my of culture (the political economy of culture).
20 more on the first two dimensions: the video games as cultural representations and the audiences playing behaviors persuasive potential since the interactive nature of video games allows consumers to make certain arguments about the nature of social and political life (i.e. Robinson, 2012a; 2015, Shaw, 2014). In cultural studies, v ideo games a re usually consider ed as a medium in popular culture that pushes consumers to think critically and act opposite to conservatism because they offer solutions to the shortcomings identified in our way of life Robinson (2015), however, disagrees that video g ames are a medium for potential resistance He argues that they can also be used to reaffirm dominant positions in current social circumstances For example, American made military videogames reveal key dynamics underpinnin g American Exceptionalism in U.S. foreign policy. In these games the United States is depicted as an innocent victim of violence. They justify a military response unbounded by international norms and laws and position the player as a representative of the U nited States who is tasked wit h upholding national values (Robinson, 2015: 452). commodity consumers (i.e. Bos, 2015). This type of research is based on the argument that video games reflect the current world. It is relevant to politics because video games, which can be thought of as artistic objects, impose meanings on the political lives of their audiences. However, video game audiences are not passive. Bos (2015) calls for study of actual game playing behaviors rather than video games as cultural representations. For Bos, gamers actively engage with video games and research should focus on how the video game audiences connect political and militaristic worlds in video games to their everyday lives in t he real world. In other
21 words, Bos examines the ways in which game players have agency to create their own meanings while playing video games. In this research dimension, video game audiences and their game consumption are fruitful sites for understanding while playing The above two dimensions of current research about video games are not central to this dissertation research. This is not to ignor e these two dimensions entirely or to declare that analyzing South Korean games via cultural representations or cultural audiences is not plausible or useful The main intention here is to focus on the third dimension as prior to the other two. T his disser tation is primarily political economy of culture. Specifically, it examines the social and economic effects of the f the government. Consequently, it does not focus on the meanings of video game content (cultural Existing research on third dimension tends to see the video game in dustry as a production sector of cultural commodities. There are several case studies of the video game industry in different countries or regions that look into the origins and formation of the industry and examine the issues each sector faced with the em ergence of the global video game market (i.e. Dyer North American industry (2012); Kerr for the UK and Ireland video game industry (2012); Sandqv ist for Swedish game industry (2012)). Dyer Witheford and Sharman (2005) focus on the dynamics and contradictions between video game sector. These three factors, they argue, drive Canadian vi deo game development.
22 Capital investment by multinational game publishers in Canada brings vitality as well as fragility (2005: 195 developer companies around issues of rati ngs and censorship (2005: 198 200). And labor circumstances are such that a competent labor force is the basis of the industrial growth, but creativity is constrained by sexist hire patterns and intensified labor management tensions due to the normalizatio n of hyper extended crunch time (2005: 200 204). the video game industry in the North American region breaking down the structure of the industry and its relationships with the global game market. The historical roots of the ind ustry and the rise of large console manufacturers result in making North America the largest producers of video game s in the industry currently faces with globalization which might hamper the long term viability of the industry, and he suggests that the industry embrace a culture of openness that facilitates the growth of the medium (2012: 112). F ocusing on the UK and Ireland, Kerr (2012) attempts to situate the changes being experienced within the video game indus try in the context of the global political economy, analyzing the origins of the industry in the 1970s and 1980s, the impact of globalization in the late 1990s, and the emergence of an industrial discourse about international competition and labor shortage s in the 2000s. Finally Sandqvist (2012) presents the history and development of the Swedish digital game industry from the 1950s onwards. According to him, Sweden has had a relatively large game development community, but very few game publisher companie s. While recent growth has been rapid due to enhanced creativity and innovation among Swedish game developers, the industry is unstable and has made little significant profit despite some
23 When we classify the above literature ab out the video game sector using approach, three observations can be made. First, existing research aim s to provide descriptive details about the video game industry in one country or certain region, and its video game development process an d consumption of games The authors share the assumption that the video game industry in one country or certain region is distinct both compared with other cultural industries, and from other countries or regions. Second, research on the video game industr y in one country or region cannot be incorporated into a single theoretical framework of political economy due to the varied and different socio economic contexts. Thus, the case studies above are not generalizable. Third, the research is focused on countri es that lead in terms of game sale revenues in the global video game market. There has been little interested in the Asian region, despite the fact that it can provide a different conceptualization of the cultural industry at a local and transnational leve l of consumption and production (Hjorth and Chan, 2009: 15). Specifically, t he South Korean case can provide a perspective on the political economy of the video game industry that has been neglected in the mapping of the global video game sector. This res earch follows Robinson (2012b), who focuses on video game regulatory K examines where responsibility for restricting access to age inappropriate content lies: with the state, the developer companies, the game retailers, or regu lation gives the burden of responsibility to the game retailers and the state. However, the regulatory framework, which is not based on any the actions of parents who ignore the ga me ratings (Robinson, 2012b). While Robinson
24 emphasizes the role of the government regarding regulatory framework in order to understand the local video g ame industry and its practices, his analysis contributes to the conceptualization of a Western dominat ed global video game industry as the UK video game sector is similar to that of the United States. Study on the South Korean Video Game Industry Compared to existing research by Western scholars on the video game sector, most literature in South Korea is concentrated on the South Korean case. Additionally, studies on the South Korean video game industry do not de al with the whole gaming sector; rather, they focus primarily on the online game sector which has grown rapidly and consequently received global attention. Moreover, existing literature does not treat the government as an important actor in the growth of the South Korean video game industry. This section first reviews existing studies on the South Korean video game industry, and then discusses how this dissertation addresses the limitations of the existing literature. Kim (2006) analyzes the development of the South Korean video game industry under changes in government industrial policy as characterized by path dependency. She contends that while the video game industry in South Korea has experienced rapid changes in terms of technological development and economic growth, the rigidity of government policy hampered the further development of the industry and thus did not support an economically succ essful outcome because of the path dependency of the national innovation system. S he suggests future governmental regulatory reform so that the national innovation system can catch up to and support the rapid changes in creativity and innovation in the Sou th Korean video game industry. While her research is insightful, her study does not cover the South Korean video game industry after 2000 a key time frame in which the online game industry exploded in profits. Until the
25 mid 1990s, the video game sector in South Korea was a small scale industry (Nam, 2009: 1) that the state did not deem to be lucrative. Wi (2009), following from Wi and Rho (2007), investigates how and why the South Korean online game industry grew so successfully. In the discipline of bus iness administration, Wi contends that technological innovation and industrial formation of the online game sector were novel and disconnected from that of previously developed game sectors such as arcade and PC package platforms. As the online game indus try developed its technological and business innovations, other game sectors failed to adapt. His study is noteworthy in the sense that it provides a detailed analysis of industrial structure in the online game business, development and management of onli ne games, and creation of corresponding virtual societies and economies among consumers. However, his research focuses only on factors inside the online game industry. He concludes that the South Korean video game industry could develop its own technology without government involvement. However, actual circumstances refute this. As discussed in this dissertation, the government has played a pivotal role in the history of the South Korean video game industry through regulation of video games. In the academic discipline History of Science and T echnology (HST) Nam (2009) compensates for some problems in Wi (2009). According to Nam we can understand the South Korean video game industry as a mixture of culture and technolog y. The new technological system the So uth Korean online game industry has developed does not only emerge from technological innovation, but also from the social institutions and organizations. Like Wi, Nam asks why the South Korean online game industry grew rapidly in a short period of time in the 2000s. To answer this question, Nam analyzes the ways in which online game technology has been constructed, how the new business model of online games was made, and how the
26 socio cultural context has impacted the development of online game technology. He approaches the development of the online game industry with a chronological history analysis that emphasizes the cultural circumstances of video game consumption and the to regulate the PC package game market in the 1980s, the rapid transition of the game market from the PC package platform to the online game sector from 1998 to 2000, and the consolidation of the online game industry and the development of game technology from 2000 to 2008. Unlike Wi, Nam treats the government as an important actor in the socio economic context of the development of online game technology. However, his analysis does not cover the South the mobile game sector s upplanted it. Last Jin (2010) asks a similar questio n to the previous two studies: W hy and how did the online game industry in South Korea gro w ? However, he answers this question by focusing on a different dimension. Jin fo cuses on the South Korean soci o cultural context, investigating the relationship between the online game industry and the broader society. According to him, a confluence of developments produced the conditions for the South Korean online game industry to flourish: favorable government p olicies based on the n eo liberal economic perspective, the development as the background for online game proliferation, globalization of the online game industry, (2010: 35). Considering the socio cultural factors, Jin analyzes the way in which South Korean society gradually accepted the online game industry as a cultural industry. Ji n understands the intervention to the neo liberal economic perspective which contributed to the online game
27 could be the factor that caused works only for online games, and is problematic if appl ied to the other game platforms. PC package games failed to make economic headway of the industry under the same economic policy changes. In sum, video game literature in South Korea reflects growing attentions to the South Korean video game sector. However, there is still a lack of a comprehensive understanding of the ways in which the video game sector develops and operates as a cultural commodity vis vis government regulation. Existing literature has paid little attention to the pivotal role of the government in regulating video games. This dissertation sheds light on the regulatory framework nt and evolution in South Korea by tracing the dynamics be tween the implementation of regulation and responses from the private sector. Research Questions This dissertation contends that the South Korean government has actively engaged in the regulation of several gaming plat forms. However, these regulations did not directly result in achieving the policy goals they purported to explicitly address. The interactions between the public and private sectors around regulation implementation drove the evolution of the regulatory framework a process that differs across each game platform. Tracing each and historical development offer s insights toward answering the main research question posed in this dissertation: Why did the South Korean government regulations by and large fail to achieve their intended goals from 1980 to 2016? The research here finds that in many cases, the South Kor ean video game industry was able to evade (through legal and illegal means) most government regulations implemented du ring the 36 years covered by this study. To examine this puzzle further, this dissertation examines
28 how the interactions between the gover nmental regulations and the industrial responses shape d regulatory implementation differently across various game platforms. By tracing these interactions across several cases of different video game platforms, the analysis offered here seeks to illuminate game platforms became ineffective. This dissertation approaches this question via the following subquestions. First, why did the government regulate the video game industry? What regulations did the South Korean government implement, under what conceptualization (or problematization) of video games? This dissertation emphasizes economic performances. That is, thro ughout the history of the South Korean video game policy, but rather were implemented under time based social and economic considerations The research here no t only examines variations between regulations over the game platforms, but also how video games in South Korea have been debated in society Second, how did the vi deo game industry respond to regulation? Under the regulation s how did the industry develo p video games and how were video games consumed in the market? This dissertation asks how far the private sector (the game developer companies and video game consumers) abide d by or resist ed given regulations from the government This study not only aims t o understand the impact of government regulation on the video game sector in South Korea; it is also interested in observing factors influencing regulatory reforms. Regulations often did not achieve their explicit goals immediately The ir effectiveness dep ended on responses in the private sector.
29 Through an assessment of the history of the South Korean video game industry, this dissertation contends that the political economy of the video game industry in South Korea can be explained by the evolution of th e regulatory regime over the game platforms that resulted from the dynamics between the public and private sectors. For this reason, its analysis deals with the ways in which the video game industry developed commodities, distributed video games to the mar ket, and how such video games were consumed in the market. By addressing these issues this dissertation aims to understand how the implementation of government regulation and industrial responses can influence the e ffectiveness of the regulations and the evolution of regulatory regimes. The third subquestion is, what impact did the dynamics of regulations and responses have on the video game market in South Korea? Each g ame platform has different time frames, different game companies, different technologie s for game development, and thus different outcomes. As the vis vis video games changed over time, the government initiated and implemented different regulations across video game platforms. Moreover, a combination of regulati ve modes from the government with a response or a set of responses from the industry reflects a political economy of video games in South Korea that is different from outcomes the regulation initially intended. Some brief examples of unintended outcomes a re as follows. Regarding the arcade game platform, government regulation was intended to ensure hygiene of the location where arcade games were played. This met resistance from the industry and ultimately resulted in the regulation ineffectiveness. Gover nment regulation was also not effective at stopping the proliferation of black market arcades in illegal locations Moreover, the government unintentionally negl ected console game development despite its regulation on console game
30 content. The consequent d eviant development of console games by unregulated small console game companies allowed the black market to beco me so powerful that conglomerates, despite regulation of th e PC package game platform, particularly economic incentives, helped that industry emerge However, competition between ministries within the government, and resistance from consumers over laws against illegal copying eventually rendered the regulation s i neffective, and thus the PC game platform was also relegated to the black market. The online game platform which grew as a result of government regulation based on economic principles encountered unexpected social issues of gambling related to the arcade game platform These social issues caused the government to change its conceptualization of video games as a whole and to shift its policy to moral regulation. R esistance from the consumers reduced these and the industry could not continue to ensur e its economic viability. Last in more recent years, of setting technological standard s as a barrier to entry in the mobile game sector enabled that industry to emerge. However, as the global mobil e game market changed, external factor s such as increased smart phone use regulation became ineffective because it could not keep up with the changes in the market, and thus the m obile game To summarize, t his dissertation contends that the political economy of video games in South Korea can be explained by examining the interactions between the government and t he private sector over regulatio n of video games. Throughout the history of the South Korean video game industry, the government has been a key player via its regulatory responsibilities. The government maneuvers its various policy instruments of laws, regulations, and guidelines to
31 prot ect and promote economic growth of the private sector. However, such instruments do not always achieve intended policy goals because the government and the private sector interact in ways that create unintended outcomes. The Concept of Regulation This diss ertation focuses on interactions between the public and private sectors over regulations as a way to understand the role of the government in the development and operation of video games in the South Korean market. It purposively defines regulation as an i dentifiable and discrete mode of governmental activity that involves a focused attempt to steer the video in develop ing and operating video games, according to defined moral standards or economic purposes and with the in tention of producing a broadl y identified outcome This definition of regulation can be further divided into two streams, depending on the nature of the regulatory activity. First, economic regulation, designed to improve economic and market efficiency, is positive where the industrial behaviors are encouraged by economic incentives. Second, moral regulation, designed to produce socially desirable outcomes by restricting industrial and individual behaviors and preventing the occurrence of certain undesirabl e activities, is negative where the behaviors and activities are discouraged through prohi bitions, disincentives, and mechanisms of command and control. 2 This section shows the theoretical connection of the operationalized concept of the regulation to broa der debates about the regulation, and discusses some theoretical implications by analyzing the South Korean case of video games. 2 The words and meanings and should not be interpreted as indicating pos itive regulation is desirable and negative regulation is undesirable The economic regu lation is positive in that it is enabling or facilitative, while the moral regu lation is negative in that it is disabling or restrictive.
32 Regulation is not a new phenomenon. While there are various arguments about the origins of regulation including empts to cont rol trade (Condliffe, 1950: 27), the governing behavior of the Tudor and Stuart periods (Ogus, 1992: 1), and government responses to the Great Depression (Sunstein, 1990: 18), most scholars agree that regulation has matured as an academic subj ect matter and that concepts and language regarding regulation have become widespread in public and academic discourse (Baldwin et al., 2012: 1; Koop and Lodge, 2017: 95). Nonetheless, the definition of regulation itself is heavily contested (Levi Faur, 20 11: 3). There is no single explicit and agreed upon definition (Baldwin et al., 1998: 2 4) Baldwin et al. (1998: 2 4; 2012: 2 3) argue that there are three main conceptions of regulation 3 : 1. Regulation as the promulgation of an authoritative set of rule s, accompanied by some mechanism for monitoring and promoting compliance with rules; 2. Regulation as all the efforts of state agencies to steer the economy; and 3. Regulation as all mechanisms of social control including unintentional regulatory activitie s and processes by non state actors. While law scholars, political scientists, and economists tend to work within the first two conceptions, sociologists emphasize the third (Baldwin et al., 1998: 4; Levy Faur, 2011: 3). Regarding the South Korean case in this dissertation, the definition of the regulation stated above reflects the second conception, that is, regulation in this dissertation is state centered but more expansive than a legalistic command and control mechanism. As a part of the definition of r egulation in this dissertation, the government regulates the economy to achieve clearly identified outcomes of regulation. Regulation here includes monitoring processes of activities and behaviors related to 3 The re are scholars who conceptualize regulation differently, and such definitions have been widel y used For example definition is ustained and focused attempt to alter the behavior of others according to defined standards and purposes with the intention of producing a broadly identified outcome or outcomes which may involve mechanisms of standard setting, information gathering, and b
33 regulation, reassessment of what values the regu lation ultimately achieves, and adjustment or modifying processes based on the socioeconomic circumstances around regulation First, to address the question of whether regulation is carried out by the public sector, this gulation is a distinctive activity carried by the government. Government as regulator is a distinguishing characteristic of the first two conceptions above, differentiating them from the third which includes the possibility of self regulation by non state actors by expanding the regulatory behaviors to all mechanisms of social control. As in the first two conceptions, Noll regulation is a tool for the government to control the economy. Selznick conceptualizes regulation as exercised by a public ag ency (Selznick, 1985: 363). For Ogus (1994: 2 3), regulation refers to the legal means by which market problems are corrected, and features a state centered legalistic character. On the contrary, the broadest conceptualization as in the third conception, includes all governing activities by all social actors. For example, Mitnick (1980 : 14) states that although his study focuses on regulation by government, private actors may also regulate. Black includes self regulation by non state actors in her definiti on, arguing that if regulation remains a concept tied solely to the state, then we will find contemporary forms of rule hard to understand at all (Black, 2002: 17). This broadest conception has strengths in that it enables analysis of social issues around video games However, as in the criticism offered by Black, it provides no boundaries as to where regulation might end (Black, 2002: 8). One may argue that this third, and broadest conception is appropriate in analyzing the South Korean case of video game s because there have been attempts to establish self regulation. However, this dissertation limits the role of regulator to the government, not only because ultimately self regulation failed to appear, but also because the government wanted to oversee self regulation by non state actors thereby coopting any self regulation
34 Second, in terms of regulatory mechanisms, this dissertation argues that regulation is not necessaril y confined to command and control mechanism via direct legislation. This reflects t he distinction between regulation as the promulgation of an authoritative set of rules and as all the efforts of state agencies to steer the eco nomy. This broad er approach to regulation has an advantage in that where command and control rulemaking seems to be inappropriate as a mean s for achieving objectives other tools can be used (Baldwin et al., 1998: 3). Thus, this dissertation conceptualizes regulation as including both command and control and less re strictive interventions such as economic incentives It does not include consideration of interventions by cultural or social norms, as in the broadest conception of regulation The broadest conception is associated with studies of governmentality which posit regulation involves all types of power relatio ns t hat require individuals to auto correct themselves in light of the dominant logic of governing (Dean, 1999; i.e. Hall et al., 1999). Since this dissertation focuses on the role of the government in the development and operation of South Korean video ga mes, and the effect of regulation on the video game market in South Korea, this dissertation limits the concept of Regulation is the result of an intentional d ecision of the government and the range of policy instruments depends on intended outcomes based on certain identified values (Baldwin et al., 1998: 41). This dissertation posits that regulation over video games has two inten ded values, or goals: moral principles and economic principles. These two modes of regulation are contrasting policy pairs. 4 Moral regulation is designed to produce socially desirable outcomes by restricting the harmful effects of development and operation of 4 This dissertation focuses on moral and economic regulations originating with the government. This does not mean that there is no possibility of the existence of other modes.
35 video games. The socially de sirable outcomes reflect broad social values such as justice, equity, fairness (Ogus, 1994: 46 56; Baldwin et al., 2012: 22 23), and social solidarity (Prosser, 2006: 378 382) 5 Moral regulation aims to produce better outcom es than unregulated efficiently operating markets. Economic regulation, on the other hand, is designed to improve economic efficiency. The Organization for Economic Co operation and Development (OECD) defines economic regulation as direct intervention in market decisions to increase economic efficiency producing better market functioning by reducing barriers to competition and innovation (OECD, 1997: 6). Such regulation ensures fair rules for market competition and encourages certain private sector ec ono mic activities through economic assistance an d incentives Finally the previous points allow for consideration of the evolution of regulatory regimes are not achieved by simply enacting legislation. Regulation requires on going m onitoring of the private sector s economic activities. Based on this monitoring, the government reassess es intended values and adjust s with regard to private sector interests. As stressed above, the government is the primary actor in articulating th e goals of regulation. However, in the evolving process of regulation, the private sector responds through interactions with the public sector is an evolving regime. It has not originated from an o verall cultural project, but rather from social and economic considerations regarding each individual game platform. 5 One might argue that the government regulation is acquired by the target industry (Stigler, 1971; Peltzman, 1989; will have an incentive to influence the regulator to benefit f rom regulation by erecting barriers to control the entry and growth of new rivals for securing and protecting their economic profits. However, regarding the South Korean political context, this account is not relevant to regulatory frameworks over South Ko rean video games. In South Korea, there is no official ways of lobbying like the United States that the private sector organizes themselves into groups to exert pressure on the decision making process to grant their interests by pushing favorable regulatio n. The government can ensure trustworthiness and disinterestedness of the regulator. The government assumes interests of the private sector by their economic activities, but the private interests are not directly inputted in the decision making process.
36 Sources This dissertation identifies the need for a historical case study of the South Korean video game industry and proposes the concept of regulation as a useful tool for advancin g knowledge of the practices and behaviors related to video games, albeit tempered with a valuation of historical episodes. This dissertation considers regulations of each game platform to be detached from the ot hers because of specific social and economic considerations regarding each game platform The research here is constituted primarily by an analysis of the legislature and the video game policy, and the responses of the industry a nd the market, emphasizing interactions between the government and the industry. The qualitative case study approach is useful for tracing the processes of regulation across the various platforms of the South Korean video game industry from 1980 to 2016. The South Korean cas e embodies complex issues and it is almost impossible to acquire internal quantitative data because the video game industry does not publicize it This section presents the main sources used to delineate the history of the South Korean video game sector and the associated regulatory framework: o fficial documents from the government, documents from the private sector, and interviews. First a variety of sources originally produced by the South Korean government to investigate government al regula tions of video games are examined The principal sources are the legislation itself and National Assembly records for debates over the legislation, the National p ublications produced by ministries such as the M inistry of Health and Welfare, the Ministry of Culture, Sports and Tourism, and the Ministry of Science and Technology and industrial reports from governmental agencies and institutes. These sources are analyzed in reference to the forms of regulation tha t are attempted, implemented, and practiced. The Office of Legislature digitizes all legislation, which is available online. The
37 Secretariat of the National Assembly provides digitized transcripts of all debates, hearings, and audits in the Congress to the public which are available on the National Assembly of Korea procedures of establi shing the regulations, and evaluations of monitoring process es Moreover, C ongression al sources contain information on market trends and the practical enforcements of legislation by the governmental agencies. In terms of official documents from the government, this research makes use of several d industrial reports. Such documents detail the through which the government regulated, or attempted to regulate, the video game sector. Given that each ministry has different viewpoints about video games, they often compete with each other regarding policies and resources. These sources describe policy initiatives and contain information of how each ministry understands video games. Furthermore, i ndustrial reports contain information on industrial trends and official statist ics related to the video game market, as well as policy recommendations corresponding to issues in the market. The National Library of Korea, the National Assembly Library, and the Korea Creative Content Agency collect all industrial reports from governmen tal agencies and insti tutes, some of which are available online. An additional source in this first group is The White Paper about the South Korean Video Game Industry, which is fundamental to understanding the regulatory frameworks. It is published by the Korea Creative Content Agency (KOCCA), established as a government affiliated institute in 1999 (and called the Korea Research and Development Institute for Game Industry before 2009 ) The White Paper documents actual practices in the video game industry
38 and the video game market over the course of every year, and governmental policy trends and prospects. KOCCA has all issues of this yearly report in book format. A s econd group of sources, produced by the private sector, are examined in order to understan d responses of the industry and the market to the regulatory framework imposed by the government. These sources include articles in newspapers and game magazines, game company f private companies and game associations, and individual memoirs on the Internet. Press sources are utilized because they document historical evidences of the development of the South Korean video game industry. Since 2011, an Internet portal site company Naver has worked to digitize three national newspapers ( Maeil Kyeongje Dongailbo and Hangyorhe ) from the years 1920 to 1999. Naver also provide s archives of the main national and local newspapers in South Kore a from 2000 onwards. A ll game related news articles from 1981 onwards were gathered for the analysis presented here Four game magazines ( Computer Vision, Gameline, Gamepia, and Game Champ Magazine ), which KOCCA archived, were also used for this dissertation. The press depicts historical events. N ews media is a reliable source of historical evidence on the South Korean video game industry, its d evelopments, and legislative or policy developments. News articles are useful in identifying which video games in each game platform were popular, and in pi npoint ing which regulations the government tried to implement based on wh ich particular issues were of concern. News articles provide not only factual information about video games, but also offer certain viewpoints about events through the way those event s are depicted. This is useful evidence because the depictions reflect public opinion on video games which can be a basis for legitimating governmental regulations. Articl es in game magazines are analyzed similarly. They provide evidence of private sector practices and allow
39 for tracing how private companies developed and distributed video games, and how the video game industry and the market responded to gov ernment regulations. Official reports, public infor mation releases, and speeches by the key officia ls of video game companies also chronicle the development and operation of video games and the practices of companies in the market under governmental regulations. Some important games and companies are highlighted in this dissertation. A study tracing one development is nearly impossible because many companies were established, evolved, and withdrew from the game business in a short period of time. Moreover, except by analyzing official statistics about the entire video game industry it is impossible to qualitatively analyze every company and every game. T his dissertation identifies some representative games and game companies that were the most popular and profitable for each game platform, such as Saehan Trading Co. for the arcade game platform, Lineage I and Lineage II for the online game platform, and KakaoTalk for th e mobile game platform A third group of sources used in this dissertation are interviews, which compensate for omitted information in the sources described above. I nterviewees consist of gov ernment employees, video game company employees academic experts on video gaming, specialists in the public and private associations, and video game consumers. This dissertation draws on documented interviews in various forms of media, such as newspapers, game magazines, and secondary academic sources. Articles in news media and game magazines that depic t empirical events often contain detailed explanations and interpretations of the facts by persons associated with or observing t he industry. Secondary academic sources, including Kim (2006), Wi and Rho (2007), Nam (2009), and Wi (2009), have documented interviews of those who worked in the video game industry. These interviews are used to ensure that important contextual events and
40 processes around governmental video game regulations a re not overlooked. In addition, interviews 6 were conducted with employees at private g ame companies, officials in private industrial associations, and individual developers. This dissertation contains in depth analysis of two interviews with prominent employees in the video game industry. These two interviews are useful in clarifying the missing features of other sources. The interviewees are Yongwhan Kim, in charge of the external affairs at Smilegate, and Sunggon Kim, an executive secretary in the private industrial association KGames, who facilitates cooperation among the video game companies in South Korea. Chapter Outlines This dissertation develops a historical case study of the South Korean video game industry vis vis seven chapters. This first chapter the introduction, includes the literature review, explanation of the research questions, and the methodology and sources. The following f ive chapters deal with the empirical ory framework over video games in South Korea. The final chapter the conclusion includes a summary of findings, contributions and limitations, and sug gestions for further study. The empirical chapters, Chapter s 2 through 6 framework over video games in South Korea through an analysis of game platforms that have comprised the South Korean video game sector. Each platf orm is distinctively organized in terms of tec hnological development, and reflects on different historical, political, economic, and social realities in South Korea. The empirical chapters explore the historical context of regula tion by the government and its implementation, enforcement, and consequences; the responses from the industry and the market as expressed in 6 These interviews were conducted in South Korea, in the s ummer of 2015, under UFIRB approval #2015 U 529
41 the development and operation of video games; the interplay of interests between the public and private sector s and related effects on regulat ory reforms; and the current economic status of the sector that resulted from evolved regulatory regimes. Chapter 2 examines the arcade game sector starting in 1975 when the first arcade game was introduced in South Korea. The chapter traces how the gove arcade games, along with its lack of monitoring, led to distorted practices within the arcade game sector and resulted in the development of a black market, greatly diminishing the market share of arcade games in the South Kore an video game industry. The government implemented moral regulation based on hygiene of the playing location and health of consumers, focusing on the consumption of arcade games. The regulation did not aim to steer the development of South Korean arcade ga mes, and the government did not monitor compliance with the regulation. Because of this lack of enforcement, t he industry engaged in illicit development of counterfeit games and became involved in corruption and gambling scandals The government responded to these scandals with more constraining moral regulation, resulting in the industry moving into the black market. In the end, the legal arcade game sector diminished, sharing less than one percent of the total sales revenue in the South Korean video game market. Similar dynamics are seen in the South Korean console game sector examined in Chapter 3. The government implemented regulation s based on moral principle s focusing on console game content However, regulation s did not cover small sized console ga appropriations of Japanese console games, causing an unintended reduction of the economic competence of South Korean console games The moral regulation on console games hindered the normal development of the industry and in turn its economi c viability After conglomerates
42 withdrew from the console game business, this sector also moved into the black market. M arket failure followed, but the government was not interested in actively correcting this Chapter 4 analyzes the failure of the gover profitabi lity of the video game industry through a close examination of the practices of the PC package game platform in South Korea from 1981 when the first PC appeared. Unlike in the cases of the previous two ga me platforms, the government implemented economic regulation on the PC package game industry b ased on the conception that game development strengthens the South Korean information technology based economy. However, the g overnment regulation lacked coordina tion, resulting in competition between several ministries within the government. They implemented overlapping and repetitive regulations in order to appropriate higher budgets. This competition meant that the government was unable to coordinate and thereby ensure the fair rules in the PC package game market in South Korea, Moreover, the PC package game sector did not have one cohesive community that was able to addr ess market problems and advocate its interests in regul atory reforms While conglomerates focused on importation of foreign games, small and mid sized game companies struggled to continue game development because of the proliferation of illegal game copies created by consumers. T hese factors led to the failur e of governmental economic regulation to achieve its goal of industrial promotion. The black market came to dominate the PC package game sector, and the industry sha red less than one percent of total sales revenue in South Korea in 2016. Chapter 5 present of the online game platform from the introduction of the first Internet network in South Korea in 1982. The government implemented economic regulat ion on the online game industry, such as policies favorable to s tartup businesses, in order to drive the development of the information technology
43 industry Competition between the Ministry of Information and Communication and the Ministry of Culture and Tourism was well coordinated, and the online game industry was ac tively involved in improving regulation. Thus, the gov the online game sector could have been successful However, gambling problems in the arcade game industry pushed the government to reconsider online games, resulting in the shift to moral regulation. At the same time, the online game industry struggled with rapid market saturation, excessive competition, and structural imbalances caused by a few companies dominating more than 80 percent of revenues Even though the govern ment implemented several moral regulations on online games such as the game rating system and the Shut dow n S ystem (discussed in further detail below), these regulations could not achieve their goals because of competitio n within the government and resist a nce from the consumers This ultimately hindered economic viability for further development of online games by South Korean online game companies. In Chapter 6, this dissertation examines the latest innovation in the South Korean video game sector, the m obile game platform, which started in 1984 when the first public mobile telecommunication device appeared. Governmental regulation for purposes of technological development played a role in the emergence and growth of the domestic mobile game market, resul ting in isolating the domestic game market from the global market. When the domestic mobile game industry tried to catch up with the changes in the global market, and expanded beyond the boundary of the country, the government gradually lost its authority over the market. The government insisted on controlling the domestic market with regulations that review and rate all mobile game content in the South Korean marke t (the rating system), and prohibit adolescents from game playing after midnight (the Shut do wn system). However, the government could not implement such moral regulations over the global mobile game industry.
44 This empirical analysis is followed by a conclusion in Chapter 7 that summarizes the his chapter also sp eculates on where such findings leave us by considering limitations of this study and offering suggestions for future research. This study is organized as an empirical exploration of the South Korean video game video games in the South Korean market has yet to be taken seriously in studies of political economy. The existing literature does not differentiate across game platforms, but this dissertation contends th at such parsing is vital to understanding the current South Korean video game market at hand. One hope is that viewing the actual practices of government regulation of video games will evoke more discussions about the role of the South Korean government in the globalized market. In doing so, the research here contributes to broader theoretical debates about the relationship between the government and the market in the globalized world econom y
45 CHAPTER 2 THE ARCADE GAME PLATFORM In this chapter, I explore t he effects of regulation from the South Korean government on endeavors and the industrial responses drives the regulative reform process in the arcade platform mainly i n the 1980s and 1990s. I argue that unsuccessful moral regulation from the government in tandem with distorted practices within the industry led the South Korean arcade game platform into the black market that the government did not intend. An arcade (game ) platform, or an arcade game system, refers to a video game that is a coin operated entertainment machine typically installed in public businesses like amusement arcades. Arcade games appeared in South Korea for the first time in the early 1970s. In the 1 970s, arcade games did not have their own unique area or facility where they were physically installed. Therefore, early arcade games in South Korea were originally found in amusement facilities as side attractions. In the 1980s, arcade game rooms were cre ated in South Korea and arcade games became popular. While the South Korean arcade game market was dominated by imported games, it is noteworthy that the South Korean video game industry produced its own arcade games in the 1980s. The government tried to control the burgeoning industry. However, the government attempted to monitor the locations where video games were played and not how the video games were distributed. The government wanted to address health and safety issues for adolescent patrons, and al so wanted to make sure that the arcades themselves were safe physical and social environments for youth. The industry negatively responded to the moral regulation from the government. Even ssues of safety and
46 propriety in the arcade game sector, the regulation did not address vending practices and the actual content of the games themselves. One reason why the regulation of vending practices needed to be implemented was that most companies co pied original arcade games and distributed pirated versions. Japanese games were the most targeted games for counterfeit reproduction. This interaction between the government and the arcade game sector resulted in the development of the black market. The p ublic opinion was that the arcade game industry created amusement that the government regulation over South Korean arcade games did not achieve its goals. Despite the ade games on the black market. Introducing Arcade Games in South Korea and the Electronic Amusement Rooms The first arcade game in South Korea, Pong Computer TV appeared in a department store in 1975 ( Maeil Kyeongje 1975 January 29 th ). However, there is no official record documenting how Pong was imported and distributed. Table 2 1. Pong Pong was released in 1972 by Atari. The game is widely known as the first commercially successful arcade game. The game simulates a game of tab le tennis. By controlling a paddle with dials, the players attempt to hit the ball back and forth. The price of one such machine was too high (from $590 to $1350) ( Kyeonghyang 1976, November 4 th ), for the general population to afford as a home product o r appliance. Therefore, from 1976 to 1980, arcade game units were mostly located and operated in the corners of amusement businesses like billiard rooms, table tennis facilities, and roller skate rinks. Arcade games helped owners of the amusement businesse s to attract their customers.
47 In 1980, various locations specializing only in providing arcade games services were in Korean, pronounced Jeonja Oracsil ) and equivalent to the amusement arcades in the United States, spread in South Korea and featured lesser unknown amusement rooms quickly spread around the country. The government strictly prohibited adolescents from frequenting amusement rooms. Nevertheless, because most amusement rooms were il legally operated, adolescents played arcade games under the radar of the government. Public opinion, which several newspaper articles recorded, stigmatized amusement rooms as places of adolescent delinquency. Furthermore, the amusement rooms were viewed as unsanitary physical environments for adolescents. Because the rooms were dimly illuminated in order to improve the clarity of the game screen, patrons were unable to have a clear view of their surroundings. There was no ventilation. Thus, patrons were rea dily exposed to second hand smoke. Other factors that prevailed in this environment were bullying, assault, theft, and other forms of delinquency. There were basically no means of protecting patrons. Hence, the public opinion about the amusement rooms was not favorable. Parents wanted the government to have oversight of the rooms. Electronic amusement rooms attract most elementary, middle, and high school students. Electronic amusement rooms, which have started to grow in numbers lems to the guidance of our youths ( Dongailbo 1980 February 21 st ). The number of both illicit and legally run amusement rooms increased in the 1980s. Various arcade games were introduced and played in both licensed and unlicensed amusement
48 rooms. The amu sement rooms introduced arcade games developed in Japan such as Speed Race and Space Invader by Taito, as well as in the United States such as Breakout by Atari. Table 2 2. Speed Race Speed Race was released by Taito in 1974. Speed Race was an early raci ng arcade game. In the United States, the game was rebranded as Racer and Wheels and released by Midway in 1975. In contrast to the volume control dials used for Pong the game featured a realistic racing wheel controller. Table 2 3. Galaga Galaga was re leased in 1981 by Namco. After the release, Galaga became one of the most popular arcade games of all time. The game featured a top down shooting action. The player controls a small ship located at the bottom of the screen to destroy the incoming waves of insect like enemies. However, the most popular arcade game in the South Korean electronic amusement rooms was Galaga by Namco. Sangwoo Kim reflects on Galaga Galaga Starcraft Ga laga accounted for more than 80 percent of the total arcade games that every electronic amusement room had (Kim, 2008). In the mid 1980s, other games were introduced to the amusement rooms. Bubble Bobble by Taito, 1942 by Capcom, Tetris by Atari, and Stree t Fighter by Capcom followed the popularity of Galaga Contra by Konami and Ikari Warriors by SNK also were widely played in the amusement rooms. The Encountering arcade games in South Korea, the govern ment tried to control the arcade only regulated physical spaces That is, while the government regulated the arcade platform with morality, its regulation did not cover the vending practices Rather, the governme arcade games were played, making sure that locations were physically and socially safe environment for adolescent patrons.
49 Management of the Arcade Game Platform in the Existing Legal System Moral regulation of the arcade game sector from the South Korean government stemmed from existing legislation of amusement facilities. The existing law, the Amusement Places Act, locations of public spaces, designed for amusement related amusement businesses must be licensed by the government, and abide by a specific set of standards. These standards addressed the infrastructure and physical aspects of the facility. For example, the installation of ventilation systems was required in the amusement places Owners were also required to maintain sanitized surfaces, and to install ash trays and trash disposals (the Ministry of Health and Social Affairs, 1980). Not only because arcade games were installed in these amusement places, but also because these amusement places were available for the public, the government did not consider direct regulation of adolescents frequenting unhealt hy environments. Rather, the government attempted to amend the existing act to cover the arcade game sector. As the arcade game platform was governed by the existing legal system, governing the location was the main framework of the South Korean government However, the licensing system did not work well. The number of officially licensed amusement places where arcade games were installed was 35 on a national scale in 1975. From 1976 to 1979, the government did not issue any licenses. In 1980, the government started to issue the permits, but the number was still low. Only 43 locations were officially permitted in 1980. However, the numbers of officially permitted places do not reflect the South Korean arcade game sector at all. Most places which ran arcade games in their businesses were operated without permission. There were more than 900 illegally operated businesses just in Seoul ( Maeil Kyeongje 1979, August 2 nd ). The government tried to crack down on illegal places
50 ( Kyeo nghyang 1980, May 1 st ), but unlicensed places continued to burgeon. Even though there are no nationwide statistics, the number of illegally operated businesses was estimated to be 7,600 in 1983, contrasting to 769 officially permitted businesses (the Secretariat of Nati onal Assembly, 1983: 10). Expansion of the Locational Management Framework on the Amusement Rooms Since 1980, the South Korean arcade game sector had its own unique places where The rooms were popular among adolescents, and spread quickly around the country. However, government tried to expand the locational management framework. A s illegal amusement businesses grew, and as the amusement rooms spread, concerns about arcade games were growing in society precisely because the main patrons of the adolesce nts must be well educated. Many felt that frequenting the amusement rooms might detract from the time spent toward education. like a black box in parental control because the p arents do not have ways to Game Culture magazine, March) In 1981, the government amended the Am usement Places Act which regulated the amusement places. The title of the law was changed to the Amusement Places Businesses Act. In the amended law, the government made a point of defining the electronic amusement rooms within the scope of the regulatory amusement room in the definition of amusement places (the Office of Legislation, 1981). In the
51 enfor cement regulation of the Amusement Places Businesses Act owners of the electronic amusement room were required to prohibit persons under 18 from entering their electronic amusement rooms and from playing their arcade games (the Ministry of Health and Soci al Affairs, 1981). However, illegally operated rooms still proliferated around the country, and the government acknowledged that these illegal rooms were hotbeds of social problems: There are a lot of illegal electronic amusement rooms. The unmonitored fr equenting of illegal rooms by adolescents creates serious health, ethical, and social problem ( the Secretariat of National Assembly, 1983: 29). The popularity of the amusement rooms exceeded the popularity of other amusement businesses like billiard rooms, table tennis facilities, and roller skate rinks. The government tried to deal with the amusement rooms more stringently. In the amendment of the law in 1984, the amusement rooms were conceptualized as a prototype of the amusement businesses (the Office of Legislation, 1984). According to Whang (2009: 48), amendment of this legal perspective reflected the circumstance that amusement rooms among all amusement businesses were increasing and exceeding the shares of the other amusement businesses. Moreover, si nce the government could not stop adolescents from frequenting the amusement rooms, the government relaxed the previous regulation that prohibited adolescents from patronizing the amusement rooms. The government divided the amusement rooms into two types a only), and amusement rooms for general use which could include adolescents. In doing so, the government tried to achieve two goals: legalizing unauthorized amusement businesses, and p reventing potential social ills (for example, gambling) from reaching adolescents. Paralleled to the distinction of the amusement rooms, the government distinguished arcade games: arcade games for adults and arcade games for general use. The amusement room owners were required to follow the new classification of arcade games from the government. The installation of arcade
52 (the Office of Legislation, 1984). Electr onic Pachinko a video game that contained adult content such as nudity was not allowed to be installed at the amusement rooms for general use, while Galaga was allowed in both types of the amusement rooms. In order to classify arcade games, the government began to review arcade games. However, the review process to establish a classification system that informed consumers of the propriety of the arcade game content was too narrow in scope to account for the content of newly released arcade games in South K orea. Amending the law in 1984, the government established the Deliberative Committee for reviewing arcade games under the Ministry of Health and Social Affairs. According to the law, the Ministry of Health and Social Affairs was supposed to address criter ia to classify arcade games, and the committee was supposed to review and classify arcade games according to those criteria (the Office of Legislation, 1984). In this review process, assigning an arcade game of the same name with different content was proh ibited. In addition, the Deliberative Committee required all arcade games in the amusement rooms to be physically sealed with lead, so that the apparatus was inaccessible to those who might attempt to alter any game contents. However, the Ministry of Healt h and Social Affairs did not provide any explicit criteria for the contents of arcade games: rather, the Ministry created an imprecise list of arcade games (the Ministry of Health and Social Affairs, 1984). Arcade games were classified to a respective list loosely based on vague criteria. A list was set in stone by the Deliberative Committee, and never reviewed for updating classification. Furthermore, this imprecise system of classification did not accommodate new arcade games which were often left unclass ified.
53 Arcade Game Development without Constraints from the G overnment : Reverse Engineering Many small South Korean arcade game companies manufactured and distributed arcade games illicitly, while the owners of the amusement rooms were strictly regulated b y the government. In this section, I explore how arcade game manufacturers designed their arcade games, and how console games emerged and were created by South Korean companies. South Korean arcade game companies started to manufacture arcade games in the 1980s. However, companies did not create their own game content. Rather, companies reproduced imported (or smuggled) arcade games. In the 1980s, Cheongyecheon in Seoul was the Mecca of the arcade game sector in particular, and of electronics in general. Ma ny small scale electronic companies were clustered in the Cheongyecheon area, specialized in fixing broken appliances. In doing so, companies adapted to constructing and remodeling electronic appliances. (Gwon, 1982, November 19 th ). The remodeling and rede signing of electronic appliances is known as reverse engineering. There was nothing that electronic companies in Cheonggyecheon could not reproduce (Lee, 2015, an interview in ChosunBiz December 28 th ). According to the news article ( Maeil K yeongje 1982 December 24 th ), about 270 small scale companies in Cheongyecheon produced three million copies of arcade games through reverse engineering. That is, these companies did not invent arcade games. Rather, they plagiarized and remodeled already existing game s. Arcade game companies imported original The South Korean video game industry started in the Cheongyecheon area. Japanese game companies like Taito developed and released Spac e Invader and Alkanoid And then, South Korean game companies copied them (Hong, 2012: 23 24, an interview in Game Culture magazine, June).
54 When Japanese game companies published new arcade games, South Korean companies could access these games either thro ugh official importation or unofficial smuggling. South Korean companies could learn and gain the capacity to develop a circuit board in five days. Thus, many South Korean companies remodeled the circuit boards of these foreign games, and manufactured coun terfeit versions with cheaper South Korean semiconductor chips. For South Korean arcade game companies, reverse engineering was efficient and cheap, compared to official import processes. Ilrae Hong reflects on this phenomenon: The circuit board which was made in Japan was small because the circuit board used its own customized semiconductor chips. However, for South Korean arcade games, the circuit board was much bigger than the original one, since a circuit semiconductor chips which were cheaper but larger than customized chips (Hong, 2012: 24 25, an interview in Game Culture magazine, June). Also, a Professor Kim 7 explains: Most companies imported original circuit boards of arcade games from Japan, copied the boards, and distributed them. If you went through official procedures to import arcade games as the final product, it would take two or three months. (Kim, 2012: 24, an interview in Game Culture magazine, March). servation, it can be seen that during the time it would take to legally produce a comparable arcade game, illicitly operated companies could smuggle, reverse engineer, and distribute multiple illegally manufactured arcade games. For example, and as noted e arlier, one of the most popular arcade games in the amusement rooms was Galaga According to the list of arcade games that the Ministry of Health and Social Affairs approved (the Ministry of Health and Social Affairs, 1984), Galaga could be installed in th e electronic amusement rooms officially. However, one predominantly found Gallag a counterfeit version of Gallaga in the amusement rooms. 7 Changbae Kim is a professor of the department of Game and Multimedia in Woosong University.
55 Galaga was originally a Japanese arcade game that Namco developed and published in 1981. In South Korea, Galaga was distributed and consumed under the name of Gallag Gallag was the same game as Galaga but Gallag was not officially imported. A counterfeit version, Gallag was made by an unknown company in Cheongyecheon. The only difference between the two arcade games w as that the copyright text on Gallag Galaga, as shown in Figure 2 1. A B Figure 2 1 Game screen c omparison A) Gallag with B) Galaga [ Reprinted with permission fr om Khan, http://weekly.khan.co.kr/khnm.html?mode=view&artid=201604051520031 (October 15, 2017) ] Expansion of Moral Regulation cade games resulted in other possibly problematic phenomena. Due to the popularity of arcade games among adolescents, arcade games started to be illicitly installed outside of general amusement facilities and outside of specialized amusement rooms. Smaller sized arcade machines were illegally set up in front of stationary stores that were usually located around schools as shown in Figure 2 2. Such arcade games in front of stationary stores were not regulated under the existing law, and were thus
56 illegal bec ause the games did not conform to the location and operation stipulation for arcade game consumption. Moreover, the adults only amusement rooms, which were not illegal in the existing law, morphed into casino like environments. It was, however, illegal for native South Koreans to frequent casinos. South Korean citizens, therefore, attempted to skirt this gambling prohibition by playing pachinko style games in the adults only amusement rooms. These pachinko style arcade games were imitation of slot machine g ames in casinos. Figure 2 2 Arcade games in front of s tati onary s tores [Reprinted with permission from OhmyNews http://m.ohmynews.com/NWS_Web/Mobile/at_pg.aspx?CN TN_CD=A0000218984# cb (October 25, 2017).] Realizing that the existing law had many loopholes, the government tried to make its moral regulation more practical. First, in 1986, the government expanded the boundary of the amusement facilities in order to l egalize arcade games located in front of stationary stores. In the Public Health Act which followed the previous Amusement Places Businesses Act these arcade arcade ga mes were installed for commercial purposes were treated as amusement facilities (the Office of Legislation, 1986). Second, in 1987, the Ministry of Health and Social Affairs established more efficient criteria for reviewing arcade games through the D elib erative C ommittee in order to deter patrons
57 from overusing gambling machines. According to the enforcement regulations of the Public Health Act (the Ministry of Health and Social Affairs, 1987), the D eliberative C ommittee was not allowed to issue a certifi cate for gambling arcade games. Also, unlicensed arcade games were not allowed to be installed in any amusement rooms. These measures with respect to the D eliberative C ommittee, however, were not feasible because the committee did not have efficient means judging whether or not an arcade game involved gambling. Therefore, the Ministry of Health and Social Affairs shut down the D eliberative C ommittee, and tried to outsource the regulation of arcade games to arcade rooms owners themselves within the private sector (the Ministry of Health and Social Affairs, 1989). In 1990, after the shut down of the D eliberative C ommittee, the Ministry of Health and Social Affairs transferred to a sub committee in the private sector, which consisted of arcade room owners. This sub criteria for language and cultural content. The rationale behind this decision was that owners would be f amiliar enough with the games to properly review content. In order to make an inspection practical, the Ministry of Health and Social Affairs passed on the authority to inspect arcade games to the private sub committee, the Korean Computer Game Industry As sociation (the President of the Republic of Korea 1990). Table 2 4. Spe culative features and g ambling separate legal from illicit behavior Speculation refers to a practice of risky transactions with the aim of gaining profit. However, it is similar to gambling because one does not know what probability of winning one person actually has. In South Korea, speculative features were widely used in regulating gambling because gambling is subjected to be illegal, but speculative features are actually legal. Gambling arcade games refers to the game machines that have speculative features. Speculative behaviors are used like gambling as a behavior.
58 At the same time, the Ministry of Health and Social Affairs illuminated the previous vague criteria for arcade game inspection. Most criteria were detailed explanations about arcade South Koreans, the reg ( in Korean, pronounced Sahangseong ) to replace references to gambling games. According to the criteria, arcade games were not allowed to trade in cash with respect to prizes and winnings. Arcade games were required to alter gambling functions (or specul ative functions). The probability of winning a prize could not exceed 15 percent ( Kim, 2004). In the inspection of arcade games, the Korean Computer Game Industry Association was required to follow the rules and criteria that the Ministry of Health and Soc ial Affairs established. Scandals around the Amusement Rooms Corruption in the Self regulation Due to the implementation of the private sector review system, a new relationship emerged between the government and the industry. However, the relationshi p was asymmetrical conflicts of interest as both stakeholder and enforcer, caused the precarious relationship to break down. The Korean Computer Game Industry Association wa s an interest group of owners of the amusement rooms. The government transferred the authority to inspect arcade games to the private association because the Korean Computer Game Industry Association was the only association that had expertise in dealing w ith arcade games. Moreover, the government chose the association to monitor the entire arcade game industry in South Korea, believing that the
59 association had leverage over the arcade game industry, as the association dominated most purchases of arcade gam es. The Korean Computer Game Industry Association was a representative the arcade rooms were main buyers of arca de games (Kim, 2012: 23, an interview in Game Culture magazine, March). hierarchical relationship between the government and the industry, the association did not try to neg an interest group of amusement room owners, exploited the regulatory policy. The government expected that the association could manage the regulation of the e ntire arcade game industry. In turn, by controlling the association, the government could monitor and achieved because the association was not able to influence a rcade game companies with respect to the video game content. A system of self regulation was in play. With the amusement room owners that comprised the regulatory association in essence regulating themselves, the phenomenon of bending the rules while revi ewing the permissibility of arcade games in their place of business was prevalent. The association, as both a stakeholder in and a beneficiary of the profitable amusement room industry, was inept to serve also as the enforcer of the regulatory policy. Due to in fact never monitored what the association did. Without monitoring from the government, the associat ion could do whatever it wanted. Changbae Kim explained the problem with the self regulation had:
60 The review process was not transparent. The association issued the certificate of arcade games only to certain companies that were favorable to the associatio n. Some problematic arcade games were approved because those companies had a professional alliance with the association (Kim, 2012: 24, an interview in Game Culture magazine, March). Moreover, the certificate itself that the association issued, as shown i n Figure 2 3, permitting each arcade game offered to be in the amusement room, was easy to forge ( Maeil Kyeonge 1989, November 20 th ). Figure 2 3 A c ertificate that the A ssociation issued [Photo courtesy of author ] Therefore, amusement room owners forged such certificates, resulting in the proliferation of illicit arcade games throughout many amusement rooms. The Slot Machine Scandal Another scandal which was important for understanding the arcade game sector in South Korea was the Slot Machine Sca ndal in 1993. Basically, the Slot Machine Scandal is known as a to 2.5 years in prison for bribing several police officers and even congressmen. The Slot Machin e Scandal exposed the cozy relationship between the underground economy and political circles. However, it is noteworthy for the arcade game platform in South Korea that the scandal made the government more interested in strictly regulating gambling in the amusement rooms,
61 eradicate the underground economy. I declare the war on organized crime. I will use my full authority under the Constitution to eradicate [criminal syndicates and their organized crime] (Roh, 1990). In doing so, the government tried to eliminate all criminal syndicates, especially organized gangs. The National Police Ag ency reported that the government tracked down 274 organized gangs, made mass arrests of 1,421 individual gang members including the heads of gangs, and imprisoned 1,086 members among them by 1992 (the National Police Agency, 1992). On the surface, it was successful because there were no active organized gangs in South Korea. In fact, organized gangs were not seen because they went underground. The adults only amusement rooms were sources of funds for the underground economy. As noted earlier, the adults on ly amusement rooms were casino like places that local Koreans could patronize. The adults only amusement rooms, especially operating virtual gambling machines, were profitable because arcade games were manipulated to be advantageous to owners. Many illegal amusement rooms existed, but there were few raids. Furthermore, the adults only amusement rooms were used for money laundering. Organized gangs ran these profitable businesses, and the profits from illegal amusement rooms supplied funds for operating orga nized crime. Organized gangs that ran illicit amusement rooms needed protection. In order to avoid crackdowns, organized gangs bribed a bunch of police officers from the bottom to the top. Furthermore, organized gangs bribed politicians in return for esca ping from prosecution because politicians could exert their influences on the prosecutor. Therefore, with bribery, organized gangs could earn double protection from exposing their businesses to danger.
62 In 1993, as the new President was inaugurated, the You ngsam Kim administration began to root out corruption within the government. The prosecution began with the adults only the prosecution expanded to more than 10 pol itical figures in the government and the Congress. Of course, these political figures tried to obstruct investigations, claiming that they were unfairly targeted in an act of political retaliation. As a result, Deokjin Cheong was sentenced to 2.5 years in prison, the Congressmen Cheoleon Park was sentenced to 1.5 years in prison, and the other suspects were proved innocent. Due to the Slot Machine scandal, the government tried to crack down on illicit amusement rooms. However, the illegal amusement rooms we re never wiped out. After the Slot Machine scandal, the government busted many amusement rooms, suspended illicit rooms, and inadequate to stop illegal operations of g ambling arcade games in the amusement rooms because actual crackdowns were operated by the police officers who could not focus only on the amusement rooms. Owners veiled illicit rooms temporarily when the police officers raided these rooms, and continued t o operate. Even though the illicit rooms were raided, owners could reopen other rooms and continue their businesses. For that reason, the government needed more practical and relevant solutions. Resolution of Scandals The Restriction of Gambling: the Resol ution of the Slot Machine Scandal gambling intensified. As noted earlier, the most members of government wanted to weed illicit amusement rooms out, but did not succeed du e to corruption. Therefore, the government
63 considered amending the Public Health Act in hopes of strictly prohibiting patrons of the amusement rooms from gambling, and in 1995, the government actually did amend the law. According to the amended Public Heal th Act (the Office of Legislation, 1995), the government excluded a certain type of amusement rooms which operated gambling games from By doing so, amusement rooms which operated gambling games then fell within the juri sdictional domain of the Act on Special Cases Concerning Regulation and Punishment of Speculative Behavior a stricter legislation than the Public Health Act Under the Act on Special Cases all owners of amusement rooms were prohibited from installing any gambling games in their amusement rooms. This act specified the issues concerning gambling related businesses and imposed special punishments for persons who used gambling games. Furthermore, under the amended Public Health Act the adults only amusement rooms were prohibited, because they operated like casinos. Therefore, rather than maintaining two amusement room sectors, one general and one adults only, only the general amusement rooms were to remain in operation within this framework. For remaining amu sement rooms for general use, the Ministry of Health and Social Affairs made a rule that adolescents were allowed to frequent amusement rooms from 6 AM to 10 PM (the Office of Legislation, 1995). The Termination of Self regulation: the Resolution of the Co rruption In addition to the Slot Machine Scandal of 1993, the scandal of corruption in the private association for reviewing arcade games was also resolved. In 1998, the government terminated the practices of amusement room owners regulating themselves (th at the Korean Computer Game Industry Association reviewed arcade games after 1990), and reassumed the authority to inspect arcade games. However, the ministry that was assigned to regulate arcade games was not the Ministry of Health and Social Affairs, but the Ministry of Culture and Tourism.
64 In 1998, the South Korean government reorganized its administrative structure and Korea, 1998). In doing so, the gover nment began to consider arcade games as cultural goods and amusement rooms as a cultural facility. The arcade game platform was thus exempted from the Public Health Act (see discussion above) which regulated the physical cleanness and propriety of the faci lity under the Ministry of Health and Social Affairs. Instead, the arcade game platform was now regulated by the Ministry of Culture and Tourism with respect to cultural content of the games rather the propriety of the physical space. Along with the 1998 reorganization of the governmental structure, the Ministry of Culture and Tourism assumed the authority to govern both amusement rooms and arcade games played in amusement rooms. The review system of arcade games that was previously delegated to the self r egulatory policies of the private sector merged with the review system of console games. The minister of Culture and Tourism assigned the review system of arcade games to the Council for the Performing Arts (formerly the Korea Public Performance Ethics Com mittee). As noted earlier, this Council was already responsible for reviewing the cultural content of more Furthermore, the Ministry of Culture and Tourism amen ded previously vague criteria that the self regulated private association used to review arcade games. In doing so, the Ministry of Culture and Tourism focused on gambling. In the clarified criteria, all gambling related functions in arcade games were stri ctly prohibited. Arcade games were not allowed to give out cash prizes (the Ministry of Culture and Tourism, 1998). This strict prohibition was enforced by the
65 ent rooms was not corrected because illicit amusement rooms still existed. Although the number of legally licensed rooms increased from 1997 to 1999, many more illicit amusement rooms dominated the arcade game market. According to nation wide surveys (the National Statistics Office, 1997 1998; the Game Promotion Center, 2001: 66), there were 13,940 legally licensed amusement rooms in 1997, as compared to 15,372 in 1998 and 18,643 in 1999. The legally licensed amusement rooms comprised only 10 percent of the amusement rooms operating in South Korea ( Dongailbo 1995, April 12 th ). games to other platforms such as PC package and online games, the total number of amusement rooms, both legal and illegal, decreased. After 1999, the trends reflected the transition to a PC package /online based consumer market. Especially, as the online game p latform was getting popular, amusement rooms yielded locations and their popularity to PC Bangs as discussed in Chapter 5. Amusement rooms barely survived (Jeong, 2002, March 5 th ) until they attracted adult customers with gambling games. Relaxing Moral Reg ulations Allowing Gift Certificates in Amusement Rooms As the government came to realize the economic potential of the burgeoning online and PC package games that were left free of moral regulation (see in Chapters 4 and 5 for further information about the to equalize regulation across the arcade, PC package, and online game sectors. Thus, after 1999 when the Ministry of Culture and Tourism took over governing the arcade game industry the Ministry reevaluated and relaxed the previously imposed moral regulations on the arcade game
66 industry in order to maintain regulatory practices in the arcade game sector that were on par with the economic regulations on the PC package and online game sectors. However, the effort to treat the arcade game sector equally to other promotive sectors did not work out. Instead, the game sector misused the relaxation. The Sea Story scandal precipitated the end of the regulations even more necessary. In 2002, the Ministry of Culture and Tourism relaxed the previously imposed regulat ions that prohibited all cash prizes from arcade games in the amusement rooms. Even though excessive gambling in amusement rooms was still strictly prohibited, the regulations were not strictly enforced. Arcade games were now allowed to use gift certificat e s, which were substituted for cash prizes (The Ministry of Culture and Tourism, 2002). By permitting this, the government expected to achieve two goals: 1) invigorating the arcade game industry, and 2) strengthening the local economy because gift certific ate s were designa ted for use not only in arcade rooms, but also for use in traditional markets like cash The goals were partly achieved with such relaxation. The arcade game sector began to rebound. Amusement room owners distributed gift certificate s wid ely around the amusement rooms and treated gift certificate s like real currency. More than 100 kinds of gift certificate s were issued and distributed in 2004. However, another part of the goals did not work out, because such gift certificate s lacked reliab ility as currency outside amusement rooms. The government did not monitor how gift certificate s were issued and distributed under which conditions. Most gift certificate s were meaningless outside amusement rooms because small
67 traders in traditional market could not ensure gift certificate and therefore certificate s. widespread circulation of gift certificate s, most gift certificate s were usable only in arcade rooms. In June 2005, the Ministry of Culture and Tourism refined the existing policy regarding gift certificate s for amusement rooms. The Ministry selected nine kinds of reliable gift certificate s, and pus hed amusement room owners to use only these nine. However, the limitation to the nine selected gift certificate s did not solve the problem because many other gift certificate s, which were illegal to distribute, were still circulating around arcade game roo ms. In 2005, 6 billion gift certificate s total (including the new set of nine and previous certificate s) were distributed. The scale of gift certificate s around arcade rooms was esti mated at 27 trillion Won (Jeon, 2006, August 22 nd ; The Korea Research and Development Institute for Game Industry, 2007: 78) As customers most often did not use gift certificate s in the traditional markets, but rather in amusement rooms where the gift certificate s were exchanged for real currency, the gift certificate s were in actuality nothing but casino chips The relaxed prohibition which allowed for the gift certificate s to be used as casino chips worked in tandem with game content which was actual gambling. Adult customers of amusement rooms were enthusiastic to play games with virtual gambling content. They were in the fantasy that they could win a lot of money (Lee, 2005, July 8 th ; Kim, 2006, January 17 th ). Thus, the entire scheme was gambling. Despite the fact that the government tried to prohibit gambling behavior in am usement rooms, the relaxation of the regulations created an environment of leniency that fostered gambling. Nor did the government make adequate provisions for enforcing punishment as gambling occurred in amusement rooms (Lee, 2005, July 10 th ). Owners modi fied
68 favor. Sea Story Scandal Sea Story a virtual arcade game that simulated the Japanese slot machine, was created and distributed to the South Korean arcade game market when the government tried to relax regulations on the arcade game sector Aone Biz as a developer company and Zico Prime as a distributor company took the risk that in such a time of relaxed regulation, the gambling properties of Sea Story might be overlooked. The game was popular, but exposed the corruption in the Korea Media Rating Board, and the loopholes of such relaxations, creating a huge scandal. As a result, the Sea Story Scandal was the final wake up call for the government to strengthen it s moral regulation of the entire video game industry in South Korea. Also, the Scandal injured the arcade game industry beyond recovery. Due to the scandal, the government tried to eliminate all illicit behaviors around the arcade game industry, and thus t he illicit industry could not survive. The Korea Media Rating Board was corrupted, but no one raised the issue of corruption ( Ahn and Song 2006, November 23 rd ). In the first submission of Sea Story to the Korea Media Rating Board in 2004, the board rated because the board knew the game was easy to modify. However, the boar not allowed for audiences Even though the board was concerned that the game could be used to gamble, the board allowed the release of the game to amusement rooms for no reason. T he developer company submitted the updated version of the game to the Korea Media Rating Board in 2005. In this second submission, the board initially rated the game as again because the board raised an issue of gambling features in the game. However, all members who reviewed the game were fired, new staff members were hired, and they reviewed the game again. The board
69 finally issued the not In the review process, staffs did not review the game content. Rather, they looked over the manual of the game. The game was popular, dominating the adult arcade game market after 2005. As customers were addicted to playing it, the game had a powerful influence in South Korean society. Because it was a gambling game, customers were easily addicted. However, no customer was likely to make big money by playing the game Figure 2 4 Sea Story [Reprinted with permission from Donga http://weekly.donga.com/List/3/all/11/81260/1 (December 15, 2017).] Rather, Sea Story caused a social problem. Sea Story Customers laid aside their occupations and went bankrupt because o f the game. Some customers were reported to have committed suicide because of Sea Story ( Hankyorhe 2006, July 28 th ). As the general public developed negative opinion s from hearing the stories started to investigate the developer c ompany, illicit amusement rooms, and even the Korea Media Rating Board. In the investigation, the corruptions around the game were exposed. The Scandal was full of corruptions that combined the political arena with the arcade game industry, and with the bl ack market. Due to the Sea Story Scandal, the government began to eliminate all illegal behaviors and
70 amusement rooms were forced to close, and thus most owners went out of business. More than 70 percent of arcade game developer and distributor companies went bankrupt. The number of accused individuals of illicit behaviors exceeded 81,000. The National Tax Service audited all arcade game developer companies and all amusement rooms. The National Tax Service charged them an additional tax by up to 2.74 trillion Won. The Ministry of Culture and Tourism terminated the policy that allowed amusement rooms to dist ribute gift certificate s ( The Korea Research and Development Institute for Game Industry 2007: 77 79). Due to such powerful regulations from the government, the black market was rapidly shrinking Result of Regulation on the Arcade Game Platform The inten t was good ... [However,] both the government and the industry were responsible [for the black market] (Hong, 2012: 28, an interview in Game Culture magazine, June). mor al terms, the black market practices as a result proved that the relationship between the government and the arcade game industry was readily breakable. The fact that the amusement places located and used arcade games as attached attractions, and the fact that the amusement rooms functioned as locations for using arcade games, only led the government to establish the moral regulation on the arcade game platform in the existing locational management framework. Moreover, the fact that most patrons of the amus ement rooms were adolescents led the government to problematize the playing locations, and to guide the arcade game industry based on moral principles. Indeed, the government did not consider the arcade game industry in terms of economic and industrial gro wth. Furthermore, the government did not monitor practices in the market to check to see if its regulations would be well kept or not.
71 The arcade game industry in South Korea negatively responded to the moral regulation from the government. The industry e The industry did not try to correct their illegal practices, or to engage actively in evolving the relationship with the government. Moreover, the industry did not foster the economically viable produ ction of arcade games. Though there have been efforts by conglomerates to establish a South Korean arcade game market, and to make South Korean made arcade games, many South Korean video game companies exploited the normal arcade game market. On the surfa ce, the black market seemed to work in the market logic. However, the black market did not have the economic viability to continue to grow by such market logic, especially since patrons of the amusement rooms and console game customers became more interest ed in other game platforms. Therefore, the arcade game market in South Korea has gradually declined after 2000, even though the market slightly rebounded from 2002 to 2005 with the popularity of illicit gambling games among adults. After 2006, when the gov ernment raised the issue of illicit gambling arcade games and tried to eliminate all illicit behaviors around the arcade game industry, the arcade game industry could not grow anymore. The industry remained a miniscule sector in the South Korean video game market. The arcade game sector shared 0.8 percent (81.4 billion won) of total sales revenue in 2016 (Korea Crea tive Content Agency, 2017: 5 7).
72 Table 2 5. Timeline The i ndustry Year The g overnment Introduction of the first arcade game 1975 Emergence o f the amusement rooms 1980 Amendment of the Amusement Places Act (Regulation over the location) 1981 Amendment of the Amusement Places Businesses Act ( Expansion of regulation to the amusement rooms ) Reverse engineering (arcade games) begins 1982 1984 Amendment of the Amusement Places Businesses Act ( Prototyping the amusement rooms ; Dividing the amusement rooms into two types ; The review system of arcade games by the Deliberative Committee under the Ministry of Health and Social Affairs ) Locating arca de games in front of stationary stores Establishment of the Korean Computer Game Industry Association 1985 1986 Enactment of the Public Health Act ( Expansion of regulative boundary of amusement facilities ) 1987 Enactment of the enforcement regulations under the Public Health Act ( Establishment of criteria to review arcade games ) 1989 Shutdown of the Deliberative Committee 1990 Start of the self regulation system by the Korean Computer Game Industry Association Corruption in the self regulation sys tem 1991 The Slot Machine Scandal 1993 1995 Amendment of the Public Health Act ( Strict prohibition of gambling ; Termination of adult only rooms ) 1998 Transfer of the authority to govern arcade games from the Ministry of Health and Welfare to the M inistry of Culture and Tourism (Shutdown of the self regulation system; The Council for the Performing Arts starts to review arcade games under the Ministry of Culture and Tourism) 2002 The Ministry of Culture and Tourism allows gift certificates as priz es in amusement rooms The arcade game sector rebounds due to popularity of gambling games 2003 The Sea Story Scandal 2005 2006 The government strictly prohibits all illegal behaviors around amusement rooms
73 CHAPTER 3 THE CONSOLE GAME PLATFORM In t his chapter, I explore the effects of regulation from the South Korean government on the console platform sector, and how the relationship between the government and the industry evolved, mainly in the console platform in the 1980s and 1990s. I argue that the lacuna in the moral regulation from the government in tandem with distorted practices within the industry and the consumers, hampered the growth of the South Korean console game industry that the government did not intend A console (game) platform re fers to a video game that is inserted into a game console system. A console refers to a video game machine used with certain media such as Compact Disks, DVD ROMs, and game cartridges. The first console games appeared for the first time in South Korea in 1 976, but were popularized after 1985. While consol e hardware was expensive for general home use, console games had an advantage over arcade games. Adolescents could play games in their home where parents monitored and guided them in a relatively safer envi ronment. However, because South Korean companies invented neither console hardware nor software, imported console hardware and foreign console software dominated the initial console game market in South Korea. The government also tried to control the conso le game industry morally. However, the government could not attempt to impose the moral regulation on the location where video games were played. Instead of joining the regulation of console games with the regulation of arcade games under the Ministry of H ealth and Social Affairs, the Ministry of Culture and Sports tried focused on moral game content of console games.
74 ole game industry was vague and loose. Therefore, the console game industry continued an abnormal development of console games which were made in the early stage of the console market. Even though the regulation of console game content w as supposed to maintain South Korean culture against foreign culture in console games, the regulation did not cover the entire console software industry. That is, the government did not attempt to correct deviant development of console games by small sized companies. Under the loosened restriction from the government, most small companies copied original console games and distributed pirated versions of the games. Japanese games were the most targeted games for counterfeit reproduction. Although the South Korean government strictly prohibited Japanese imports after independence from Japanese colonization, the informal prohibition only covered tangible property. The console game sector exploited the fact that console games, as intellectual property, fell out side of this prohibition. The informal prohibition was unconstrained by the South Korean console game sector because the government lacked active implementation of the protection of intellectual property. The relationship between the government and the co nsole game sector made the growth of the console game industry impossible. That is, the relationship was irrelevant to the development of the console game industry, and thus resulted in the black market. As other game platforms emerged, the government lost interest in the console game platform. Conglomerates could not continue their con sole game businesses and withdre w from the market. The black game industry to rema in underdeveloped.
75 Introducing Console Games The first console games appeared in South Korea in 1976. A digital watch manufacturer, Olympus Electronics, manufactured a home version of a Pong clone console and sold it in the South Korean market, renaming as Otron TV Sports ( Maeil Kyeongje 1976, November 13 th ). However, there is no official record documenting how Otron TV Sports was developed and distributed, except an advertisement of the console that recorded what console games were featured, and how much the console cost. Maeil Kyeongje Olympus Electronics planned to develop other console hardware that supported exchangeable cartridges, but dropped its plan due to financial trouble (Jang, 1981, March 17 th ). In 1985, Daew oo Electronics manufactured a console hardware, Zemmix that was well known as the first popular console in South Korea. Not only was Zemmix reasonable for customers (81,000 Won, or less than $100), but also, the console already had various games that were similar to arcade games ( Kyeonghyang 1985, December 30 th ; Maeil Kyeongje 1989, March 18 th ). Zemmix was readily successful in the South Korean market, and led to the emergence of the South Korean console game industry ( Kyeonghyang 1991, J uly 31 st ). A B Figure 3 1. P opular console g ames: A) Cabbage Patch Kids and B) Magic Tree [Reproduced with permission from Konami of Japan 198 9 by Konami.] Because Daewoo Electronics built Zemmix Daewoo Ele ctronics was not concerned with developing a new console game for Zemmix
76 Zemmix could use various games that Japanese game developer companies already developed in game cartridges In 1989, Samsung Electronics and Hyundai Electronics released console hard ware in the South Korean market. The two consoles, Gam Boy and Com Boy were also popular with South Korean consumers. The most popular console games were Cabbage Patch Kids: Adventures in the Park Magic Tree ( in Japanese), and Knightmare that Konam i of Japan developed. Since 1985, the South Korean arcade game sector has had console games. Conglomerates in South Korea started to produce console hardware, and many developer companies in South Korea started to develop their own console software. Consol e games in South Korea have two noteworthy significances: First, for the consumer: Given the fact that South Korean parents were concerned that their adolescents might frequent the amusement rooms, console games provided an option for adolescents to play a rcade games at home where it was physically and ethically safer. Second, for the industry: The South Korean console game industry started to have the know how to develop its own console games by which the industry could legally import Japanese and the Unit (i.e. home video games), and customize them to the South Korean market. The console game hardware market, which started in South Korea in 1985, was dominated by three big conglomerat es ( Ch ae bol ) in electronics: Daewoo electronics, Samsung electronics, and Hyundai electronics. However, since South Korea did not invent console hardware, the three conglomerates had to import and customize console hardware by license. Such hardware was im ported mostly from Japan, and was customized by a legal process known as Original Equipment Manufacturing (OEM). Daewoo electronics first released Zemmix in 1985, and Samsung electronics and Hyundai electronics followed in producing Gam boy and
77 Com boy in 1989 respectively. South Korean conglomerates did not invent any original console Zemmix was a Gam boy M aster System while Com boy NES Figure 3 2. Console hardware: Zemmix, Gam boy, and Com boy [Reproduced with permission from Daewoo Electronics, Samsung Electronics, and Hyundai Electronics, 198 5, 1989 by Daewoo Electronics, Samsung Electronics, and Hyundai Electronics.] The South Korean conglomerates could not import Japanese console hardware as a whole unit because no complete tangible goods from Japan could be imported to South Korea directly. The gove rnment was concerned about the influx of Japanese culture to South Korean society, and prohibited imports of Japanese complete goods. This is one of reasons why Samsung electronics and Hyundai electronics imported parts of licensed Japanese console hardwar e and produced the final console hardware with different names. Console hardware was expensive for the average household (from 100,000 Won to 130,000 Won). Nevertheless, South Korean parents bought consoles because they were concerned about their children frequenting the electronic amusement rooms. The same kinds of arcade games in the electronic amusement rooms could be played at home. Conglomerates used The conglomerates marketed console games not just to adolescents but also to all members of the family. For example, Daewoo electronics advertised
78 Zemmix ooms With consoles, families could play arcade games at home all together. I pestered my parents to Console Game Development Conglomerates: Localization The three big cong lomerates were also eager to supply console game software to the market. However, in addition to not producing their own console hardware, the South Korean companies also did not produce original console software. This left the conglomerates the choice of importing console software from the United States or from Japan where it might have been efficient, as Japanese console software which was custom fit to the Japanese hardware programming. The South Korean government discouraged the indirect importation of Japanese culture (through Japanese console game content). Japanese console software, or Japanese game prohibition. Console games were prohibited from containing Japan ese cultural content. Since many console games in the United States had been originally developed from Japan, they also prohibition by customizing the games imported from Japan and the United States. The conglomerates modified all Japanese characters and cultural contents by this customization process. For example, the console games, Alex Kidd in Miracle World and The Sword of Hwarang ( in Korean, pronounced Hwar angeui Geom ), were the first localized console games in South Korean console game history. Alex Kidd in Miracle World was a localized version of the game, which Sega originally developed in 1986. During the customization, Samsung
79 electronics translated the game items and all messages in the Japanese language into Korean. For The Sword of Hwarang Samsung electronics altered visual elements that featured Japanese cultural content, as shown in Object 3 1. The original version of the game, Kenseiden by Sega in 1988, had the samurai as the main character and the Japanese territory as the game background settings. However, in the localized game, The Sword of Hwarang by Samsung electronics in 1989, the company changed the main character from the Japanese samurai t o the Hwarang of Silla (a male youth warrior in Silla, an ancient Korean kingdom), and the game background settings from the Japanese territory to the Korean peninsula. Object 3 1 Comparison between original version and localized version Alex Kidd in Miracle World (Original version, developed by Sega) (.mov file 94MB) Alex Kidd in Miracle World (Localized version, developed by Samsung electronics) (.mo v file 125MB) Kenseiden (Original version, developed by Sega) (.mov file 56MB) The Sword of Hwarang (Localized version, developed by Samsung electroni cs) (.mov file 50MB) Plagiarism by Unlicensed Third party Developers: An Example of Saehan Trading Company Many South Korean console game companies other than the three big conglomerates were in fact unlicensed third party developers. This section focuses on how South Korean console software developers plagiarized Japanese console games. As third party developers, South Korean console game companies needed two licenses. The first was a license from the Japanese console game company in order to use the Jap anese imported console hardware sold in South Korea. The second license, also from the console game company, could be applied to two purposes: 1) To modify Japanese imported console software in the case that a game company wanted to develop a game for such console; and 2) To modify
80 console software for one console hardware to work in another console hardware in the case that a game company wanted to convert a game. However, South Korean console game developer companies developed their console games without any licenses from the Japanese console game companies or the Japanese property holders. Therefore, these unlicensed third party developers were bootlegging console games. Table 3 1. L ist of Zemina ame s Game (by Zemina) Year Original d eveloper Original game t itle 1942 1987 Capcom 1942 Brother Adventure 1987 Nintendo Mario Bros. F 1 Spirit 1987 Konami F 1 Spirit: The way to Formula 1 Green Beret 1987 Konami Green Beret King Kong 2 1987 Konami King Kong 2 Nemesis 1987 Konami Gradius Nemesis 2 1987 Konami Nemesis 2 Penguin Adventure (Dream Continent) 1987 Konami Penguin Adventure Project A2 1987 Pony Canyon Project A2 New Boggle Boggle 1988 Taito Bubble Bobble A Good Place to Heaven 1988 Taito Tengoku Yoitoko Double Dragon 1989 Technos Japan D ouble Dragon New Boggle Boggle 2 1989 Taito Bubble Bobble Super Boy I 1989 Nintendo Super Mario Bros. Super Boy II 1989 Nintendo Super Mario Bros.: The Lost Levels Super Bubble Bobble 1989 Taito Bubble Bobble The Three Dragon Story 1989 Konami Knightm are Alla II 1990 Casio Block Hole 1990 Konami Quarth Flashpoint 1990 Sega Flash Point The Micro Xevious 1990 Namco Xevious: Fardraut Saga Soko 1990 Thinking Rabbit (Sokoban) Puznic 1990 Taito Puzznic Strange Loop 1990 Nippon Dexter St range Loop Gradius III 1991 Konami Gradius III Super Boy 3 1991 Nintendo Super Mario World Wonsiin 1991 Hudson Soft (Shin Jin Rui) Street Master 1992 Capcom Street Fighter Super Boy 4 1992 Nintendo Super Mario World Doksuri o Hyeongje (Eagle 5) 1990 Zemina Cyborg Z 1990 Zemina Tatica 1991 Zemina Magic Kid Googoo 1992 Zemina Saehan Trading Company, known as Zemina in the console game market in South Korea, was one of the leading console developer companies in South Korea. Saehan sold vari ous
81 console game software in the South Korean game market. However, Saehan developed few s logo to their own, Zemina on the game screen, manufactured game cartridges with their own labels, and released the game software to the market. Object 3 2 Penguin Adventure (bootlegged by Zemina in 19 87, originally developed by Konami in 1986) (.mov file 56MB) From 1987 to 1992, Saehan released 32 console games in the South Korean game market. Among its console games, only four games were originally developed by the company. The other 28 games were pl agiarized versions of Japanese games. The most pirated games were console O N A M E M I N Saehan customized console games from Japanese property holders to fit Zemmix. As stated above, a game company that wanted to convert a certain game from one console platform to another had to obtain a license from the original intellectu al property holder. However, in the South Korean console game market, monitoring intellectual property rights was nearly impossible. Intellectual property holders had no legal remedy against South Korean companies who breached their intellectual property r ights because many Japanese game companies were not aware of the vending of these plagiarized games in the South Korean market. Even the consumers in the South Korean console game market were unaware of whether the console games were counterfeits. I thoug ht that console games were developed by South Korean companies because of the Korean language on the packages and even in game scenes
82 For example, Saehan released Brother Adventure in 1987, a plagiarized ve rsion of Mario Bros developed by Nintendo of Japan in 1983. Also, New Boggle Boggle by Zemina in 1988 was similar to Bubble Bobble ( in Japanese, pronounced Baburu Boburu ) developed by Japanese property holder, Taito. Super Boy I by Zemina in 1989 was a retouched version of Super Mario Brothers developed by Nintendo. Despite the fact that Saehan plagiarized Japanese products, the Saehan bragged about their ability to innovate and localize Japanese games, in order to offer consumers a creative product: We [Zemina] developed Super Boy I [created by Nintendo] just in four months. Usual development takes more than six months to complete (Changhee Kim, 1991: 38 9, an interview in Game World magazine, April). We tried to localize Gradius III [developed by Konami] with the license. Since Konami only provided a part of game sources, we should change only the game title screen and some scenes in the game (an anonymous individual developer in Saehan, 1991 : 54 an interview in Game World magazine, December). The anonymous individual developer in the above quote is explaining the circumstan ce that Saehan did not possess technology advanced enough to scrutinize and modify the complete content of Japanese console games. Therefore, where a typical conversion process would involve changing the game title screen and all scenes in the Japanese gam es to Korean language characters and Korean cultural content, Saehan stated that they were only able to change some of the game scenes. Rather than attributing this partial conversion to their lack of technological advancement, the company claimed that it Game Champ (1995, May: 66), Saehan did not contact the Japanese property holder Konami for the
8 3 Imposing Moral Regulation The Review Process on Console Games the Ministry of Culture and Sports As stated in the previous chapter, the Ministry of Health and Social Affairs regulated all arcade games consumed in South Korea. When console games emerged in the South Ko rean market in the mid 1980s, they initially fell outside of any government regulatory jurisdiction. In 1993, instead of absorbing the regulation of console games with the regulation of arcade games under the Ministry of Health and Social Affairs, the Mini stry of Culture and Sports tried to impose moral regulations on console games. The Ministry of Culture and Sports imposed moral regulations focusing on the content of console games. The Korea Public Performance Ethics Committee under the Ministry of Cultu re and Sports addressed the Review Policy for New Media in July 1993. The committee defined console games as cultural products in new media. In expanding the existing review process on cultural required to pass the 1993), console games were defined as media content that contained images and sounds. The erefore, the committee was able to review commercial console games. The Korea Public Performance Ethics Committee applied their previous review processes for other eligible cultural content such as music and film, to console games. The review process was d ivided into two types according to the proprietary origins of console games: 1) The pre review process was applied to console games imported from foreign countries, and 2) the main review process was applied both to console games developed in South Korea a nd to those that
84 passed the pre review process. For the pre review process, game companies who wanted to were required to submit such games to the committee to revi ew their content. In doing so, the committee judged whether game content was importable as it was, importable after adjustment of problematic content, or not importable at all. For the main review process, game software created by South Korean companies, a nd software that had passed the pre review process were eligible. Although the committee reviewed game content more thoroughly, the main review process was similar to the pre review process. The committee judged whether game content was releasable as it wa s, releasable after deleting or adjusting of problematic content, or not releasable at all. After the review, in the case of games determined to be releasable, the committee issued official certificates for such games. Table 3 2. T he Deliberate Committee and the Korea Public Performance Ethics Committee The Deliberate Committee was under the Ministry of Health and Social Affairs, while the Korea Public Performance Ethics Committee was under the Ministry of Culture and Sports. The Deliberate Committee revie wed arcade games that especially operated at the amusement rooms. The Korea Public Performance Ethics Committee reviewed console games. Table 3 3. The Korea Public Performance Ethics Committee The Korea Public Performance Ethics Committee was established in 1966 to censor cultural content according to ethics. Its name changed multiple times: the Korea Arts Culture Ethics Committee (1966 1976), the Korea Public Performance Ethics Committee (1976 1997), the Council for the Performing Arts (1997 1999), and T he Korea Media Rating Board (1999 present). Problems in the Moral Regulation The review process by the Korea Public Performance Ethics Committee however, was problematic. The newly imposed regulatory policy of console games under the Ministry of Culture and Sports was loose and vague. South Korean cultural industries challenged the review process, believing it to be an antiquated form of censorship from when the military authoritarian government first established the committee. In actuality, the review p rocess did violate the
85 Constitution of South Korea which guarantees freedom of expression. Furthermore, the review process was not publicized and thus was not transparent. The reviewers could make an arbitrary decision to censor cultural content because th e stipulated criteria were vague. One vaguely Sports, 1993). The criterion was intended to prohibit any cultural content in console games that were vague and imprecise. Nevertheless, the committee maintained its existing review system While console game companies did have the constitutional option of challenging the regula tory of bureaucracy, expensive and time consuming for companies. structure c ommittee did not hire new staff members who specialized in these games. Rather, the video tape movie division in the committee assumed the role of reviewing console ga mes (the Secretariat of the National Assembly, 1993: 17). Reviewers in the committee struggled to maintain a standardized application of criteria with respect to different games. Secondly, the review process was not thorough. Various cultural products now fell under the new legal responsible for reviewing both an overly broad and opaque market. Thorough review by the committee was nearly impossible. In applying for the rev iew process, game companies had to record on video tapes all possible scenes that a player could encounter and submit these tapes to the committee for review. Since tapes contained long game playing scenes, reviewers took around 20 days to review one game (the Secretariat of the
86 National Assembly, 1993: 48) Contributing to the problem of incomprehensive (or lax) review, game companies could intentionally fail to include content which they feared might be prohibited in their recordings. The committee could make such companies take legal responsibility for incomplete content submissions. However, committee resources were over drawn due to the broad market they were charged with reviewing. Thus, the committee never detected tampered submissions and never foll owed up with games that were flagged. C onsole game companies could not come to a consensus on what they deemed to be the faults of the review process The review process was onerous for all, but conglomerates and small scale companies had different views from each other. It was in the best interest of conglomerates that produced both console hardware and software had to support the review process by the committee. Hardware was not required to be reviewed. And software regulated by the government was profit able for conglomerates competing with other small games. This is because the review process charged a fee that outpriced the smaller companies from the market. On the other hand, small scale companies tried to find ways to sidestep the go regulation. Smaller companies bent the rules to avoid having their games categorized as review. In the case of a game developed by a foreign game company a nd imported to South Korea, as noted earlier, such a game was mandated for the pre review process. However, a console game labeled for individual use (or non commercial use), console games could be imported without the review process. Small scale game comp anies like Saehan Trading C ompany imported foreign console games without review by declaring such console games for individual use. Small scale game companies altered these imported games, and submitted them
87 to the main review process. This was effective b ecause the review process by the committee did not determine whether game content was plagiarized, but rather whether game content was suitable for South Korean culture. Therefore, if such games passed through the review process, small scale game companies officially released these console games to the market. If games did not pass the main review process, then small scale game companies illegally forged a license and sold the games on the black market Market Failure Chaotic Console Game Market In spite o f government efforts to regulate the console game market, the South Korean console game market was chaotic because smuggled hardware and pirated software had a price advantage in the market. The conglomerates who took the legal route, where upon console har dware was manufactured based on originally developed Japanese console systems, were in competition with companies that smuggled console hardware such as Famicom (see Table 3 4) from Taiwan. The latter companies came to dominate the South Korean market. As shown in Figure 3 3 Famicom comprised an overwhelming 76 percent of the market in 1993 Even though the Taiwanese Famicom popularly known as Fami clone was a counterfeit version of Japanese Famicom, Famicom from Taiwan could be smuggled into South Korea more affordably. Because Famicom was smuggled, companies that traded in these illicit products could dodge the sales and consumption tax. In the market, while Gam boy and Com boy, South Korean hardware constructed from legally imported Japanese parts, ret ailed at around 100,000 Won, Famicom price was around 40,000 Won. Therefore, consumers chose Famicom, rather than Gam boy and Com boy
88 Table 3 4. Famicom Famicom is Japanese portmanteau of the same console, Family Computer which was initially released in 1983 by Nintendo. Famicom was released in the U.S. market in 1985 with the name of Nintendo Entertainment System (NES). However, NES has a different physical shape from Famicom as it was intended for the U.S. market. In South Korea, Famicom was not all owed to be distributed, yet NES was. Figure 3 3 Market shares of c onsoles in the South Korean market in 1993, Source: s hare of console hardware in the South Korean market, Game Champ Magazine, May 1993: 104 Furthermore, console game softwa re, which were pirated but disguised as legal products through the use of forged certificates, also had a price advantage in the South Korean market. South Korean companies that smuggled such software did not pay royalties and thus retailed these illicit p roducts at a cheaper price than software that conglomerates developed. As most consumers of console software were adolescents, a retail price was one of the main factors affecting purchase choice. Finally, c onglomerates, which struggled with the black mar ket, withdrew their console game businesses by 1998. After that, the South Korean console game market continued to exist on the black market until Sony Computer Entertainment Korea Inc. established and released their console hardware, Playstation 2 in 2002 (Cho, 2012 a : 61 63). There were no official console hardware manufacturers in South Korea from 1998 to 2002. 76% 4% 2% 10% 5% 3% Market Share (1993) Famicom (smuggled from Taiwan) Com-boy (made by Hyundai Electronics) Super Com-boy (made by Hyundai Electronics) Gam-boy (made by Samsung Electronics) Super Alladin-boy (made by Samsung Electronics) Other
89 Direct Distribution by Foreign Companies Starting in 1998 the government gradually lifted the restriction on importing of Japanese cultural produ cts which included console games. With the ban lifted, Japanese console hardware and software appeared again in the South Korean market by 2002 (Chan, 2008). However, newly emerged consoles struggled to make the proper console market due to the already exi sting black market, and never attained the economic viability needed to sustain the console game industry in South Korea. Console hardware developers ambitiously entered in the South Korean market, with an anticipation of generating huge profits (Jin, 2010 : 50). Gaming businesses in South Korea were burgeoning due to the popularity of online games. Console games would be a possible cash cow for the industry. Sony released PlayStation 2 to the South Korean console market in 2002 through its subsidiary compan y, Sony Computer Entertainment Korea. Microsoft sold its Xbox with an official distributor in South Korea, Sejoong Game Box, and Nintendo also distributed its GameCube with another South Korean official distributor, Daewon CI ( the Korea Research and Develo pment Institute for Game Industry, 2004: 96). With the efforts to settle consoles in the s total revenue grew from 16.2 b illion Won (1.6 percent of market shares) in 2001 to 156.2 Billion Won (4.6 percent of market shares) in 2002, and to 222.9 Billion Won (5.7 percent of market shares) in 2003. Moreover, the emergence of these three consoles in South Korea led the South Korean companies to have an interest in developing console games. As console hardware was sold, the number of console games grew. The first commercialized console game that a South Korean game company developed was Tomak : Save the Earth ( : in Korean) by
90 Seed9 Entertainmen t in 2003 as shown in Fig ure 3 4 which was supposed to run on the PlayStation 2 platform ( the Korea Research and Development Institute for Game Industry, 2004: 99 ) After that, several South Korean game companies attempted to develop South Korean games, and also localized foreign console games. Figure 3 4 T he f irst c onsole game by the South Korean c ompany for PlayStation 2 Tomak : Save the Earth [ Reprinted with permission from Game Donga, http://game.donga.com/74330 (February 17, 2 018)] The console game industry, however, never generated a sustainable amount of revenue from console games sales. Therefore, the market began to decline again After 2002 when the government opened the console game market to foreign console hardware ma kers, the government did not monitor the market or attempt to correct the failure of the market at all (the Korea Research and Development Institute for Game Industry, 2006: 95). The existing black market hampered the growth of the South Korean console gam e industry. First of all, the industry failed to have sufficient time to catch up with the infrastructure for developing console games to the extent of the foreign console g ame industry In addition, the console game market was proven to not be profitable In order to develop console games for certain console hardware, any game developer company was required to have a license with
91 hardware format holders such as Sony, Microsoft, and Nintendo. Acquiring the license was very hard for South Korean companies be cause they were not proven as having the sufficient skill s or technology to develop console games. Very few companies could obtain the license from the holders. For these licensed companies, development costs were burdensome for these licensed companies be cause the domestic console game market was still not proven as stable (the Korea Research and Development Institute for Game Industry, 2006: 109). Second, illegal copying practices among console consumers continued to hamper the growth of the console game industry. Even though the industry developed new and creative console games, the consumers did not buy these games. Rather, consumers obtained pirated versions of the games online In order to use pirated versions of games in consoles, consumers needed to modify their console hardware illegally. The modification through remodeling devices disabled the technical protection method that the original manufacturer initially installed. The black market modified consoles at cheap prices. Consumers went to illegal vendors and asked them to install a modchip for using pirated game software. Console hardware manufacturers tried to stop this abnormal practice in the black market through warning that they would not provide any after services for modified consoles. Howev er, the warning was not effective because the black market also provided after services. The government did not take any action to correct the run Copyright Protection Center was inactive ( the Ko rea Research and Development Institute for Game Industry, 2006: 95). The attach ratio, which represented the average number of units of console software that people would buy for their console hardware reflected how powerful the black market was in South Korea. According to a White Paper about the South Korean video game industry from the Korea Research and Development Institute for Game Industry (2010: 87; 2012: 109), the attach ratio of
92 consoles in South Korea was less than 2, compared to more than 7 in the United States and Japan. That is, South Korean consumers did not buy console games officially. Lastly, the software trading practices among consumers blocked console game developers from making considerable revenues. In the console game market, consum ers did not buy new game software. Rather, consumers traded their own software for a new one. The black market vendors were brokers who arranged transactions between a seller and a buyer for a commission Trading or using a second hand goods was not actual ly illegal, but it was problematic for the industry because the revenues from game software did not go to the development sector ( the Korea Research and Development Institute for Game Industry 2005: 90; 2006: 96) As game trading was widespread among Sout h Korean console game users, the South Korean console game developer companies lost their willingness to develop new and creative console games. Thus, the number of newly released console games in the market decreased rapidly Result of Regulation on the C onsole Game Platform It [Console games] had remained extremely unde rground (Nick, 2007, August 14 th ). Console gaming never took hold in Korea to the same extent that it did in the United States and Japan (Wi, 2009: 113). Because the government was not ver y involved in the console game market, its passivity created the continuity of the black market because the government failed to correct the market failure of the console game platform. Before the government and the industry negotiated the relationship, th e industry lost its viability because of the black market. The unconstrained black market continued. Even though there had been several efforts to revive the console market in South Korea, the console game platform fell into a negligible sector by failing to make a considerable and sustainable revenue
93 The black near non involvement in the console game market. Though there have been efforts by conglomerates to establish a South Korean console game market, and to make South Korean made console games, many South Korean video game companies exploited the normal console game market. efforts could not contribute t o the growth of the South Korean console game sector. On the surface, the black market seemed to work in the market logic. However, the black market did not have the economic viability to continue to grow by such market logic, especially since customers b ecame more interested in other game platforms. Therefore, the console game market in South Korea eventually declined as consumers shifted their interests to playing games on other platforms. After struggling so much such the black market, c onglomerates wit hdrew their console game businesses by 1998. After that, the South Korean console game market existed only on the black market. Smuggled consoles and even officially released consoles were readily hacked and remodeled by unknown South Korean companies to u se pirated game software. At the same time, gamers moved their interests to the PC package platform and the online game platform. Therefore, the console game market declined and remained a miniscule sector in the South Korean video game market. The South K orean console game sector made up 2.4 percent (262.7 billion won) of total sale s revenue in South Korea in 2016 ( Korea Creative Content Agency, 2017: 5 7 ).
94 Table 3 5. Timeline The i ndustry Year The g overnment Introduction of console hardware and software Plagiarism by unlicensed third party developers 1985 1993 The review system of console games by the Korea Public Performance Ethics Committee under the Ministry of Culture and Sports Conglomerates withdraw the console game businesses 1998 The governme nt lifts the restriction of Japanese cultural products PlayStation 2 by Sony, Xbox by Microsoft, and GameCube by Nintendo are released in the South Korean market 2002 Industrial growth declines, the sector becomes negligible because of the black market 2004
95 CHAPTER 4 THE PC PACKAGE GAME PLATFORM This chapter explore s the effect of regulation from the South Korean government on the PC package game sector, how the relationship between the government and the industry evolved, and how such an evolved rela tionship had an impact on emergence of the black market, particularly in the PC package platform in the 1990s a nd 2000s. I argue that economic regulation from the government in tandem with distorted practices in the industry led the South Korean PC package game platform into the black market like the arcade game platform in Chapter 2 that the government did not intend The first PC package games appeared in South Korea when PC hardware was introduced in South Korea in 1981 However, PC games were not popula rized by 1983 because the price of PC hardware was high for the general population to afford as a home appliance (Kim, 2009 : 126 ). After 1983, with an effort to distribute PC hardware at a cheaper price, PC package games were popular. The government tried to nurture the industry the South Korean PC package game industry started developing its own games. However, despite the fact that several ministries implemented multiple overlapped policies, the government did not try to coordinate them. More importantly, the government did not attempt to establish and monitor the viable and fair rules for the PC package game market in South Korea. The industry responded to the economic regulation from the government. Even though games by the industry, the regulation did not address market practices to guide them under the fair rule. One reason why the regulation of market practices needed to be implemented was that
96 chain structure for PC package games emerge d but the structure worked better for the black market. The relationship between the government and the PC package game sector resulted in developing the black market. Neither government nor industry was interested in negotiating the relationship to make it economically productive The government lost its original direction for supporting the industry because many ministries within the government were busy competing with each other. The industry also struggled internally because it was not one cohesive co mmunity. Conglomerates were interested in dominating the market to make profits by importation of foreign games on the one hand. On the other hand, small and mid sized companies were struggling with illegal copies in the market. Therefore, the relationship between the government and the industry did not evolve further. That being said, the relationship hindered Introducing PC s and PC Package G ames in South Korea The f irst personal computer (hereafter, PC), which was designed for individual use and produced by a South Korean company, appeared in South Korea in 1981 (Jeon, 2012: 36), even though the government agencies and some universities had already been using importe d computers for administrative and academic purposes since 1967 (Kim and Oh, 2006: 8). Sambo Engineering Co. launched TriGem SE 8001 as the first domestically manufactured PC in South Korean PC history in 1981 ( Maeil Kyeongje 1981, February 16 th ). Big con glomerates such as Samsung Electronics, Gold Star, and Hyundai Electronics were about to release their own personal computer systems through technological partnerships with foreign companies such as Honeywell, Hudson, HP, and Methius ( Computer Vision 1984 a, April: 31). Kim and Oh (2006:
97 to develop a PC in the 1980s. The price of one such PC was expensive for the general population to afford as a domestic a ppliance at 429,000 Won. Such computers were distributed mostly to private companies and schools. PCs were used for commercial and educational purposes, not for individual uses like gaming. Therefore, from 1981 to 1983, it was hard to find PC package games and game cultures related to PC package games in South Korea. In 1983, PCs were popularized. PCs were not conceptualized as gaming devices. PCs were a tool to prepare adolescents for the information technology era. Even though PCs were not conceptualized as a game hardware, adolescents mostly used it for games. Moreover, the government led some parents to expect that the government would implement a new regular curriculum, including a computer subject. PCs were still expensive, but the notion that PCs wou ld help adolescents to study pushed parents to buy PCs. Arcade games were blamed for PC supports: fun ( Dongailbo January 13 th SPC 500). The rapid transition from 8 bit standard to 16 bit was one of the fac tors that influenced compatible computers which bit standards, which were various, the IBM compatible standard made PC manufacturing easier at a reduced cost because computer manufacturing companies could make PCs with standardized components
98 without any royalties. Therefore, the retail price of PCs decreased, and PCs became affordable to the public. Table 4 1. 8 bit and 16 bit personal computers While 8 bit personal computers had no technological standard (several standards competed with each other in the market), 16 compat Th e early PC package games in South Korea were not commercially distributed because computers were not built only for gaming, and their processing units were not comp arable to a circuit board in arcade games. Therefore, adolescents, who mostly wanted to use personal computers for playing games, had to input game source codes by themselves. Very simple games as shown in figure 4 1 were introduced by game magazines. Figure 4 1 A PC game, Nibbles (developed with Q Basic of Microsoft) [Reproduced with permission from Microsoft, 19 91 by Microsoft.] In the 1990s, commercially build game were introduced in South Korea. Specifically, changing the main media for PCs to f l oppy disks facilitated the emergence of commercial PC Various kinds of PC package games, developed by various companies in various regions, were introduced in South Korea. Arcade like games such
99 as Alkanoid by Nova logic and Ponpoko by Sigma Enterprise, shooting games like Rampage by Activision, and simulation games such as Sim City by Maxis Software and Romance of the Three Kingdoms by Koei, and action adventure games such as Prince of Persia by Brderbund were all developed in foreign countries and widely played in South Korea. Shooting games like Fox Ranger by Soft Action were originally developed by South Korean game companies and also widely chosen by PC package gamers. Table 4 2. Arkanoid Arkanoid is an arcade Breakout of the 1970s by adding power ups, different types of bricks, various level layouts, and visual expressions. The game was converted to the IBM PC compatible platform by Novalogic in 1988. The player controls a space vessel which prevents a ball from falling from the playing field, attempting to bounce the ball against a number of bricks. When all the bricks are gone, the player goes to the next level. The G s Indirect Involvement in the Growth of the PC Package Game P latform The South Korean government tried to establish the domestic PC manufacturing industry by procuring PCs for educational purposes. The governmental efforts for procurement could establish i nfrastructures for preparing for the information technology era. In 1981, the government acknowledged that the PC manufacturing industry had the potential to spur economic development. President Chun, inaugurated in 1981, needed new industrial sectors to continue economic development because the economy under the military authoritarian government proved ineffective. The President stressed sustainable economy by developing science and technology sectors (Song, 2006). The electronic industry was the one that the government chose to focus on. The PC manufacturing industry was readily included in such electronic industry because most electronic manufacturing companies had made PCs. In order to push the selected industry to work, the government created demand b y procurement of PCs. First of all, in February 1982, the Ministry of Science and Technology announced The Plan for Procurement of Personal Computers for Education According to the
100 plan, the Ministry had to procure 5,000 PCs and provide such PCs to high s chools. The Ministry made a competitive bid among PC manufacturing companies. The Ministry selected 5 companies, and such companies delivered PCs to high schools in 1983 (Kim and Oh, 2006: 22 23). The rationale behind the plan was to nurture the PC manufac turing industry by creating demand because the existing PC market was too small to make companies viable. However, without explicit guidelines that the PC manufacturing industry had to follow, the plan was hard to implement One of the bureaucrats evaluat ed the problems that the plan had: The plan did not have any details about what kind of PCs could be procured, and how the government procured PCs (Seo, 1996 July 18 th ). Nevertheless, the plan worked. The leading electronic companies in South Korea began to be interested in manufacturing PCs. Conglomerates such as Samsung electronics, Daewoo electronics, and Gold Star started to produce PCs for the domestic market, in cooperation with foreign PC companies. Second, the government wanted the PC manufacturi ng companies to compete with each other, by procurement of PCs to establish infrastructure for education. In 1984, the Ministry of Education announced that the government needed to procure PCs and had already set 1,050 million Won aside for the procurement According to the plan, the Ministry distributed 3,360 procured PCs to public schools ( Computer Vision April 1984b: 32 35). Moreover, the Ministry of Education first introduced a computer subject in the regular curriculum in 1987. Along with revised cur riculum, each public school had to establish their own computer facility, and to purchase more corresponding PCs than the ones they already received in 1984. procurement was ba sed on a competitive bid. Conglomerates competed with each other to
101 Moreover by winning the bid in the competitions for the procurement, conglomerates could earn the advantages in the PC market, because the public wanted to purchase a proven PC. In short, Sambo Engineering, which made the first PCs in South Korea, Gold Star, and Samsung according to Kim and Oh (2006: 25), Gold Star and Samsung electronics were competing excessively because they were traditional rivals in the electronic appli ances sector. Third, the government set a technological standard to guide the PC industry, by revision of criteria of PC procurement. Due to imposing a new standard, South Korea could make a technological transition rapidly from 8 bit PCs to 16 bit. In 19 89, the Board for Coordination of National Information Infrastructure revised criteria that were about procurable PCs, from 8 bit PCs to 16 term goal to establish the overall national informat for the government and for the public schools) should be 16 bit IBM compatible PCs, so that all PCs could be well connected in the same national information network (Seo, 1989). Along with producing 8 bit PCs, and switched their production to 16 bit PCs. As noted earlier, rapid transition from 8 bit PCs to 16 bit was noteworthy to the South Korean PC market. That is, due to the technological standard of 16 bit PCs, PC manufacturing companies could produce PCs at a cheaper price. In the 1980s, the retail price of a PC was above 5,000,000 Won. This unaffordable price lowered to around 3,000,000 Won in the early 1990s. Moreover, such PC manufacturing companies diversified PCs from those that had a low specification and a cheap price to PCs that had a high specification and an expensive price. With diversified PCs in the market, the
102 customers could choose their PCs widely that wer e fit for their purposes ( Kim and Oh, 2006: 43) and PCs were widely diversified, the public was more interested in purchasing PCs. Therefore, PCs became one of the must have items in every home. Emerging the PC Package Game I ndust ry Once PCs were popularized for educational purposes, individuals and groups began to develop PC games. However, strictly speaking, these attempts to develop PC games did not signal the emergence of the South Korean PC package game industry Not only were such PC games not successful in the market, but also such PC games were operated with 8 bit PCs which were not popularized in South Korea. In 1987, Inhwan Nam, a high school student developed the first commercialized PC game in the South Korean PC package game history, named Dream Traveler ( in Korean, pronounced Shingeomeui Jeonseol) as shown in figure 4 2. Table 4 3. Dream Traveler Dream Traveler is the first commercialized PC package game in the South Korean game history. The game is role playing genre, and contains Korean characte rs. The game is operated for 8 bit PCs, especially Apple II system, and released with cassettes and diskettes. However, the game was not successful in the market since it was mostly distributed by illegal copies. Figure 4 2 A PC package game, Drea m Traveler and its package [Reproduced with permission from Aproman, 19 87 by Aproman.] According to the game magazine (Jeon, 2012: 45), Nam as an individual developer had difficulty reaching game companies to publish the game. Eventually, he was able t o commercialize the game with help from a company, Aproman. However, the game did not revolutionize the PC
103 package game industry in South Korea because the game did not sell well in the market (Nam, 2009: 22). Moreover, the game was made for 8 bit PC, whic h was not as acceptable to consumers. With the rapid transition from 8 bit PCs to 16 bit, and with the popularization of PCs in the public, the South Korean PC package game sector began to emerge. Small and mid size developer companies were established a nd started to develop PC package games for 16 bit PCs. For example, Soft Action was established in 1990 with 3 individual developers. However, the PC package game market was not fruitful for them because developer companies had difficulty finding a reliab le publisher. The initial PC package game market was chaotic because there was no trustworthy value chain structure. Cho (2012: 68) evaluated that there was in fact no genuine PC game software market in South Korea. Foreign PC package games were distribute d through unknown routes. PC retail stores sold their PCs tied with free illegal PC games. PC stores also offere d the service of copying PC games. Choi reflected on the illegal copying practices in PC stores: Bringing a blank diskette, we could copy PC gam es freely in PC stores. We as customers took for granted such practices because it was the only way to get PC games (Choi, 2015 December 21 st ). In 1990, PC game publisher companies were established. Such publisher companies tried to establish a reliable value chain structure for PC games, and responded to the illegal practices in the market actively. Dongseo Game Channel started to publish PC package games in September 1990, and SKC Softland was established as a game publisher in June 1991. According to C ho (2012: 68), the two publisher companies could establish a reliable value chain structure in the PC package game market in South Korea. Furthermore, the two publisher companies were eager to eliminate the illegal practices in the market, even though the illegal copies would never be eliminated in the market. The two publisher companies tried to take a
104 legal action against some companies that illegally distributed PC package games. Due to their efforts, the PC package game market gradually worked in a reli able value chain structure. Table 4 4. Fox Ranger Fox Ranger is the first commercialized PC package game for 16 bit PCs in South Korean gaming history. The game was developed by Soft Action in 1992, and was published by SKC Softland. The game is a side sc rolling shooter genre. Players control a combat plane for eliminating enemies. There are 6 stages with an end boss at the end of each stage. Among many small developer companies, Soft Action released the first PC game, Fox Ranger in 1992. SKC Softland published the game. According to Nam (2009: 23), Fox Ranger was successful in the market. The game sold more than 24,000 copies despite even more illegal copies. The number of sold copies of the game was estimated by Soft Action. That is, there should have been more official copies in the market because there was no official system to aggregate the total sales of the game. Also, there should have been even more illegal copies in the market because Fox Ranger was released in the floppy disks as shown in Figu re 4 3 which were easy to copy illegally. Figure 4 3 The game package and the d iskettes of Fox Ranger [Reproduced with permission from SKC Softland, 19 92 by SKC Softland.]
105 rowth of the PC Package Game P latform In addition to make an effort to establish the PC manufacturing industry by the industry, acknowledging its economic potential Many Ministries tried to nurture the PC package game sector, even though these efforts were not well coordinated. The government treated the PC package game sector as the PC software industry. For this, the government first needed to make the public familiar with information technology, e specially PCs, because the government wanted the information technology industry to develop not in a top down fashion from the government, but bottom up from the public. The Ministry of Posts and Telecommunications: E stablishing B ackgrounds to Support the I ndustry In 1991, the government amended The Act on the Promotion of Communication Network Utilization, communication network. The amendment was mainly about establishment o f the National Computerization Agency that was designated to develop technology for information and communication network, to standardize such technology for spilling over, and to operate the national information and communication network. In addition, the government established a certain center for public relations (the Office of Legislation, 1991) and this center worked for the PC package game sector. Under the amended Act on the Promotion of Communication Network Utilization the government established the Information Culture Center of Korea (ICC) in 1992, which was affiliated with the Ministry of Posts and Telecommunications. ICC worked for public relations and education. According to the act, ICC was designated to educate the public to use information technology in general, to educate them to develop PC software in specific and to produce public
106 information. Relating to PC package games, ICC held the first game scenario contest in 1993. In the contest, the first winning work was supposed to be commercia lized as a PC package game. Table 4 5. Iigimae: Manpasikjeokpyeon and Ilgimaejeon: Manmanpapasikjeok Iigimae: Manpasikjeokpyeon was a game developed by Danbi Soft and published by Goldstar Software in 1994. The game is known for being based on the first prized game scenario in the first game scenario contest in 1993 held by ICC. However, the game is of the shooting genre which is not relevant with the scenario. There was another game known as being based on the same game scenario. The roleplaying game, I igimaejeon: Manmanpapasikjeok was developed by San gini in 1994. According to the author of the scenario Sangini modified more than 90 percent However, ICC just made the connection between a developer company and the winner of the contest. ICC did not protect the prized scenario as the intellectual property. Therefore, some developer companies developed PC package games, but companies modified the original ample, Moonyoung Lee won in the first contest in 1993. His game scenario, Iigimae: Manpasikjeokpyeon ( : in Korean) was supposed to be commercialized as a PC game. Eventually, two games were developed. One game, with the same name of the scenario, was developed by Danbi Soft, and the game was published by Goldstar Software in 1994 ( Kyeonghyang 1994, August 25 th ). However, the game was not actually based on the scenario and developed without any notices to the author of the scenario. Another game, I igimaejeon: Manmanpapasikjeok ( : in Korean) was developed by San gini in 1994. However, San gini modified more than 90 percent of the scenario in developing the game, without any approval from the author ( Cha, 2003, August 22 nd ). In 1993, ICC organized the first Computer Edu tainment and Game Software Festival ( Hankyorhe 1993, February 20 th ). While the festival stressed the education purposes of PC software, the goal of the festival was also to expose South Korean games to the public in order to alleviate the negative opinion s about video games. With the festival, ICC wanted to invigorate
107 the South Korean PC game industry and provide the favorable environment for the development of the industry (Lee, 1993, March 1 st ). The Ministry of Commerce, Industry, and Energy: Nurtur ing t he PC Package Game Industry as the PC Software I ndustry Another ministry jumped in to support the PC package game sector in 1994. The Ministry of Commerce, Industry, and Energy (MCIE) announced Integrated Development Plan for the Game Industry in 1994 (The Ministry of Commerce, Industry, and Energy, 1994). Along with the plan, the MCIE tried to involve itself in developing the sector not only because its main tasks were to guide and nurture overall industrial sectors in South Korea, but also because the gov ernment had selected the information technology sector as a new driving factor in economy. According to the plan, the ministry was supposed to allot 40 billion Won to develop core technology. Specifically, the ministry established the Research and Developm ent Board for the Game Industry in 1994. The Board analyzed the global video game market, and made itself into a hub that facilitated technology exchanging between South Korean companies and foreign companies (Seo 1994, November 3 rd ; Dongailbo 1994, Nove mber 3 rd ). have a reliable technology comparable with that of foreign companies. The government guided the sector in actively establishing a viable industry. The ministry needed to figure out the trends and changes in the global market and foreign gaming industries because the government wanted the industry to cope with the market changes based on such information. Since games developed by foreign companies mostly dominate d the South Korean market, South Korean companies struggled with foreign games because they did not have reliable technology to develop profitable games. Such companies could not afford to develop reliable technology. Thus, the ministry
108 intended to guide t he South Korean PC game sector toward reliability and viability, in order to make the sector competitive with foreign game companies. Furthermore, the ministry planned to hold an exhibition on the South Korean game industry. With the exhibition, the gover nment tried to ameliorate negative public opinions about the video games. According to the plan, the government acknowledged that such negative public opinions hindered the economic growth of the PC package game industry. By displaying domestic as well as since the government tried to support industrial growth. For the PC package game indu stry, domestic game companies could develop their comparable and viable game technology by comparing their games with foreign games in an exhibition. Moreover, with an exhibition, the government wanted the PC game industry to make a consortium for developi ng core technology between conglomerates and small size game companies. In fact, the MCIE had difficulty carrying out the plan fully. First, the plan did not allow for coordination with other Ministries Nevertheless the MCIE needed to cooperate with ot her Ministries. The MCIE needed help from the Ministry of Science and Technology (MST), since the Korea Amusement Software Development Association, a quasi private association affiliated with the MST, was supposed to carry out most of the plan. Without coo rdinating with the MST, the MCIE could not implement the plan. Second, the MCIE did not hold an exhibition on the South Korean game industry based on the plan. According to the plan, the MCIE had to mediate differences of opinions among related companies a nd private associations. However, the exhibition was likely to be stalled because the MCIE did not even gather different opinions of companies and associations.
109 E xpansion of t he PC Package G ame Industry in South Korea D iversification of PC Game G enres In t he South Korean PC package game industry, small developer companies began to develop PC games. However, such PC games were skewed in terms of game genre. Representative samples were Boksumujeong (developed by Family Production), Fox Ranger II (developed by Soft Action), Osung and Hanum (developed by A Plus), and Go Go Our Planet (developed by Danbi System). In terms of game genre, most PC games belonged to the shooting arcade genre. As Cho evaluated (2012: 75), the shooting arcade genre was simple and easy to develop because companies did not need a sophisticated game scenario as well as technology. Foreign imported PC games, especially those from the United States, dominated the South Korean market. PC games which South Korean companies created were not co mparable to such imported games because foreign game companies had considerable capital and reliable technology for developing PC games. As two big publisher companies in South Korea focused on importing foreign PC games, South Korean companies had trouble finding publishers, meaning that developer companies could not sell their PC games. For example, Dongseo Game Channel already published sophisticated games in the adventure genre: The Secret of Monkey Island in 1991, in 1992 and Indiana Jones and the Fate of Atlantis in 1993. Lucas Arts from the United States developed the games. The games were very popular among South Korean PC gamers, even though the games were expensive at around 25,000 Won. SKC Softland also publishe d one of the ever famous PC game series, Ultima VII: The Black Gate in 1993. Origin Systems from the United States developed the game. As South Korean companies developed many PC games, South Korean PC games gradually increased in the market, but could not dominate the market (Korea Cultural Policy Institute, 1996: 60).
110 Table 4 6. The Secret of Monkey Island The Secret of Monkey Island is an adventure game that Lucas Arts developed and published in 1990. The player plays a role of Guybrush Threepwood, a young man who dreams of becoming a pirate, and explores fictional islands while solving puzzles. The Secret of Monkey Island has been featured regularly in lists of "top" games of major game magazines such as Computer Gaming World and IGN. The game spawned four sequels. Revenge: Monkey Island 2 was released in 1991. Lucas Arts released the third one, The Curse of Monkey Island in 1997. In 2000, Lucas Arts released Escape from Monkey Island And the final title, Tales of Monkey Island was released in 2009. Table 4 7. Ultima Ultima is a series of role playing games that Origin Systems developed from 1980 to 1999. Electronic Arts owns the brand. Especially, Ultima VII: The Black Gate is the seventh game in the Ultima series, and released in 1992. T he game was critically acclaimed and commercially successful, being lauded as one of the best role playing games ever created. Table 4 8. Astonishia Story Astonishia Story is a series of role playing games developed by Sonnori. The first game, Astonishia Story was released for PC platform in 1994. Its second sequel, also for PC platform, was released in 1994 under the title Astonishia Story: Forgotten Saga handheld game system PlayStation Portable platform in 2005. Since the game has been licensed by Ubisoft, the game was published in the United States and Europe in 2006 More than 50 companie s were estimated to be developing PC games in 1994 ( Korea Cultural Policy Institute 1996: 60) As the industry grew, the quality of games grew too. Astonishia Story a PC game developed by Sonnori in 1994, reflected such development in the industry. The g ame was a role playing game which was harder to develop than other genres. Astonishia Story featured excellent computer graphics and music. Also, the game had a large amount of story, but it was easily understandable. Such features were attractive to PC ga mers. Readily, the game was popularized among customers. Sonnori sold 10,000 copies within a month from release, and estimated 100,000 total copies of the game in the South Korean market. It was a huge success, compared with the typical 2,000 total copies of a shooting arcade game ( Lee, 2008, an interview in ThisisGame October 22 nd ). developer companies released PC games in various genres in 1994: Ys II: Special (developed by Mantra), Pee & Gity (developed by Family P roduction), Illusion Blaze (developed by Family Production), Super Samtong (developed by Sa e ron Software), Eardis: Revolution Force
111 (developed by Soft Action), Lychnis (developed by SoftMax), K 1 Tank (developed by Tarf System), and so on. All such games w ere developed by small developer companies and reflected South Korean PC game companies that could not find ways to publish in competition with foreign PC games struggled with illeg al copies in the black market. For example, in the case of Astonishia Story stated above, Sonnori estimated that there were twice as many illegal copies of the game as there were legal copies. Chankyu Park, who was an individual developer at Sonnori, suppo rts the illegal copies of Astonishia Story in the black market: When you bought PCs, you got an illegal version of Astonishia Story because PC retailers installed the game in PCs illegally (Park, 2008, an interview in ThisisGame October 22 nd ). Illegal copying pr actices in the market got worse A program team leader of Sonnori, Jinkook Ahn, stated: Basically, the industry calculated that the number of illegal copies in the market is twenty times more than that of the genuine version ( Ahn, 1998, an interv iew in Kyonghyang October 27 th ). Therefore, newly established PC game companies that did not have a considerable capital lost an economic viability by such illegal practices in the black market. PC game companies tried to minimize illegal copying practi ces in the market by including detection measures in their PC games. However, such measures were insufficient to illegal practices in the market. Developer companies used two different methods to protect their PC games from illegal copying. Some developer companies introduced protecting systems in PC package games so that games were erased automatically when customers installed the game more than three times. Some developer companies included certain questions in the game scenario to detect whether customer s used a genuine version or not. Customers had to answer
112 such questions right because the answers were in the genuine game package as shown in Figure 4 4. Figure 4 4 A password in the game package, and a game s cene in Astonishia Story [Reproduced wit h permission from Sonnori, 19 94 by Sonnori.] If customers failed to answer, the games were stopped and thus customers could not continue to play. However, such efforts from developer companies to protect illegal copies were not sufficient to eliminate i llegal practices in the market. Game protection systems were hacked by unknown users within a day of releasing. Those who used illegal copies of games could evade protection systems by copying a manual in the original package (Kim, 2016, an interview in th e Webzine of NC Soft, March 15 th ). Emergence of the Private A ssociati ons The South Korean game industry took the next step to get networked and organized. First of all, facing piracy, or illegal copying practices in the market, PC game publisher companies formed the Korea Electronic Visual Culture Association, lead by Dongseo Game Channel and SKC Softland ( Dongailbo 1994, February 9 th ). After an approval of establishment as the private industrial association by the Ministry of Culture and Sports, 61 PC and console game companies encompassed the association. Conglomerates such as Goldstar Software, Samsung Electronics and Hyundai Electronics that were producing customized foreign PC and console games joined
113 the association ( Maeil Kyongje 1994, February 22 nd ). The major goal of the association was to fight against piracy in the market. The association jointly tried to control illegal PC games in the market with the government. The association reacted actively against illegal practices in the market by accusin g illicit companies of piracy, and demanding that illicit companies apologize. Second, PC game developer companies also established an association in 1994. Five companies Mirinae, Twim System, Family Production, SoftMax, and Maggoya founded the Korean PC Game Developers Association (KOGA). KOGA tried to cope with the issues that member companies faced. Contrary to the publisher driven association like the Korea Electronic Visual Culture Association, KOGA was an alliance of small PC game developer compa nies. KOGA wanted to establish the developer friendly publishing environment because member companies had trouble finding the way to publish as stated above (Yoo, 1994, November 3 rd ). Moreover, the association shared technologies and information for develo ping PC games among 2012b: 81). Many more companies joined the association over the years. Companies were predominantly small independent developer companies such as Taff Sy stem, Ecstasy, Sigmatec and Dongsung Joycom. The two associations vied for leadership in the PC game industry. However, for the South Korean video game industry as a whole, the two associations were still inferior to other big associations in the arcade ga me platform because the PC game sector was not comparable to the arcade game sector in 1995 even though the PC game sector was growing. The Korea Electronic Visual Culture Association supported the annual Computer Edutainment and Game Software Festival whi the big profile exhibitors such as conglomerates ( Maeil Kyongje 1995, July 24 th ). However, the
114 festival the next year fell into obscurity because the small companies in K OGA carried the festival without the conglomerates taking much notice in the next annual festival. Eventually, exhibition, the Amusement World that was held by the Ministry of Culture and Sports. The Visual Entertainment Creators Association, a large private association that was an overarching alliance of arcade and PC game companies, supported the Amusement World ( Game Champ 1995, December: 12 13, December). Expans nvolvement in the PC Package Game P latform In 1995, The Ministry of Information and Communication ( MIC, former the Ministry of Posts and Communication) announced Development Project for Computer Game Industry which was part of M ultimedia Industry Promotion Projects (the Ministry of Information and Communication, 1995). Under the project, MIC wanted the video game industry in South Korea to be one of the core strategic industries for economic development in the information and tec group for coordination between several ministries such as the Ministry of Finance and Economy, the Ministry of Trade and Industry, the Ministry of Culture and Sports, the Ministry of Science and Technology, and the National Policy Agency. The consultative group thought of some ways to lighten a special consumption tax on consoles, and relaxing regulations for the amusement businesses (Choi, 1995, July 14 th ). However, such decisions were not relevant to the PC game sector which was burgeoning. In order to cope with the phenomenon th at PC package games were distributed via the Internet, MIC established a quasi governmental committee, the Korea Internet Safety Commission. The commission reviewed all information within the Internet PC package games
115 were included in such information. Ev already reviewed by t he Korea Public Performance Ethics Committee under the Ministry of Culture and Sports, MIC tried to monitor the games in the Internet. This new review process was not a preliminary review, but a post review. For all information in the Internet, the committee could demand any information providers to modify or even erase information when such information violated the Internet Ethics, the criteria to judge whether adolescents could access it or not. At the same time, MIC attempted to make a new overarching review system that could cover all video games in South Korea. The existing review system became divided into three systems, and different platforms had the different review systems. The Kor ean Computer Game Industry Association under the Ministry of Health and Social Affairs reviewed arcade games installed in the amusement rooms. T he Korea Public Performance Ethics Committee under MCS reviewed console games played in the home. The Ministry o f Information and Communication reviewed games distributed via the Internet. Therefore, even though MIC wanted to relax the effort to merge the review systems encount ered a jurisdictional dispute between the three ministries. MIC could not solve such dispute, and thus MIC had to change its focus to deal with games in the Internet. MIC established another private association in 1995. The name of the association was the Korea Entertainment System Industry Association ( KESA) The association covered almost 90 percent of South Korean video game companies. Even though the members overlapped with other private associations, most companies wanted to join the association becau se MIC announced that MIC funded the association exceeding 40 million Won. With the governmental
116 fund, the association developed the core technology for developing games collectively. Also, the association found ways to improve the existing governmental re gulations for the video game sector, and suggested their results to MIC for relaxing the regulations. Fierce C ompetition in the PC Game Sector Value Chain Structure Even though the interests to develop PC games were growing, ... PC games were not proven t a gold mine The distribution channel was primitive (Lee, 2005: 94). efforts to nurture the PC package game sector, the South Korean PC game sector could make a de fa cto value chain structure that consisted of development, publication, distribution, and consumption While the government focused on how the domestic industry could be viable, the government did not monitor the market. The competition in the market became fierce. However, as conglomerates with considerable capital expanded their businesses to game publishing, and as such conglomerates focused on importing PC games for short term profit, small PC game companies encountered a hardship to continue the PC game development due to lack of investments. Outwardly, the value chain structure in South Korea for PC package games was not that sector entailed the design and creatio n of game software. The publisher companies involved the overall management of games: financing, manufacturing, packing, and marketing. The distribution sector shipped games to retail outlets. Usually, the publishing sector dominated the game market becaus e the sector was located at the core of the bottleneck structure so as to control the entire market with a capital and a commodity. In the South Korean value chain structure, the publishing sector was divided into two types: companies who specialized in
117 im portation of foreign PC games, and companies who dealt mainly with games that South Korean companies developed. However, the South Korean value chain structure was special because conglomerates dominated the importation of foreign games. In 1996, several conglomerates began to publish PC package games, acknowledging their economic potential. There were already two big publisher companies in the market, Dongseo Game Channel and SKC Softland as stated above. However, conglomerates could safely start their ga me publishing businesses, since the PC game sector expected such conglomerates to drive the domestic game development further with a considerable capital. The conglomerates which started the game publishing businesses were Doosan, Miwon, Samsung, and LG (f ormer Gold Star) (Oh, 1996, July 24 th ; Gameline 1996, December). However, conglomerates in the game publishing business did not support the South Korean developer companies. Rather, conglomerates competed with each other to import foreign PC games. Exces sive competition between conglomerates in the PC game publishing sector caused foreign PC games to dominate the market. In 1996, there were more than 1,400 PC package games in the market (Korea Cultural Policy Institute, 1996: 54). 355 games were newly rel eased in 1996. Among them, South Korean companies developed 52 games, making only 14.6 percent of the market share in terms of game sales in the South Korean PC game market. All other PC games were imported from foreign countries (the Ministry of Informati on and Communication, 1998: 81). The market share percentage decreased to less than 10 percent in 1997 ( Jeong 1997, February 18 th ). Even though the PC game market in South Korea was growing according at an annual growth of 30 percent (Nam, 2009: 63), it w as not based on the growth of South Korean developer companies, but on sales of foreign PC games.
118 e in the publishing sector. However, KOGA could not make an economically viable structure for its members. Facing oligopolistic features in existing value chain structure, the member companies of KOGA wanted to rebuild structure. Thus, the association esta blished a publisher company, KOGA Publishing Company, in order to earn independence from the existing value chain structure for the member companies in 1996 ( Oh 1996, October 8 th ; Gamepia 1996, November). However, KOGA Publishing Company was not comparab le to conglomerates. The company was successful in publishing some PC games, but it lacked an investment fund, struggled with conglomerates, and eventually went bankrupt (Cho, 2012b: 81). The competition between conglomerates to publish foreign PC games br ought increasing because of royalties In order to expand their market share, publisher companies offered high royalty rates to foreign game developer companies. It was possible for conglomerates because conglomer ates could afford to pay the royalty, having considerable capital. However, the problem was that the profit from sales of foreign PC games was not shared with domestic developer companies, but with foreign developer companies. Jaeseong Jeong, President of Mirinae Soft, reflected such problems that conglomerates had. Conglomerates make few investments in the domestic developer companies because of focusing only on short term gains (Jeong, 1995, an interview in Dongailbo May 15 th ). Furthermore, conglomerates market because the price of the commodity increased. Increasing the loyalty cost led conglomerates to increase the price of goods. According to Nam (2009: 64), as the price of the PC gam es increased to twice the usual price from 30,000 Won to 60,000 Won, the PC gamers
119 gave up buying the genuine version of PC games. Instead, the PC gamers used illegal copies of games. The customers did not trust the price system. Nevertheless, the governm ent did not get involved in fixing the problems. An oversupply of PC games led distributors and retailers to use irregular practices such as bartering, dumping, and tie in sales which distorted the price system. The same software had a different price bas ed on what kind of irregular practices were used in the value chain structure. Free Bundle Games from Game Magazines The competition between game magazine publishers was one of the important factors in hampering the growth of the PC package game industry because game magazines provided many free PC games, or free bundle games, to subscribers. Game magazines became popular by providing useful game information when many games were released in the South Korean market. Game magazines contained information on t he game market, articles about games and detailed reviews of various games. Customers needed game magazines not only because customers needed guidance to choose games among the large variety of choice, but also because gamers played games easily with detai led reviews of games. Even though each magazine had its own specialized area, most magazines overlapped in terms of content. In 1996, magazines began to offer free game software to their subscribers as shown in Figure 4 5. The initial purpose of such free games was that magazines found and introduced games as the oldies but goodies. Such games became a factor for subscribers in choosing which game magazine to subscribe to. Some subscribers chose game magazines not because of the quality of articles and rev iews of games, but because such free games were attached to the magazines.
120 Figure 4 5 Game magazines and free bundle g ames [Reprinted with permission from Money Today, http: //news.mt.co.kr/mtview.php?no=2012010421008139326&type=1 (November 8, 2017).] All magazines competed with each other to gather subscribers, and fierce competition between magazines led magazine publisher companies to change their initial purpose for prov iding free games. Game magazine publisher companies did not contend for victory by improvement and specialization of content in their magazines. Rather, the kinds of games included in their bundle CD were crucial for magazine sales. Hence, companies began to provide the latest games as their free bundle games instead of the oldies but goodies in order to gather more subscribers. The free games provided were various. Game magazines provided many of the latest games from South Korea, Japan, and even the Unit ed States. According to GameMeca (Kim, 2012, January 11 th ), the most distributed Korean games were the War of Genesis (1995, developed by SoftMax), Forgotten Saga (1997, developed by Sonnori), and The Legend of Exorcist (1998, developed by Trigge rsoft). There were Japanese games such as the Legend of Heroes (1989, developed by Nihon Palcom), Farland Saga (1996, developed by Technical Group Laboratory), and Ys Eternal (1998, developed by Nihon Palcom). The PC games from the United States were also provided, such as SimCity (1989, developed by Maxis), Civilizations (1991, developed by MicroProse), the Heroes of Might and Magic (1995, developed by New
121 World Computing), Warcraft 2 (1995, developed by Blizzard Entertainment), and Diablo (1996, developed by Blizzard Entertainment). All games above were not the oldies but goodies, but the latest games which should have made a profit for developer and publisher companies. Receiving the latest games for free from game magazines, subscribers were eager to bu y game magazines. Free bundle games caused South Korean customers to be less willing to buy the genuine version of games which meant the profit and investment for game developer companies decreased. Subscribers equalized game magazines to latest games. The re were, of course, some game enthusiasts who insisted on purchasing the genuine version of games. However, most South Korean gamers did not have to buy the genuine version of games because gamers could get the latest games for free If they would wait unti l game magazine was released. Overlapping Policies for the Growth of the PC Package Game S ector The Ministry of Culture and Sports (later the Ministry of Culture and Tourism) The South Korean video game market grew (Lee, 1997, June 11 th ). This phenomenon r potential and tried to support the industry actively by implementing plans and initiatives xceeded the revenues of other cultural industries such as the movie and music industries, as shown in Table 4 9. Table 4 9. Market scale of cultural i ndustries in 1996 Movie Animation Video Game Music Character Market s cale (based on revenue) 202.8 400 199.6 500 400 200 Source: The Ministry of Culture and Sports, 1997, Statistics on Cultural Industries p. 40. Legend: Billion Won Since it does not only includ e the revenue of the PC package game sector, it is not sufficient to
122 argue that the South Korean PC package game market was growing. However, it is sufficient for the MCS to acknowledge the video game industry as a cultural industry, and to support the vid eo game industry regarding economic regulation. In 1996, the MCS began to nurture the video game industry in general, and the PC package game industry in specific, under the overarching purposes of the Ministry the South Korean culture and First of all, the Ministry tried to set the jurisdictional basis for supporting the industry. The Ministry amended the existing Act on Music and Video Media in 1996. On the one hand, the amendment reflected that the M inistry Performance Ethics Committee as discussed in Chapter 3. On the other hand, the amended act specified that the Ministry had to administer a policy for development of the video game industry. Such policy had to include support for the video game industry in terms of game Office of Legislation, 1996a). Second, the MCS implemente d policies for the video game industry in 1997. According to a White Paper about the South Korean video game industry from the Korea Research and Development Institute for Game Industry (2002: 774), the Cultural Industry Division in the MCS included the vi deo game industry in the overall cultural industrial policy for development. The Cultural Industry Division prepared jurisdictional and institutional support for the video game industry, since the Division worked on enacting an overarching act such as the Basic Framework Act for the Cultural Industry and the Act on Music, Video, and Game Media that dealt with South Korean culture and cultural industry. In doing so, the MCS could pursue the nurturing policy for the video game industry as part of the cultural industry. Even though the MCS had not yet made
123 an integrated and organi zed policy, it tried to help the growth of the video game industry, especially the PC game industry in South Korea. For example, the MCS started to select five PC games as February 1997. The rationale behind this contest was to support creativity of South Korean PC games. Game companies that were developing creative PC games could enter such contests. The MCS offered 10 million Won for each selected game, a nd promised that the government would purchase certain amounts of selected games ( Jeong 1997, January 27 th ; Dongailbo 1997, January 27 th ) Moreover, the MCS established the Game School through cooperative efforts with KOGA. The Game School selected 500 p eople who were interested in developing games, and offered almost free education to them as the government paid the educational fee instead ( Dongailbo 1997, July 26 th ; Maeil Kyeongje 1997, July 29 th ). In September 1997, the MCS supported the South Korean PC game companies in participating in the European Computer Trade Show 1997, opening the Korean Pavilion in the show. 12 companies went to the show, and could interact with foreign companies and consumers in the show ( Maeil Kyeongje 1997, September 3 rd ; Dongailbo 1997, September 8 th ). Table 4 10. The Game Promotion Center The Game Promotion Center was a quasi governmental institute under the Ministry of Culture and Sport. The center was established in February 1999. The rationale behind the establishme nt of the center was that the Ministry of Culture and Sport wanted to work together with the private sector for the growth of the industry. According to the official document (Ryu, 2007), the Center established the Game Academy as an educational institute under the Center in 2000. The Ministry of Culture and Tourism renamed the Center to the Korean Game Development and Promotion Institute in 2001. The Institute was merged into the Korea Creative Content Agency (KOCCA) in 2009. The MCS established the Game Promotion Center in February 1999. The center as a quasi governmental institute had a role of a hub connecting the industry with the government. Around 60 small game companies moved into the center, since the center offered the physical places and infrast ructures that companies could use. The center supported game development, offered
124 Huh 1999, February 4 th ). Jurisdictional C ompetition between Three M inistries In contrast to its moral regulation of the arcade game sector, the South Korean government tried to actively involve itself in the growth of the PC package game sector regarding economic regulation. Each ministry acknowledged the economic potential of the PC game industry, and thu changes to the industry reflected that several ministries formulated a handful of policies which were promoted to the PC game industry as shown in Table 4 11. Table 4 11. T he poli cies from the g overnment for the growth of the PC game i ndustry Ministries Year Plan s and i nitiatives The Ministry of Posts and Telecommunications (later the Ministry of Information and Communication) 1992 Establishment of Information Culture Center of Ko rea The Ministry of Commerce, Industry and Energy 1994 Integrated Development Plan for Electronic Games Industry The Ministry of Information and Communication 1995 Development Project for Computer Game Industry The Ministry of Culture and Sports (later the Ministry of Culture and Tourism) 1997 Development Plans and Initiatives for the Video Game industry The PC package game sector showed a decentralized decision making process regarding a competition between ministries within the government. A ll polici es and initiatives with respect to economic regulation were not supposed to control the game development in terms of South Korean culture and cultural content. However, competition between ministries was not effective because there was no coordination to make ministries into one group so as to make up a well organized governmental policy for the PC package game industry (Kim, 2006: 256). Each ministry had different jurisdictional boundaries. For a newly emerged sector like the PC game industry that drew a lot of attention from the government, the ministries could not decide which one would take the lead
125 to govern. All ministries, which seemed to relate the new sector, claimed PC games for their jurisdictional boundaries. In order to take a new sector for th eir jurisdictional boundaries, several ministries tried to make various policies, but did not try to organize them. In doing so, the ministry could earn a higher budget from the government. They were in competition, but competition between them led to over lapping policies and initiatives (the Korea Research and Development Institute for Game Industry, 2002: 775). Without the coordination between them, the ministries could not show the effectiveness of their overall policies to realize their goals. Overlapp ing and repetitive policies and initiatives needed coordination However, the government could not coordinate competitions between the three ministries because the three ministries were stubborn. None wanted to lose their possible budget. Lee argued that t he government was not able to come up with consistency between policies for the video game Presidential Secretary, reflected ministerial selfishness: C ompetiti on between ministries is unimaginable. The Blue House [the President] is only able to coordinate it (Park, 2010, an interview in ET News May 28 th ). Table 4 12. The ministries and c orrespond ing private p artners Ministries Corresponding private a ssociation s The Ministry of Information and Communication (former the Ministry of Posts and Communication) Korea Entertainment System Industry Association (KESA) The Ministry of Science and Technology Korea Amusement Software Research and Development Association The Ministry of Commerce, Industry and Energy Korea Electronic Amusement Industry Association Korea Game Software Developer Association The Ministry of Health and Social Affairs Korea Computer Game Industry Association The Ministry of Culture and Tourism (former the ministry of Culture and Sports) Korea Association of Visual Amusement Developers Korea Electronic Visual Culture Association The Ministry of Trade and Industry Korea Amusement Software Research and Development Association Moreover, overlapp ing private associations also made uncoordinated policies and initiatives chaotic. Along with the policies and initiatives, each ministry had corresponding
126 partners; or private associations in the video game industry as shown in Table 4 12. The members of such private associations overlapped, and associations had similar goals to guarantee the private associations were eager to get the governmental funds and su pport. There was no cooperative effort between associations (Lee, 1994: 47). Even though the private associations as associations did not have any results. Moreover, ind ividual developers were excluded from benefits of government economic supports relatively ( GamePia 1996, June: 73), because the government directed its support to the associations, not the individuals. Result of Regulation on the PC Package Game Platform The government wanted the South Korean PC game platform to grow. In contrast to its regulation of the arcade game platform the government tried to nurture the PC game industry regarding economic regulations. Despite these efforts by the government, the b lack market practices (i.e. illegal copies) proved that the relationship between the government and the PC package game industry was not relevant to achieve the government intentions The fact that the government acknowledged a necessity to have a new indu strial sector for driving the economy led the government to establish the economic regulation on the PC manufacturing industry as well as the PC package game industry. Several ministries implemented many plans and initiatives for nurturing the industry. Ho wever, the government did not guide the industrial performance regarding the moral regulation. Furthermore, the government did not monitor the The PC game industry in South Korea positively responded to the economic regulation from the government. The industry could grow by various governmental efforts, especially from three Ministries. Given the popularity of PCs and PC games, the industry could safely start to
127 develop PC package games, and have a de facto value chain structure. Many conglomerates entered the PC package game businesses, though most conglomerates focused on importation of foreign PC games. Two factors, the domination of foreign games in the South Korean market and the illegal copying practices in the black market, hindered game development. Even though developer companies tried to solve such problems, such efforts could not foster economically viable production of PC games. The relationship between the government a nd the industry seemed to be fruitful in a sense that the relationship was supposed to focus on the growth of the PC package game industry. However, the relationship did not monitor market failure. The new sector needed coordination within the government a s well as the industry. The relationship caused the PC package platform to grow, but a lack of coordination hindered the relationship. Finally, the PC package game industry struggled with the black market. The distinctive characteristic of the media, such as diskettes and compact disks, was inherently supportive to the illegal practices in the market. Diskettes and compact disks which contained PC games were easy to copy. It facilitated illicit practices in the black market. There were many illegal street vendors and such vendors sold illegally copied games at very cheap prices. Illegal street vendors sold pirated version of PC games at the price of 5,000 Won to 10,000 Won, while retail prices of genuine version were 50,000 Won to 60,000 Won ( Kim 1999, Dec ember 16 th ). However, neither government nor industry regulated such illicit practices.
128 Figure 4 6 Street v endors selling illegally copied g ames [ Reprinted with permission from ILovePC Online http://www.ilovepc.co.kr/news/articleView.html?idxno=430#09Si (January 23, 2018).] Proven as a non profitable sector, the PC package games industry in South Korea declined. Struggling with foreign PC games as well as pirated version of their games, many PC game companies eventually went bankrupt in 1997 and 1998 (Oh, 2012: 93). Conglomerates exited from the game publishing sector. Companies that had barely survived tried to change their game development to other game platforms that c ould ensure intellectual property rights from the black market. The PC package game market in South Korea has gradually declined since 1999, and remained a miniscule sector in the South Korean video game market. The South Korean PC package game sector shar ed less than 1 percent sharing of total sales revenue in 2004 (the Korea Research and Development Institute for Game Industry, 2005: 42), and the figure never rebounded. The PC game industry made up 0.3 percent (32.3 billion won) of total sales revenue in 2016 (Korea Creative Content Agency, 2017: 5 7).
129 Table 4 13. Timeline The i ndustry Year The g overnment Introduction of the first personal computer 1981 1982 The Plan for Procurement of Personal Computers for Education (the Ministry of Science and Tech nology) Conglomerates begin to manufacture PCs 1983 1984 The Ministry of Education procures PCs to public schools The first commercialized PC game (for 8 bit PC) Dream Traveler 1987 1989 The Board for Coordination of National Information Infr astructure revises criteria of procurable PCs from 8 bit PCs to 16 bit Establishment of several PC game developer companies and publisher companies 1990 Soft Action releases the first (16 bit) PC game Fox Ranger 1992 The Ministry of Posts and Telecomm unication established the Information Culture Center ( Public education ; Game scenario contest ) 1993 The Information Culture Center (the Ministry of Commerce, Industry, and Energy) holds the first game festival Diversification of PC game genres Astoni shia Story Establishment of the Korea Electronic Visual Culture Association Establishment of the Korean PC Game Developers Association (KOGA) 1994 Integrated Development Plan for the Game Industry ( Establishment of the Research and Development Board for th e Game Industry ; Game exhibition ) Establishment of the Korea Entertainment System Industry Association 1995 The Ministrty of Information and Communication initiates Development Project for Computer Game Industry ( Establishment of the consultative group ; E stablishment of the Korea Internet Safety Commission for reviewing games in the Internet ) Conglomerates expand into the game publishing business (Focusing on importation of foreign PC games) KOGA Publishing Company (Reaction to domination of foreign PC ga mes in South Korean market) 1996 The Ministry of Culture and Sports enact the Basic Framework Act for the Cultural Industry and amend the Act on Music and Video Media (the Ministry of Culture and Sports) 1997 The games of this month contest Establishment of the Game School Establishment of the Game Promotion Center (the Ministry of Culture and Sports) Bankruptcy of the PC game developer companies Termination of game publishing business for conglomerates 1998
130 CHAPTER 5 THE ONLINE GAME PLATFORM In thi s chapter, I explore the effect of regulation from the South Korean government on the online game sector, how the relationship between the government and the industry was negotiated, and how such a negotiated relationship had an impact on the economic succ ess of online games. I argue that the cooperation between the government and the online game industry created the viability and efficiency of the online game industry. The first text based online game appeared in South Korea in 1992 when computer networks could be found only within a small number of universities However, online games were not yet p opularized in 1994 when a start up company published the first commercialized text based game because few users could access computer networks. Once the PC comm unication services were widely used in South Korea, online games became popular. The relatively liberal government embraced market friendly policies, aligning with neo liberalist economics. The Ministry of Information and Communication took a leading role in facilitating a competitive market structure for information technology, and engaged in establishing an information technology infrastructure which was the basis of online game development. Moreover, the Ministry of Culture and Tourism continued to suppo rt online game companies in developing and operating online games. The two ministries, of course, competed platform caused them to have more interactions with the industry, and the two ministries tried to coordinate with each other. technology driven policy led the online game sector to develop creative online ga mes by small and mid size start up companies. Conglomerates did not jump into the online game businesses
131 because the online game platform was not proven to be considerably profitable. Fortunately, the lity, could not affect the online game sector. Without conglomerates, small and mid size online game companies could make a viable business model. Nascent online games such as Lineage by NC Soft were popular in the market, and could dominate the South Kore an game market. The government focused on investments for game development, and the industry focused on policy, but tried to negotiate its position in the power relat ionship with the government. Therefore, online games were successful in the market. The economic growth of the online game industry had difficulty maintaining due to the Sea Story scandal. Even though the scandal was all about arcade games, it resulted in policy changes within the government. The government shifted its focus from economic supports to moral regulation. Prior to nurturing the industry economically, the government oversee govern the cultural industry morally. Online games became a subject of m oral regulation again for that reason. The online game industry opposed this regulation, but did not react. Regardless of the game companies and their online games dominated the online game market in South Korea. Before actively engaging in negotiating its position, the online game industry struggled to survive in the market. The fact that the online game platform was successful without the black market reflected t he fact that the government and the industry had a relatively reciprocal relationship. However, after the market became saturated and overheated, and the government changed its position on moral regulation ame unstable, reducing
132 innovative productivity and causing a decline in the growth rate. This could be understood as the relationship having changed, and thus the relationship between the government and the industry did not ensure the online game developme nt would be economically viable. Changing in the lack of reaction resulted in an unstable market. Emergence of PC Communication Services and Online G ames Internet Network I nfrastructure South Korea established the fi rst Internet network, or computer network, in May 1982. Two mainframe computers, located in the computer science department in Seoul National University and Korea Institute of Electronics Technology (KIET) in Gumi, were connected with (Chon, 2011: 11 12) Because the network was used for research and development in university and research institute rs were researchers, undergraduates, and graduate students in universities and research institutes that the networks connected to. Table 5 1. PC c ommunication inals) or between a personal computer and a mainframe computer. The PC communication includes the private connection between PCs, but usually refers the connection between a PC or a terminal and a mainframe computer. A PC could communicate messages or data with a mainframe computer, basically via wired telephone network or the Integrated Services Digital Network (ISDN). The public could use computer networks when the PC communication network services were commercialized in 1986. For example, Dacom started Chollian ( in Korean, pronounced Chol li an ) in 1986, Korea Telecom released HiTEL in 1994, and another company, Nowcom also serviced Nownuri in 1994. The PC communication network consisted of the main frame computer and the terminals. The main frame computer whi ch a service provider company operated played the role of a hub that connected each terminal.
133 The services were different from the Internet that used the fastest broadband network. The users had to use dial up modems to access the services, and the speed o f transaction between terminals was limited, because the service shared a wired telephone network. The services were not based on graphics, but on texts as shown in Figure 5 1. Some users could use the Internet which was graphic based, but the Internet was not popularized due to expensive usage fees. Figure 5 1 A terminal and PC communication s ervice, HiTEL [Reproduced with permission from Korea Telecom, 19 94 by Korea Telecom.] In PC communication services, the hacking culture began to appear (Ahn 2012: 122). Through PC communication services, users made many clubs. Each club had a different theme. Among them, especially related to video games, the most active club was the KETEL Game Association ( in Korean, pronounced Gae O Dong ). Members of the club usually shared games. Furthermore, they hacked video games so as to use games for free with their colleagu es in the same club (Song, 2009: 319). Introducing an Online G ame in South Korea In 1984 when neither the Internet nor the PC communication services were introduced in South Korea, a group of students in Korea Advanced Institute of Science and Technology
134 ( KAIST) developed the first online game, Kid MUD which was a modified version of Diku MUD The Kid MUD was a text based role playing game. However, few users could play online games because most Koreans were not able to access or use any computer networks. Table 5 2. MUD (Bartle, 2003: 9 10). The MUD game is one type of online games, but usually refers to a text based multiplayer online game. Table 5 3. Diku MUD Diku MUD was developed in 1991 by a group of programmers at the Department of Computer Science at the University of Copenhagen (Shah and Romine, 1995: 22). The source code for Diku MUD was available at no charge. Anyone could use the game, an d modify the game without paying royalty if modified derivatives of the game source code would be distributed for the public for free. In 1994, Samjung Data System developed the first commercialized MUD game in South Korea, Jurassic Park The game was a text based role playing game Users could play the game through Chollian services. Jake Song was known as being a leading developer of the game. To play Jurassic Park the customers had to pay 20 Won per minute to Dacom, the service provider. According to him (Song, 2012: 160), the game featured a game book style playing, but the game was developed without any license from the game book of the same name. Figure 5 2. The game s cene of The Land of Dangoon [Reproduced with permission from Mari Telecom, 19 94 by Mari Telecom.] Starting from Jurassic Park many MUD games were released via the PC communication services such as Chollian, HiTEL, and Nownuri, and MUD games were popularized rapidly
135 among the users of the PC communication services (Ahn, 2004, March 9 th ). The leading MUD games were Jurassic Park (developed by Samjung Data System), and The Land of Dangoon (developed by Mari Telecom in 1994 and serviced in Nownuri) (Wi and Rho, 2007: 31). As shown in Figure 5 2, users had to type commands for pla ying the games. The MUD games became some of the most popular content in PC communication services. However, the online game companies were not able to make further development of games economically viable (Nam, 2014: 308). Compared to the arcade and PC pa ckage platforms, the online game platform was likely to be profitable not only because there were no conglomerates that tried to exploit the market with a considerable capital, but also because there was no black market to hinder a net profit to the develo per companies. However, the online game companies struggled with the PC communication service providers. Proven that the online games were profitable, the PC communication service providers tried to increase their profit sharing rates from 10 percent to 50 percent (Oh, 2010: 91). The online game companies were not able to argue better rates because the PC communication services, which were the only way to service their games, were oligopolistic. The online game companies that did not have leverage to negoti ate for a better profit would go bankrupt (Wi and Rho, 2007: 32 33). Establishing Infrastructure: Nation wide Broadband Connection Implementing ambitious and comprehensive measures for the informatization of South Korea, the South Korean government had pl ayed a leading role in transitioning to the information society as well as in developing the information technology industry. Since the mid 1990s, the government had implemented plans, projects, and initiatives for establishing the nation wide broadband co intentions to promote the development of the cultural industry in general, and of the online game industry in specific. Establishing infrastructure and building up the foundation for growing t he
136 information technology industries, the government had an indirect role in the growth of the online game industry. Among the global trend of each country trying to secure their national competitiveness in the global networked society, South Korea also e stablished the initiative for the super high speed information and communication network (Jeon, 1994: 5). Following the successful expansion of backbone networks as well as the modernization of the wired telephone network, the government tried to promote t he national informatization. According to the Framework Act on Informatization society possible or facilitating the efficiency of activities by producing, distributing, or uti lizing information (the Office of Legislation, 1996b). Based on such policy agenda for informatization, several private companies started the broadband connection services in 1995. Under the framework act, the Ministry of Information and Communication (MI C) implemented the F irst Master Plan (1996 2000) in 1996 (the Ministry of Information and Communication, 1996). According to the goal of the plan, the government wanted to construct an advanced nationwide information infrastructure. The infrastructure cons isted of communication networks, Internet access, application software, computer hardware, and information services (Jeong and King, 1997). In detail, the Ministry focused on establishing high speed networks through market competition and investment from p rivate sectors, and achieving the goal of connecting more than 80 percent of households with high speed connections by 2005 Embracing neo liberal economic perspectives, the government induced competition between private tele communication companies in order to facilitate the spread of broadband
137 telecommunication market privatizing the previously public enterprise. Hanaro Telecom and Durune t were established as competitors against KT, servicing the broadband connection. Hongseok Seo, a bureaucrat in MIC, evaluated that the competitions among private companies led to expand a nationwide information infrastructure such as the Internet (Seo, 20 07: 66). The intense competition between the private companies led the price reduction and precipitated the increase in the demand for services. Thus, the broadband connection was spread more across the nation. Emergence of Another Type of Online Games and PC Bang Graphic Based Multiplayer Online Games: The Kingdom of the Winds and Lineage As stated above, the failure of MUD games was not caused by a lack of creative content. Rather, the reduced profitability with respect to the profit sharing with the PC c ommunication service providers caused such failure of the games. For example, Samjung Data System, that was the developer company of the first commercialized MUD game had to terminate the game service because it was not profitable for the company (Nam, 201 4: 309). Table 5 4. MUG graphic based massively multiplayer online role playing game (MMORPG). Besides the PC communication services, the broad band connection proliferated in South liberal economic perspectives. And, another type of online games, a MUG game, was emerged and became popular in South Ko rea. Nexon, which was the start up ve nture game company, released the first commercialized graphic based online game, The Kingdom of the Winds in 1996. However, The Kingdom of the Winds was not successful. According to an individual developer who worked at Nexon, Nexon
138 had difficulties develo ping the game because the market was not favorable to a new type of online games (Song, 2007). In 1998, another venture start up game company, NC Soft, developed Lineage Lineage unlike The Kingdom of the Winds was huge success in the market. The game wa s evaluated as making South Korea one of the top leading countries around the world for online games, instigating the explosion of the South Korean online game market with respect to the increased popularity of online games. In terms of simultaneous log in s that measured for popularity and capacity of online games, the game marked more than 1,000 in 1998. However, the number exploded exponentially, 10,000 in 1999, and 100,000 in 2000. Table 5 5. Lineage Lineage was a graphic based massively multiplayer on line role playing game, developed in 1998 by NC Soft. It was the first game in the Lineage series. The game was most popular in South Korea, and was available in Chinese, Japanese, and English versions. Jake Song designed the game, and he had previously de signed The Kingdom of the Winds by Nexon in 1996. NC Soft targeted general Internet users to enjoy the game. The company focused on making the game easily accessible and playable only with the mouse. Because Lineage had an intuitive interface as shown in Figure 5 3, the game became popular among Internet users, acknowledged as an easily enjoyable game. Figure 5 3 The f irst popular online g ame in South Korea, Lineage [Reproduced with permission from NC Soft, 19 98 by NC Soft.]
139 Moreover, the reason the episodes. NC Soft continuously updated the game with several episodes, and such episodes kept making revenues. The updated game became more attractive to customers because NC Soft applied f eatures that the users wanted to include in updates. Typical games had certain endings, so users were usually too bored to play further because there would be no more game content after such endings. Lineage featured an open world, in which users could do whatever they want basically. The world in Lineage did not have an ultimate goal that caused the game to come to an end The users were not too bored to play, feeling ready to play a new game. PC Bang s PC Bangs ( in Korean, pronounced P C Bahng, and Bang means Rooms in Korean) refers to a business that allowed customers to play online games with each other in a certain physical space, similar to a cyber caf PC Bangs offer 24 hour a day access to Internet to c ustomers through leased Internet lines, and they are equipped with latest multimedia PCs for matching with latest online games. In PC Bangs, customers could use such PCs at almost one dollar per an hour. The broadband connection for the Internet in South Korea made a new social phenomenon, the proliferation of PC Bangs starting in 1998. The growth rate of PC Bangs was remarkable. According to the national statistics, even though the number of PC Bangs remained at around 100 in the early of 1998, the number grew exponentially, marking 3,500 PC Bangs in the end of 1998. PC Bangs grew more and more (The Game Promotion Center, 2001: 63). From every street, one was able to see the signs that every building had one or two PC Bangs. PC Bangs became ubiquitous in l
140 At a glance, PC Bangs were not that different from cyber caf s in the United States. However, PC Bangs were a cultural place as well as a playful space (Wi, 2009: 121). Compared to cyber caf s, PC Bangs offered an open and coin operate d setting and sold snacks and beverages. PC Bangs that had many latest updated PCs as shown in Figure 5 4 offered their customers to mostly play online games together. Huhh (2008: 28) evaluated PC Bangs that games in PC Bangs. Figure 5 4 PC Bang in Seoul, South Korea [Reprinted with permission from DANAWA, http://dpg.danawa.com/news/view?boar dSeq=64&listSeq=3420840 (October 14, 2017).] According to Chee (2006), PC Bangs were a social space that traversed online and offline co presence, as well as a space that was associated with the phenomenon of online gaming and the online/offline communit ies it produced. In terms of the location for game playing, PC Bangs continued to have a similar role with the arcade rooms in Chapter 3. Customers were various, but the most frequent were adolescents. As the place to play together, PC Bangs were the place that adolescents used as their hideout (Park, 2004). PC Bangs were a new exclusive space for adolescents.
141 The G overnment : Neo liberal Economics and the Cultural Industry Emphasis on Venture S tart ups and I nform ation Technology S ector The South Korean gover nment tried to rework its economy, focusing on eco nomic growth from venture start ups in the information technology sector. The financial crisis in 1997 exposed the problems that the South Korean economy put too much emphasis on Chaebol centered economic gr owth based on the heavy and chemical industry. Due to the financial crisis, the South Korean economy struggled with high rates of unemployment, massive scale bankruptcies of major corporations including some Chaebols, and a substantial decline of the stock market. South Korea needed to change industrial structure from the Chaebol centered structure, which was based on the heavy and chemical industry, to the information technology oriented structure of venture start ups. The government acknowledged the IT sec tor as its path to recover the economy (Kim, 2006). he IT sector based on the start up companies in his inaugural address: We will push a policy to make our nation strong in lead ing cutting edge techno logies. The economic recovery from the growth of venture [start up] companies would be our top pr iority (Kim, 1998, February 25 th ). One might argue that the Kim administration tried to continue government led economic growth, since t he government seemed to select and push one industrial sector for economic growth. However, the Kim government escaped from the economic crisis by the infusion of emergency loans by the IMF, which provided South Korea the loan in exchange for neoliberal st ructural reform along the lines of the Washington Consensus. The IMF demanded that South Korea should adopt a neoliberal economic model (Im, 2017: 205). The government let the market work and nurtured the economy based on the market logic.
142 The market logi c was not necessarily related to establishing infrastructure, because infrastructure itself did not make an economic profit Someone had to pay in establishing infrastructure that the market would work in. Therefore, the government, especially the Ministry of Information and Communication, implemented Cyber Korea 21 as the second master plan in March 3 rd ). In order to get South Korea prepared for knowledge based and information technology based economy, the plan was focusing on how the government would establish a national information infrastructure. As part of the plan, the government planned to invest an information infrastructure up to 11 billion dollars. Establis hment of an information infrastructure enabled the market to be competitive as well as productive The information technology related industry based on an established infrastructure would create new jobs so as to be able to grow by itself (the Ministry of Information and Communication, 1999). Economic Support of the Cultural I ndustry President Daejung Kim stressed the economic potential of the cultural industry, stating that the cultural industry was one of the basic key industries for economic growth in the 21 st government reclassified the cultural industry. The cultural industry, was previously classified as the service industry. Now, it was included in the category of the manufacturing industry. Such reclassification opened a possibility for the government to economically support the cul tural industry as venture start ups. Under the Act on Special Measures for Promotion of Venture Businesses venture start up companies were able to earn a financial subsidy from the government. Also, the government conferred a tax benefit on venture start up companies under the act (the Office of Legislation, 1998). Under the act, cultural venture companies could have
143 benefits f rom the government when companies tried to develop a new technology, and create a cultural commodity through using such a new technology. However, cultural venture companies had a difficulty gaining economic benefits by the act because t enture start c ould be argued as venture start ups. The act li sted the types of venture start ups, which varied from the construction industry to the movie industry to the video game development industry. That is, the criteria to judge which industries could be eligible to be included were vague. Therefore, the act did not realize its overarching goal to restructure South Korean industry ba sed on nurturing venture start ups. The video game industry, which w as classified as the cultural industry, also came to be treated like the manufacturing industry. In order to promote the cultural industries, in 1999, the Ministry of Culture and Tourism enacted the Framework Act on the Promotion of Cultural Industries Th e act acknowledged that the cultural industries were kno wledge intensive and created economic value. In the act, the video game industry was clearly stated that the industry was included as a cultural industry. The rationale behind the act was that cultura l industries as a national strategic industry enhanced competitiveness by supporting and fostering cultural industries from the government, thereby contributing to lay the groundwork for the development of national economy (the Office of Le gislation, 1999). Based on the Framework Act, the government began to raise the cultural industry promotion fund in 1999. The total amount of the fund was up to 50 billion Won (Do, 1999, January 15 th ) which combined money from public funds with that from private institutional funds (the Office of Le gislation, 1999). Venture start up companies related to cultural industries could
144 apply to the fund and also receive tax benefits (the Ministry of Culture and Tourism, 2005; Korea Culture and Tourism Institute, 2 005: 67 68). However, the fund was not an investment, but a loan, as shown in Table 5 6. Most online game companies did not receive the fund because newly established venture startups could not provide a loan security. In order to get a loan, companies we re required to provide a loan security in which the borrower pledged some assets as collateral for a loan. The Ministry of Culture and and future potential. Howe abilities to repay loans. The banks preferred companies that had an ability to secure loans. Most companies had difficulty receiving and using the fund, even though companies had enough potent ial for creating a game content, because companies could not provide a loan security. Table 5 6. The g ame i ndustry f und in the c ultural i ndustry p romotion f und Game company l ocation Equipment for game development Game development p roject Total amount of a loan 2 b illion Won 4.5 b illion Won 5 b illion Won Subject Game c ompany ( registered to the Ministry of Culture and Tourism) Game c ompany (registered to the Ministry of Culture and Tourism) All game companies, and venture capital c ompanies Limitation 0.2 b illion Won per a company 0.5 b illion Won per a company 0.3 b illion Won per a game development project I nterest Rates 4.5 percent 4.5 percent 3.5 percent Loan Period 5 years ( with a two year grace period) 5 years (with a two year grace period) 3 years ( with a one year grace period) Integrated Governing of the Online Game S ector Along with supporting the video game industry as discussed above, the government tried to establish institutional and jurisdictional promotion to the online game sector in a mor e integrated way. In detail, the Ministry of Culture and Tourism took the leading role in governing
145 the video game industry, since online games were recognized as a cultural commodity having economic potential. Having transferred the authority to govern th e arcade game sector from the Ministry of Health and Social Affairs, the Ministry of Culture and Tourism tried to redefine video games and set the jurisdictional basis for governing the video game industry. In 1999, the Ministry of Culture and Tourism enac ted the Act on Music, Video, and Game Media which was a revised law from the previous Act on Music and Video Media While the previous act subjected video games merely as video media by the computer program, the new act explicitly defined video games. Thu s, the Ministry of Culture and Tourism became in charge of governing the video game sector as its main task In the law, the Ministry of Culture and Tourism was required to plan and implement the promotion policy for the video game industry in general, and the online game industry in specific (the Office of Legislation, 1999). As the government has supported the film industry, which has been driven by export, the government has also begun to support the online game industry for the national economy (Jin, 2 010: 53). For the institutional support to the video game industry, the Ministry of Culture and Tourism established the Game Promotion Center in 1999. The Center was required to analyze the domestic and international online game market, and to prepare the future game policy for the government. The Center took care of all game related practices such as research and development, education, and marketing. The Center provided a virtual industrial complex where game companies could rent space at a cheaper price than the market The Center developed the cutting edge technology and shared it with online game companies and helped companies to market their online games (Kim, 1999, February 3 rd ).
146 Online G ames omination of the South Korean Video Game M arket Online Ga mes and PC Bangs Starcraft and Lineage in PC Bangs instigated the growth of the online game sector in South Korea. Customers first experienced Starcraft and Lineage in PC Bangs, and later became regular customers of online games. That is, Starcraft and Lin eage in PC Bangs were a point of necessary passage for the online game sector becoming a leading and successful sector in terms of economic growth. Starcraft even though the game was developed by Blizzard Entertainment of the United States, had a crucial role in the growth of PC Bangs. The revenue from the sales of Starcraft was directly proportional to the number of PC Bangs (Nam, 2009: 99). The game, a real time computer strategy game with networked multiplayer capabilities, was a contributing factor in the mass popularity of online games (Chan, 2008). Young people were quick to abandon popular leisure activities like playing billiards or arcade games. They switched their interests to play online games in PC Bangs. PC Bangs became a core place for enjoyi ng leisure activity in South Korea, and had an intervening role in the emerging successful online game industry. Table 5 7. Starcraft Starcraft is a real time strategy game, created by C. Metzen and J. Phinney and owned by Blizzard Entertainment. Blizzar d Entertainment released the game in March 1998. The original game and its official expansion has been praised as one of the best real time strategy games. The series became very popular especially in South Korea, where professional game players and team p articipate in matches, earn sponsorships, and compete with each other in television matches. Moreover, Starcraft has been a commercial success. After its release, it became the best selling game for that year, selling over 1.5 million copies worldwide. In the next decade from release date, the game sold over 9.5 million copies across the globe, with 4.5 million copies being sold in South Korea. PC Bangs and Starcraft were a well matched pair in the market. The game required PCs that connected with each ot her either directly with cables or indirectly over the Internet. Of course, individual users could play the game at home. However, PC Bangs offered the only physical place in which customers played the game together, and they could chat about the game
147 in p erson right after the end of playing. Apparently, Starcraft users preferred PC Bangs to home. Moreover, the fact that PC Bangs offered a much faster connection capacity than homes, as well as latest PCs, led users to go to PC Bangs rather than playing alon e at home. Along with Starcraft Lineage became popular in PC Bangs. In 1999, the sales of the game doubled in every quarter. While revenues of typical game companies were around tens of millions Won, NC Soft recorded tens of billions Won in sales (Nam, 2 009: 130). Lineage also matched the characteristics of PC Bangs. Personal networks centered around PC Bangs fitted virtual communities in Lineage which was different from other foreign online games in which solo play was crucial. Users were required to coo perate in Lineage and PC Bangs allowed users to do so. Furthermore, NC Soft targeted PC Bangs as their main revenue sources. According to Nam (2009: 131), employees of NC Soft visited every PC Bang with Lineage program disks and installed the game in PCs in PC Bangs. NC Soft marketed actively to PC Bangs that Lineage could attract customers for PC Bangs. Creation of a New Business M odel Starting from Lineage its focus to development of onlin e games. Jin evaluated that South Korean game companies developed immensely profitable and skillfully designed online games which have made South Korea an online game empire (Jin, 2012: 35). Among many factors, a new business model created by the online ga market. The online game industry created a new business model to encourage their economic other game platforms such as arcade games and PC package games. While arcade and PC
148 package games generated revenue from one time sales, online games generated the revenue from subscriptions to play games. Wi evaluated that arcade and PC package games were essentially a retail industry, whereas online games were a service industry (Wi, 2009: 33). Consuming online games was not purchasing software, but playing games v ia networks. A final product was not a game itself, but an online game service. That is, online game users purchased the ability to play online games multiple times, and thus revenues went to online game companies not once, but continuously. Furthermore, o nline game developer companies earned the revenue as a whole because online games were not required to have multiple steps in the value chain structure. Users directly purchased online game services, and there was no need to use publishers, distributors, o r even retailers. Table 5 8. Primary revenue models for online g ames Game type Subject Price p lans A subscription m odel Players need to pay before playing Individual p layers Set amount Set volume PC Bangs Set amount Set volume A partial pa y pricing m odel Games for free, but in game purchasing for certain functions or items Individual p layers The online game industry used two primary revenue models; a subscription model and a partial pay pricing model. A subscription model was used for on line games that required users to pay fees in order to play games. A subscription model consisted of two different fees: fees directly to individual players and fees to PC Bangs. Each fee also had two types of price plans: the set amount where users payed a monthly subscription fee for unlimited access to games, and the set volume where users pre paid for a certain amount of time to play games. In a partial pay pricing model, games were free to play, but users were able to purchase additional items or certa in functions if they wished. Available items and functions were sometimes simply aesthetic
149 and added nothing to gameplay beyond visual effects, but other items and functions gave game characters special effects from faster experience gaining to bonus in ga me currency to powerful equipment. Such a business model had an impact on the growth of the online game sector in South Korea since the model ensured online game companies a predictable stream of revenue for further development of games. Especially, along with the popularity of PC Bangs, fees to PC Bangs enabled online game companies to secure a stable revenue flow. Typical online game industry revenues could fluctuate from month to month (Wi, 2009: 123), if online game companies focused solely on individu losing possible customers as they increased fees to their customers. However, owners had to accept such models because customers would not frequent PC Bangs if PC Bangs did not provide online games Expansion of R egulation of the Online Game S ector The Military Service Exemption Program The Ministry of Culture and Tourism, in conjunction with the Military Manpower Administration, successfully expanded the military service exemption program to the online game sector in 2000. Due to confrontation against North Korea, South Korea has had a policy of mandatory military service for eligible men. Some men who have an important technological skill for a certain industry can fulfill their military obligat ions by working for certain companies which were chosen by the military service exemption program. The rationale behind the program was to foster economic growth by providing skilled workers to the industry. Eligible workers for the program were required t o work between 26 and 34 months in the projected company. After this period, eligible workers were credited as fulfilling their military service.
150 Before 2000, the online game industry was hardly covered in the program because the industry was vaguely clas sified as the information processing industry. As stated above, the government rearranged the standard industry classification system, treating the video game industry as the manufacturing industry. In 2000, the government clarified the system more. The vi deo game industry became an independent category which included the manufacturing industry of video games and the game software development industry. Such reclassification opened the online game industry to be eligible for the military service exemption pr ogram. The military service exemption program was mutually beneficial to both individuals and companies. For an individual worker, the program was a great opportunity. Rather than wasting eligible workers were able to develop their abilities more and to build their experiences in video game businesses during the exemption program. Because game development required cutting edge skills in programming, individuals had to keep their skills up t o date. Spending two years or more in mandatory military service was usually a waste of time, in which skills would go out of date. Thus, young Koreans, who were interested in working in the video game business, were eager to join companies that were selec ted by the program. For online game companies, the military service exemption program was an opportunity. Online game companies were small, and compared to Chaebols, offered lower salaries to individual workers. Prospective workers apparently preferred Ch aebol to small companies because they expected to earn higher salaries and better benefits. The military service exemption program helped small online game companies to counteract Chaebol by attracting possible future workers. Being designated as a compan y eligible for the program created a trust from the public because it created an image of us that has been recognized by the
151 government. We could make a positive impression (Kang, 2007, an interview with Wi, 2007: 73). Being a designated company in the pr Arising Concerns about Online Games The online game industry grew rapidly. Even though the arcade game sector still ranked first in terms of revenues in 2001, it was decreasing, according to a White Paper about the South Korean video game industry from the Game Promotion Center (2001: 28 29). As online games ide effect on South Korean society, especially adolescents. Such critical opinions against online games opened a pro Lineage the most popular online game in the South Korean market, was ac cused of driving deviations, or making social issues. For example, one university student hit one owner of a PC Bang and blackmailed him because he was delirious from game playing (Lee, 2000, November 16 th ). A middle school student killed his younger broth er. His crime was associated with his excessive game playing, saying that he wanted to murder someone as in the game ( Choi 2011, March 6 th ). One pregnant woman player miscarried her baby by several abuses from other players in Lineage The abuses were jus t in game messages, but these players abused her several times because she did not help their game play. They did that just for fun without any conscience (Jeong, 2001, November 9 th ; Yoon, 2001, November 7 th ). One Lineage player fired his air rifle in fron t of the headquarter s building of NC Soft because he was upset by being scammed by another player in Lineage (Park, 2002, May 6 th ; Ji, 2002, May 17 th ). However, even though the company knew of cheating problems in Lineage, NC Soft did nothing to monitor pr oblems or prevent them from happening
152 The game item exchange was further problematic. For Lineage some users sold game items such as powerful swords and armors for real currency. Since game items were high in scarcity, such items were expensive One very scarce item was valued at tens of million Won. An auction website as an official trading method was not established yet. Many frauds in game item exchange happened. Some of those players established actual physical places for gathering items in Lineage an d sold items for real currency. Organized gangs were involved in this illicit virtual economy also. Several organized gangs were accused by the police of gathering money illegally through item trading in Lineage (Ji, 2002, June 2 nd ). Several civic organiz government to solve these kinds of problems around online games through implementing moral regulation. The civic organizations made the pro social argument that the government should prioritiz South Korean society in general. The civic organizations accused the government of nurturing the online game industry at the expense of adolescents (Ok, 2002, June 14 th ) It was only met with more criticism because the industry did not correct or even show movement toward correction of their problems. Jake Song, the head of NC Soft as well as the head develope r of Lineage argued that the crime rates by adolescents would be higher if adolescents could not play Lineage NC Soft evaluated the correlation between online games and crimes by adolescents, and claimed that because of the number of adolescents playing online games in PC Bangs, the crime rates by adolescents outside PC Bangs decreased (Song, 2002, June 14 th ). It, however, was just rhetoric. The industry did not seem to take the social responsibility of online games seriously. That is, the social responsi
153 to the society, but the online game industry did not defend itself actively, or cope with criticism from the society. Therefore, the online game industry undermined the pro ind ustrial argument that the government should promote the video game industry with economically and eventually social argument that the government should guide the video game industry and monitor the industry regulation Imposing a New Moral Regulation on Online Games: the Rating System Like PC package games, online games were subjected to a rating system from the Ministry of Culture and Tourism. Yet online games were already re viewed by the Korea Internet Safety Commission. Imposing this new rating system by the Korea Media Rating Board reflected a conflict between the Korean Internet Safety Commission, the Korea Media Rating Board and the online game industry. In early 2002, t he Korea Media Rating Board tried to expand its review system to online games, after implementing a new rating system for reviewing video games. The Board argued the necessity of the new rating system: Among all video games, only online games have been dis tributed without our review process. The Board needed to review online games that have had side effects on the South Korean society (the Korea Media Rating Board, 2002: 2). That is, online games now became subject to double review processes from the Korea Media Rating Board, and the Korea Internet Safety Commission. Considering the fact that online game companies had to prepare a new review system, the board ga ve online companies a grace period until companies made a new game. That is, online games already reviewed by the Korea Internet Safety Commission did not need to submit such a new rating system. It could be seen as inter ministerial conflict between the Ministry of Culture and Tourism and the Ministry of Information and Communication. In the first rou nd of conflict, the Korea
154 Internet Safety Commission tried to maintain its opinion, because online games were also games distributed via the Internet and because the commission already had reviewed online games. The C ommission, however, was not actively in volved in negotiating its authority to review online games for this time. A conflict between the Korea Media Rating Board and the online game industry might cost the Korea Media Rating Board its authority about online games The announcement of the Korea Media Rating Board that the board would assume review of online games generated fierce opposition. First of all, the online game industry did not want to accept it, arguing that an exception the board proposed would not be relevant. Even though the board m ade an exception that games already reviewed by the Korea Internet Safety Commission could be released without additional reviews by the Korea Media Rating Board, and thus expected that it might make a grace period for online game companies to prepare a ne w rating system, it was not effective for online game companies because companies were about to update their online games. If online games were updated, companies were not exempted from the new system because the Board treated updated online games not as t he same games, but as different games. Hence, the online game industry argued the board did not understand the distinctive characteristics of online games in which online game companies often updated their online games. It, for them, was clearly not corres Second, as the Commission already regulated online games with the review system, imposing another review process was not acce ptable for the Commission. The Commission already had the legal basis to review online games. Under the Telecommunications Businesses Act the Commission had reviewed information distributed via the Internet. Online games were information in the Internet, thus were assumed to be regulated by the Commission. Even though
155 online games were games which were regulated by the Act on Music, Video, and Game Media online games were information distributed via the electronic communication means, or the Internet, whi ch was regulated by the Telecommunications Businesses Act Nonetheless, the Korea Media Rating Board enforced its new review system on online games. In May 2002, the Office for Government Policy Coordination began to find a way for the two ministries to c oordinate with respect to the double review systems, gathering officials of two ministries. The first attempt, however, failed because the two ministries were stubborn. Thus, the deputy director of the office suggested a public hearing on game review syste ms. In June 2002, the public hearing on game review systems was held. In the hearing, the three entities directly involved in the review systems argued their opinions about the problem. The public hearing was, however, stalled, even though it is noteworthy that at least each actor could argue its position with respect to the review process on games, and tried to negotiate it through deliberations. It did not make any practical solution. Therefore, in July 2002, the Korea Media Rating Board implemented the n ew rating system for online games. Before releasing or updating online games, online game companies were required to submit their online games to the Board. The Korea Media Rating Board now reviewed online games and gave online games ratings: suitable for all ages, intended for audiences 12 and over, intended for audiences 15 and over, not allowed for audiences under 18, and tentative ratings (holding, and failure to pass) which meant that game companies were required to modify and resubmit game content to the Korea Media Rating Board in order to get the rating of games. and the Online Game I ndustry: Lineage The first round of conflict happened mainly between the Korea Media Rating Board and the online Lineage This conflict brought a
156 debate between the Board and the industry, but concluded that the new rating system, with respect to the moral regulation from the government, was legitimate since NC Soft acc epted the In 2002, NC Soft was about to update Lineage NC Soft was required to submit an updated version of Lineage to the Board in order to get the rating of the game. The whole online game industry paid attention to how NC Soft dealt with the problem because the online game industry expected a big company like NC Soft could actively negotiate with the government or even solve the problem. However, since NC Soft anticipated Lineage would have a rating of 12 and older by the Korea Media Rating Board, NC Soft was passive to argue changes of the existing rating system. In October 2002, the Korea Media Rating Board determined a rating of Lineage as rated Lineage October 23 rd ). system. However, NC Soft eventually had to follow the decision because NC Soft was more concerned with decreasing revenues from the rating. NC Soft made its main revenue from Lineage company could not provide the game to PC Bangs because adolescents, who were prohibited resisting the NC Soft prepared to update it again and Lineage should no not allowed Finally, in November 2002, the Korea Media Rating Board rated
157 Lineage, with two differently updated servers: one allowed the player to kill another (rated as intended for audiences over 15), and other prohibited the player from killing another (rated as intended for audiences over 12) (Jang, 2002, November 15 th ). I n sum, with respect to Lineage firmly its new moral regulation as the board implemented the new rating system on online games. NC Soft had to take a practical economic interest by abiding by the govern regulation. An Inter ministerial Conflict and its Resolution by C oordination : Lineage 2 The double review systems went on until NC Soft Lineage 2, exposed the conflicts between the two different systems in 2003. Line age 2 suggested an opportunity to resolve inter ministerial conflict between the Ministry of Culture and Tourism and the Ministry of Information and Communication. In 2003, with an investment of more than 10 billion Won, and a development period of three years, NC Soft was about to release Lineage Lineage 2 Due to Lineage previous issue with the new rating system by the Korea Media Rating Board, NC Soft was careful to deal with the new blockbuster online game this time. NC Soft foresaw that Li neage 2 would have a rating as the game intended for audiences 15 and over because the open beta version of Lineage 2 had the same rating by the decision of the Korea Media Rating Board. Also, NC Soft was confident because Lineage 2 by the Entertainment Software Rating Board of the United States. However, in October 2003, the Korea Media Rating Board rated Lineage 2 reasonable be cause the content was not changed at all from the open beta version of Lineage 2 which had the rating as the game intended for audiences 15 and over. The Board insisted its
158 decision, stating that the board was lenient for the open beta version, and already warned NC Soft of the problematic content. However, since NC Soft did not modify the problematic content, the Board had to be strict for the updated version of Lineage 2 th 2003, the Korea Game Industry Association made a statement, even though NC Soft did not participate imposing the moral regulation on online games. According to the a ssociation, the Korea Media Rating Board operated unilaterally without any deliberations or negotiations with the industry. The Board reflected its lack of transparency on its review process, without any precise principles. Also, the association wanted NC Soft to participate in opposition to the Korea Media Rating regulations. The Ministry of Culture and Tourism which governed the Korea Media Rating Board faced s board to have a reasonable and understandable decision of rating, but the Korea Media Rating Board did not follow the ministry. On November 6 th 2003, the Korea Media Rating Board held a rating. According to the board, the decision would stand because NC Soft did not raise an ng criteria were clear and firm. Moreover, the board, even though it was affiliated with the Ministry of Culture and Tourism, was not necessarily following the ministry because the board was an independent quasi governmental organization, and the ministry
159 In this situation, the problem around Lineage 2 became worse. On May 24 th 2004, the Korea Internet Safety Commission decided that Lineage 2 was harmful to adolescents. The decision of the commission seemed t must not be distributed to people who were under 19 years old. For NC Soft, two different review and rat ing systems made NC Soft violate the decision anyway. If NC Soft followed one, the company must violate another. Nonetheless, NC Soft could continue its Lineage 2 service. The Office for Government Policy Coordination jumped in to solve the problem of over lapping systems between the Korea Media Rating Board (the Ministry of Culture and Tourism), and the Korea Internet Safety Commission (the Ministry of Information and Communication). For this time, unlike the failed first attempt of coordination in 2002, th e Office boundaries. After several meetings and hearings to negotiate about the overlapping problem, the Office for Government Policy Coordination decided that the government unified the game rating system to the Korea Media Rating Board in September 2004. In order to compensate for the -that the rating system had a limitation to manage games after games had their ratings becaus e there were no management procedures in the system -the Office for Government Policy Coordination ordered two ministries to make a closer cooperative The Office, finally succeed in institutionalizing a coordinative system between the two ministries. On October 1 st 2004, the Ministry of Culture and Tourism and the Ministry of Information and Communication adopted an agreement for cooperation. According to the agreement, two ministries agreed that the cultural industry was in the purview of the Ministry of
160 Culture and Tourism, and the information technology industry was in the boundary of the Information and Communication. The two ministries accepted and respected each min and responsibility to their jurisdictional boundaries. Especially, for the overlapped policy such as the game review systems, the two ministries suggested making a certain policy council between the two ministries in order to avoid redundant p olicy and to improve connectivity for ensuring effectiveness of policy (the Office of Government Policy Coordination, 2004). The double review systems on online games reflected the competition between the two ministries within the government on the one ha nd, and the debates between critiques about online game industry on the other hand. That is, it was conflict between different frameworks, the pro social framework and the pro industrial framework. The government was eager to nurture the online game industry based on the pro industrial framework. However, as social problems around online games had arisen, the pro social framework was strengthened. The online game in dustry should have buttressed the pro industrial framework, but the industry did not move actively. Thus, the Ministry of Culture and Tourism switched its policy based on the pro social framework, strengthening the moral regulation. Failed Attempt to Imple ment Shut down S ystem on Online Games As online games dominated the South Korean video game market after 2004 (The Korea Research and Development Institute for Game Industry, 2005) concerns with regard to adolescents frequenting PC Bangs and playing onlin e games indiscriminately also grew. It was similar to concerns about amusement rooms that adolescents could frequent amusement rooms and make delinquencies. Adolescents now gathered in PC Bangs and played online games without limitations. Thus, some non go vernmental organizations, which were concerned with
161 playing. In 2005, several civic organizations requested that the government involve itself in down S the bill proposed an amendment on the Juvenile Protection Act The proposed bill focused on shut down S ystem was that adolescents were prone to have side effects su ch as addiction, violent behaviors, and lack of sociality due to excessive online game playin g. Thus, the bill proposed the S hut down S ystem on all online games that kept adolescents from playing online games at night (the Office of Legislation, 2005a). H owever, the Congress did not pass the bill. Even though there were heated debates between pros and cons of the bill in the Congress, the bill was revoked as the official parliamentary session ended. In the deliberation in the Congress, the bill encountered oppositions from several entities. economic support. problems, prese nted its consultation that the S hut down S yst em might rai se an issue of compulsion. The S hut down S of minimizing restrictions to t he private sector. Rather, the S hut do wn S ystem was understood as he author of the report argued that passing the bill did not make an enough benefit because the existing review system of the Korea Media Rating Board was able to provide enough regulation (Jeong, 2005). Moreover, the Ministry of Culture and Tourism oppose d the bill. The Ministry saw the video game industry not as the subject to
162 govern, but as the subject to nurture. The S hut down S ystem, for the Ministry, might hamper continuous growth of the online game industry. Preparing to Extend E conomi c R egulation I n 2005, the Ministry of Culture and Tourism started to prepare for making new legislature that dealt only with video games. In the draft of the act, the government clearly stated that it needed to expand its promotion to the video game industry because the video game industry was the core cultural industry for the next generation, which yielded economic values (the Office of Legislation, 2005b: 1). economic regulation to the video game industry. According to the bill, the government was required to support the growth of the video game industry, with assistance such as tax breaks and copyright protection. The government would provide a cutting edge technology to the industr y and educate individuals to work in the industry. The government was supposed to promote gaming culture with practical plans for stimulating e sports (The Office of Legislation, 2005b: 1 5). Especially for the game review system, the bill stated that the government was required to make a new independent institution to review the video games. However, such independent institution should be temporary, the ultimate goal was to establish the self regulation system by the private sector. Finally, the Game Indus try Promotion Act was passed in Congress in April 2006 and was supposed to be in place in October 2006. Under the newly enacted Game Industry Promotion Act the Ministry of Culture and Tourism established a new institution for reviewing only video games. T he Game Review Board (GRB) as a quasi governmental institution, was similar to the Korea Media Rating Board (KMRB). However, as discussed earlier, KMRB struggled with its problems: KMRB might have been used a tool of censorship because it had an experienc e that the military authoritarian
163 government had used; KMRB was irrelevant to review games because video games were totally different in terms of rapid development and changes from other typical media such as film and music. Thus, the newly established GRB featured a more independent review process from the government and professional procedures to deal with video games. Furthermore, the rationale behind establishing GRB was that the government wanted to achieve the ultimate goal of implementing the self re gulation system by the private sector itself, so GRB was a tentative governmental institution which was supposed to change itself to the private independent institution. Strengthening the Moral Regulations The Sea Story Scandal The Sea Story Scandal, as d iscussed in Chapter 3, exposed the problem with the However, it is important to deal with the Scandal in this chapter about the online game sector for two reasons. Firs t of all, the video game industry was acknowledged as a whole, even though the industry was divided into several sectors in terms of platform. Problems in a part of the industry were understood as problems that the entire video game industry caused. It was clear that scandals as discussed below were caused by the arcade game industry. However, scandals were problematized not as the arcade game industry, but as the entire video game industry. The online game sector was especially impacted, because it made up the greatest portion of the video game industry. Second, which was based on economic regulation, enabled itself to relax excessive moral regulations to the arcade game sector. However, the ulations on the arcade game sector caused scandals, and the general
164 industry suppor ted by the government because video games had an economic impact on the South Korean economy, was not properly justified scandals. Such economic regulation had to be reassessed. And finally, the governm ent went back to the moral regulation. That is, For these reasons, scandals around the arcade game sector were important t o figure out how and why the government would go back to the moral regulation which mainly affected the online game sector. Setting the Game Review Board Permanent: Amendment of t he Game Industry Promotion Act The Sea Story Scandal in 2006 exposed the prob lem of imprudent economic supports to the industry. Therefore, the government amended the existing Game Industry Promotion Act re the video game industry, the amendment featured stronger moral regulations such as expansion of the review system, and more prohibition of gambling than the previous one (The Office of Legislation, 2007). Apparently, all congressmen who were concerned with the resolution of the Sea Story Scandal raised an issue of the possible problem around the online game industry. They did not want the game review board to change to the independent private self regulating institution because it might produce more cor ruption within the self regulation system. The government
165 permanently. Act ually, the government decided that the video game industry in South Korea did not have the ability to govern itself yet. Thus, even though the self regulation system would be the ultimate goal, the government still insisted on maintaining the system by its elf. If the private sector had the ability to review its video games by itself the self regulation was possible and desirable. Actually, the industry was not fully pr epared the self regulation yet (Kim, 2008, in the of GRB: 45) Maintaining the game review system from the government did not mean that GRB was effective and consistent. Rather, GRB had issues such as quality of review, fairness, and GRB had the same issues that KMR B showed when they reviewed online games. The staffs of the board were temporary, and lacked fairness in reviewing online games. Too many games applied, so the staff members were not able to review them thoroughly (Han, 2010: 57 58). The staff spent just t hree minutes for reviewing one online game. GRB monitored online games after rating, but the monitoring was not effective because GRB had to consult the National Policy Agency in order to force online game companies to correct the issues that were flagged (Lee, 2010: 56). That is, GRB did not have the jurisdictional authority to punish the illicit behaviors of online game companies (38). Industrial Performances: Blockbusterization and Market S aturation After 2007, the online game sector began to share the largest part within the South Korean video game industry, valued at 2.24 trillion Won or 43.5 percent of the total market revenue of 5.14 trillion Won ( The Korea Research and Development Institute for Game Industry, 2008: 41). Since onli ne game companies had considerable investments in development, online games were blockbusterized meaning that online games were aggressively advertised The online
166 re blockbuster online games as the market saturated. The formula for making online games successful was changed from innovative creation to massive investments and aggress ive marketing. As similar online games filled in the online game market, customers gradually wanted to play more complicated, and more dynamic (breathtaking) online games with interesting stories and vivid graphic expression. In order to fulfill customers to invest more time and money in the development of games. Compared to the early development of the online game industry, this was a huge investment for online game companies. Around 2000, typical online games were deve loped with the production period of six months to one year, fewer than fifty individual developers in a company, and an investment of hundreds of billions Won. After 2007 when online games were blockbusterized, these figures increased with the production p eriod of two to three years, more than a hundred individual developers in a company, and an investment of more than ten billion Won ( Korea Creative Content Agency 2009). The marketing cost was, needless to say, higher The online game industry achieved i ts success in terms of economic growth within relatively short period of time, but it caused the market to lose its dynamics for stabilization. The fierce competition in the online game market and thus blockbusterization of online games might be understood that the industry showed a normal cycle of the market creation, the market development, the market stabilization, and the market deterioration. The South Korean industry, however, experienced some phenomena right before the market deterioration without th e stabilization in a rapid growth of the industry because the market was polarized so that a few big
167 companies dominated the market. No middle range companies existed, and many small companies could not enter into the saturated market. With blockbusteriza tion, a few big companies that had considerable investments pursued the economy of scale trying to merge with innovative small online game companies. Because big online game companies started publishing businesses, and because such big companies made the bottle neck phenomena in the online game market as they dominated more than 80 percent of revenues from the sales of online games, small innovative online game companies changed their business target from customers to publisher companies. For small compani es, the only way to survive was by merging with big major companies. However, it did not make them economically games failed in the market. Furthermore, the compet ition between big online game companies was overheated. Big online game companies used the scales of the economy inappropriately. The only way to survive within the competition was to increase the market share of their owned game lists. That is, such compa nies competed with each other not by differentiating their online games from other games, but by securing as many online games as possible. It was like the shot gun approach because big n the market. If a new online game failed in the market, a company lost its market share, and the market share never went up. We [SmileGate] tried to extend our business to publishing online games. It was a good strategy for us because we could hedge a bi g failure of our own games in the success of games in the market (Kim, 2015) Hence, the total revenues of the online game industry still grew but the growth rate was gradually decreasing as the market was overheated and sat urated.
168 Intermingling Economic with Moral Regulations Mid and Long term Plans for Nurturing the Industry The notion that online games caused social delinquency strengthened after the Sea Story Scandal, and the government tried to govern the online game in dustry by imposing moral policies. Nevertheless, the Ministry of Culture, Sports and Tourism continued to promote the industry. Even though the Ministry knew that there had been a lot of criticisms about online games, the Ministry continued to support the industry economically In 2008, the Ministry of Culture, Sports, and Tourism (MCST) initiated The Second Revolution (2008 2012) as the mid and long term plan for nurturing the online game industry. In doing so, MCST tried to help online game companies to export their online games (the Ministry of Culture, Sports, and Tourism, 2008: 5). Actually, MCST lost its rationale to economically promote the domestic video game industry due to the Sea Story Scandal. The economic regulations from the Ministry helped t he online game platform emerge and grow. However, the social issue around the arcade game apse eventually. Major online game companies monopolized most investments for development of balance it, the entire online game industry could not sustain its gro wth (the Ministry of Culture, Sports, and Tourism, 2008: 16 19). In order to overcome the limitation of focusing on the domestic market of online games, MCST market w Ministry of Culture, Sports, and Tourism, 2008: 20). In detail, to help online game companies
169 operate in the overseas market, MCST established the Korea Centers aroun d the world. The Korea Centers provided one stop service to companies who wanted to export their online games in terms of legal services, localization processes with local game companies, and marketing. The Korea Centers played a role of a hub to connect S outh Korean online game companies (mostly small companies) to the global market (the Ministry of Culture, Sports, and Tourism, 2008: 25 30). The Shut down System In the South Korean online game market, the market condition for online game companies was ge tting worse. Even though online games became popular after 2007, the public began to be concerned with the problem of online games that online game users, who relied overly on playing online games, were highly likely to cause social delinquencies. Thus, th e government tried to implement the Shut down System on online games again. on game players. Accidents and incidents related to overuse of games occurred, and became s ocial issues. People were overindulging in excessive game playing. For example, a set of parents was arrested by the police. They were accused of neglecting their little baby to die because they usually played online games more than 12 hours everyday. In t he mental health diagnosis, they were diagnosed with overindulgences on online games (Jang, 2010, March 3 rd ). One middle school student killed his mother who scolded him for excessive game playing and neglecting school study. He committed suicide after he killed his mother (Kim, 2010, November 17 th ). The media were concerned that online games were likely to cause adolescents to have delinquencies if they became addicted to online games. Following such concerns, the government tried to get involved in adol overindulgence problem actively in 2010. Two Ministries jumped in. On the one hand, the
170 Ministry of Culture, Sports, and Tourism (former the Ministry of Culture and Tourism) initiated the Measures for Prevention of the Game Overindulgence in April 2010. According the initiative, online game companies were required to install a fatigue system in their online games that made games slower and difficult to encourage players to stop playing. Also, online game o online games late at night (the Ministry of Culture, Sports, and Tourism, 2010). On the other hand, the Ministry of Gender Equity and Family amended the Juvenile Protection Act which imposed certain responsibilities on game companies. Under the amended act, game companies had to develop certain measures and to apply them to their games. In doing so, adolescents, who were under 16 years old, were not allowed to play games from the midnight to 6 AM regardless of location (the Office of Legislation, 2011a). Apparently, the two policies in place to impose the Shut down System to online games overlapped, and the two Ministries conflicted with each other. Thus, in May 2010, the Office of Government Policy Coordination engaged actively in coordinating between t he two policies. According to the government documents (Cho, 2011: 6), the Office of Government Policy Coordination held five meetings, but the conflict between the two Ministries was not resolved because they were stubborn. After the Blue House engaged in September 2010, both ministries agreed with how they took the jurisdictional domain with respect to the Shut down System, making an agreement between the two Ministries. According to the agreement, the overall restriction fell in the boundary of the Game Industry Promotion Act that the Ministry of Culture, Sports, and Tourism governed. Specifically, special treatments on the game overindulgence for those who were under 16 would be defined on the Juvenile Protection Act which the Ministry of Gender Equity a nd Family governed (Cho, 2011: 7).
171 The opposition to the Shut down System also came out mainly from the online game industry, but such opposition was not considered in establishing the policy. Oppositions varied from the effectiveness of the policy to the cause of the overindulgence problem. For the opposition side, the Shut down System was not effective in achieving the goal, preventing adolescents from overusing online games. Even though the Shut down System was in place, adolescents could continue their game playing because they had more effective ways to sidestep the system. Moreover, the government should have proposed cultural alternatives that adolescents enjoyed instead of online games. Otherwise, the government deprived adolescents of cultural needs Some scholars pointed out that there had been no correlation between was caused by cultural and social environments around adolescents. The online game industry and some civic organizations that concerned the industrial economic growth raised an issue on the system. The Shut down System, however, was in place in 2011, since the Congress did not consider such oppositions, and thus amendments for the two Acts were a pproved by the Congress. Practically speaking, the Shut down System could not achieve its goal like the online play online games which made the system meaningl ess. Survey results about the system revealed Gender Equity and Family, 2012). There were no detective measures to tell whether adolescents appropriated their paren adolescents from playing online games, but that adolescents bypassed the system using their
172 and Shut down System was (Park, 2012, June 2 nd ). Problematizing Online G ames Even though not every attempt to impose more moral regulations on online games was in place, t here were several attempts to implement moral regulations, problematizing online games as an addictive material. For such initiatives, online games were conceptualized as very dangerous material like drugs that might affect the society negatively, and thus the government was encouraged to actively prepare measures to diagnose, treat, and prevent. In January 2013, congressmen Inchoon Sohn with 17 other members proposed the bill, Internet Game Addiction Recovery The bill featured the imposition of online ga me addiction recovery from the government, and the implementation of an extended Shut down System from 10 PM and 7 AM. For the treatment against the online game addiction problem, the Ministry of Gender Equity and Family was supposed to impose certain expe nses on the online game industry whose proportion was to be predetermined by the presidential decree within the scope of under 1 percent of the annual revenue in each online game company (the Office of Legislation, 2013a). Moreover, according to the bill, the Ministry of Gender Equity and Family was required to establish the Commission for Prevention of Game Addiction. The Index of Game Addiction was supposed to measure each online game with this index and determine whether online games were addictive or no t. If online games were determined as addictive by the index, the Commission (the Office of Legislation, 2013b). In April 2013, another debatable bill was proposed. Congressmen Uijin Shin with 14 other mem bers of the Congress moved for the adoption of the Bill for Prevention, Management, and Treatment of Addiction. The bill featured the necessity of active governmental regulations. According to the bill, the government was required to regulate industries th at made addictive
173 materials such as alcohol, drug, and online games (the Office of Legislation, 2013c). In doing so, online games were treated as identical to drugs and alcohol which induced addictions. The bills encountered huge opposition from other Min istries, and the online game industry. The Ministry of Culture, Sports, and Tourism opposed the bill because the bill of Internet Game Addiction Recovery was supposed to give the main authority to govern online games to the Ministry of Gender Equity and Fa mily (Kang, 2013, January 23 rd ). The minister for Culture, Sports, and Tourism argued that the Bill for Prevention, Management, and Treatment of Addiction features in terms of cul tural and economic impacts ( ZDnet Korea 2013, November 14 th ). The online game industry, while passive to oppose the Shut down System, strongly opposed the bills. The Korea Association of Game Industry argued that the bill unnecessarily problematized all online games, and thus led the online game industry to decline. Even though the industry led South Korean exports as core cultural industry, the government tried to problematize online game irrelevantly, considering online games as a cause of all social pr oblems. Thus, in order to show their opposition, the industry tried to boycott the government supported game show, G Star ( KGames, 2013) The industry, however, withdrew the decision not only because the industry expected the bill would not be passed again st strong oppositions, but also because the GameMeca 2013, July 8 th ). Moreover, other game associations from foreign countries supported the Korea Association of Game ills, arguing that including online games should not be classified as addictive materials because it was not scientifically proven. Rather, the bill was clearly over regulation that hampered the growth of the online game industry (Park, 2014, June 11 th ).
1 74 T herefore, as the industry expected, the Congress disposed of the bills due to the expiration of its session. Negative I mpact on the Online Game M arket In 2013, the online game industry in South Korea shrunk calculating its revenue of 5.45 trillion Won o r down 19.6 percent from the previous year. Even though the online game market shared the largest portion of the South Korean video game market at 56.1 percent, the proportion largely decreased compared to 70 percent in 2011, and 69 percent in 2012 ( Korea Creative Content Agency 2014: 74). It resulted in evaluations that the competitiveness of the online game market was weakening. There were few online games that were newly developed or made a breakthrough. This was because costs for development or marketi ng online games increased along with the uncertainty of whether online games would succeed in the market. As the market became unstable, online game companies continued to be passive. Companies that had blockbuster online games with massive users focused o n maintaining their existing businesses that updating their online games, and managing online game servers. That is, companies did not start to develop new online games which might put themselves in danger. Rather, they tried to attract their online game u sers to keep playing existing online games. Even though the number of online games in the market was constant, there were few prognoses for buoyant market. willingness to develop on line games. As stated above, online games were equalized to an addictive material that the government must strictly monitor and control. In doing so, the Therefore, onlin e game companies did not attempt new and innovative development aggressively because there was no guarantee of success, but companies did passively watch how things went.
175 Sung gon Kim and Yonghwan Kim evaluated the industrial passiveness based on collective action dilemma. The industry had a social responsibility, but it looked like the industry had the collecti ve action dilemma. (S. Kim, 2015 ). No company was interested in making a practical and effective solution (Y. Kim, 2015 ). Moreover, in the market, online games did not gather prospective customers anymore. Rather, online game users moved their focus to mobile games. Massive marketing and game attract new prospec tive users. Many online games had been released, but such games did not show enough innovations to attract users because online games in the market were similar to each other. Integrated Regulation from the G overnment In 2014, the Ministry of Culture, Spor ts, and Tourism (MCST) addressed T he Mid and Long term Plan for Promoting the Video Game Industry (2015 2019) However, the plans were halted because of the political scandals that the (previous) president and MCST involved. Facing a decline of the growth rates of online games, MCST attempted to ensure the have revenues of 13 trillion Won by 2019 which grew from 10 trillion Won in 2015. Moreover, the exports of o nline games would grow from 2.8 billion USD in 2015 to 4 billion USD by 2019. The growth in exports impacted the job market in South Korea, since the online game industry needed more individual workers for developing online games. It is projected at 120,00 0 individuals by 2019 from 100 ,000 in 2015 (the Ministry of Culture, Sports, and Tourism and Korea Creative Content Agency 2015: 7).
176 MCST, in the plan, tried to maintain the balance between regulation and promotion. hing a new game rating system which combined the governmental organization (GRAC Game Rating and Administrative Committee) with the non governmental institution (GCRB Game Content Rating Board). The Game Review Board, which had an issue in the game rat ing system as discussed above, was terminated. MCST established and approved two different institutions for a game rating system. GRAC as the quasi governmental institution took a responsibility to rate all online games, but usually emphasized on adult onl y online games (or 18+ games). GCRB as the independent institution from the government assumed for ratings others of All, 12+, and 15+. GRAC had the authority to govern system was that MCST wanted to achieve both goals: that the government should protect adolescents from possibly harmful content, and that the industry should govern itself in order to ensure its autonomy (the Ministry of Culture, Sports, and Tourism and K orea Creative Content Agency, 2014: 19). For protecting adolescents, the government dealt with adult only games, and delegated the authority for other ratings to the private sector. Figure 5 5 The symbols of the r ating system [Re printed with permissio n from the GRAC, https://www.grac.or.kr/Institution/EtcForm01.aspx ( February 15, 2018).] Furthermore, GRAC and GCRB clarified their criteria more clearly. All online games were required to submit these institutions for ratings, and the two institutions were required to review online games with seven clearly addressed criteria: sexuality, violence, threatening,
177 language, substances (alcohol, tobacco, and drug), anti societal messages or crime and gambling. These criteria were used in reviewing game content by GRAC and GCRB, but also were designated to help parents to choose suitable games for their adolescents easily. Table 5 9. The rating s ystem by the GRAC and the GCRB Rating s ymbol Custo m Subject For a ll 12+ 15+ 18+ For testing releasing (stability check, efficiency test, closed beta test and so forth) However, the overall plan has not yet been realized. Some measures in the plan were halted due to the political scandal that MCST w as suspected to be involved in corruption. President Geonhye Park was impeached, and the minister and vice minister of MCST were arrested on charges of corruption and abuse of power ( Song, 2016, November 1 st ; Fifield, 2017, March 10 th ; Chae and Jung, 2017, April 13 th ) As all policies of the previous government were cultural policies were reassessed and thus halted (Yoon, 2016, November 2 nd ). All promotional cultural policies, which needed government budgets to continue, were drastically reduced or stopped because the government cut a considerable part of the budget. The online game industry was not directly involved in the line game industry lost its driving force to continue.
178 Result of Regulation on the Online Game Platform South Korea is one of the countries in which it is hard to run a game company. The government al regulations make growth more difficult for the industry (Morhaime, 2015 an interview with a news media, News room of JTBC, December 2 1 st ). This chapter discussed the online game platform. The government wanted the South Korean online game industry to grow. Embracing the neo liberal economic perspectives, the efforts to nurture the industry economically, the online game industry grew quickly. The newly emerged sector could grow even more with the proliferation of PC Bangs in South Korean society. For a business friendly environment, the government tried to make the infrastructure for a national network, and to prioritize the economi c growth based on the start up businesses. The online game industry actively negotiated its posi tion with the government, for ensuring its made it so that the South Korean online games were successful and profitable in the market. Online games shared the b iggest part of the entire video game industry in South Korea in terms of revenues. The Sea Story Scandal, even though it was all about the gambling problem of the illicit dustry. The government shifted its focus from nurturing the industry economically to governing the industry morally. Furthermore, the industry struggled with market saturation, increasing competition, and structural imbalances. In this situation, the indus try did not actively negotiate its needs with the government. Only a few games dominated the market. Development of innovative and creative online games was more difficult because of severe competition and the difficulties in financing.
179 Because of the gov negative 4.7 percent growth in 2015, comparing to the previous year. In the domestic market, m aintaining its success ( Korea Creative Content Agency 2016: 71). It also happened in the global market. Online game companies faced competitive contenders in the globalized market. Even though the South Korean online game industry has been vibrant in the global market, its growth became stagnant. Companies confronted a big challenge from China and other Asian countries. The Chinese online game industry might have had a late start, but it was growing faster than anywhere else. Several Chinese companies alre ady enjoyed a global presence, even overtaking the South Korean market ( Korea Creative Content Agency 2016: 74). The online game industry has to deliberate the ways to proliferate with its boom of online games against foreign online game companies. For do ing so, the South Korean online game industry has to actively engage in negotiating its position in the domestic market first.
180 Table 5 10. Timeline The i ndustry Year The government (e conomic) The government (m oral) Introduction of the first Internet 1982 Introduction of the first commercial PC communication network 1986 Introduction of the first commercial MUD game 1994 Introduction of the first commercial MUG game 1996 The Ministry of Information and Communication constructs a nationwide inform ation infrastructure 1997 The Ministry of Information and Communication telecommunication market NC Soft releases Lineage PC Bangs are proliferated in South Korea 1998 The government reclassifies the cult ural industry as the manufacturing industry Synergy between online games and PC Bangs Online game companies create a new business model 1999 The Ministry of Information and Communication implements Cyber Korea 21 plan The Ministry of Culture and Tourism enacts the Framework Act on the Promotion of Cultural Industries The Ministry of Culture and Tourism enacts the Act on Music, Video, and Game Media The Ministry of Culture and Tourism establishes the Game Promotion Center The civic organizations raise a n issue about online games 2000 The Ministry of Culture and Tourism with the Military Manpower Administration expands the military service exemption program to the online game sector Lineage exposes the problem of the new review systems of the Korea Medi a Rating Board 2002 The Korea Media Rating Board starts the online games review system Lineage 2 exposes the double review system problems between the Korea Media Rating Board and the Korea Internet Safety Board 2003
181 Table 5 10. Continued The i ndu stry Year The government (e conomic) The government (m oral) 2004 The Office for Government Policy Coordination coordinates an agreement for cooperation between the two Ministries. The civic organizations raise the issue ce problem on online games 2005 Atte mpt to implement the Shut down S ystem by an amendment of the Juvenile Protection Act ( Failed ) The Sea Story Scandal 2006 The government enacts the Game Industry Promotion Act The Ministry of Culture and Tourism establi shes the Game Review Board Blockbusterization and market saturation 2007 The Ministry of Culture and Tourism amends the Game Industry Promotion Act making the Game Review Board as a permanent governmental institution 2008 The Ministry of Culture, Spor ts, and Tourism initiates The Second Revolution (2008 2012) for nurturing the online game industry The over indulgence problem of online games 2010 The Ministry of Culture, Sports, and Tourism initiates the Measures for Prevention of the Game Overindulg ence The Ministry of Gender Equity and Family amends the Juvenile Protection Act The Shut down System is implemented 2013 The bills are proposed (problematizing online games): Internet Game Addiction Recovery ; The Bill for Prevention, Management, and Tr eatment of Addiction 2014 The Ministry of Culture, Sports, and Tourism initiates The Mid and Long term Plan for Promoting the Video Game Industry (2015 2019): A new rating system (GRAC and GCRB) 2017 All plans are halted by the political turmoil
182 CHAPTER 6 THE MOBILE GAME PLATFORM In this chapter, I explore the effect of regulation from the South Korean government on the mobile game sector, how the relationship between the government and the industry was negotiated, and how such an evolved relatio nship had to react to the global market changes. The government tried to regulate the mobile game regulation did not work well because the government was not able to govern the globalized s moral regulation played a role in growing the domestic market, but also isolated the South Korean mobile market from the global market when the domestic industry tried to catch up the global market changes. Compared to the online game platform in the pr policy for the mobile game platform was not that different, as a business friendly policy. The government first tried to create a fair competitive market for driving the mobile telecommunication industry. The govern ment privatized the public firm, or Korean Mobile Telecom which had dominated the market, and set the local technological standard to block foreign phone manufacturers into the domestic market. Due to the government policy, the South Korean communication d evice industry could grow, and the mobile game industry started to mobile game sector to emerge. The first mobile game appeared in South Korea in 1999 when mobile phon reached the level of containing certain features other than the voice communications. Mobile games, however, were not popular by 2002 when the general public considered mobile phones as a general equipment for lives, because mobile games were expensive. After mobile phones were
183 widely spread in South Korea, and after consumers diversified their interests to use phones, mobile games became popular. The South Korean mobile phone manufacturers and mobile game developer companies fell into the iso lated market that from entering, when the domestic industry encountered the global market changes: the transition to smartphones and the open market for smartphone applications. The domestic indus try tried to embrace the market changes, but the local technological restriction from the government worked for the barrier of further growth. Eventually the government lifted the local standard, and the South Korean mobile phone and game markets rapidly w ere expanded with the globalization. The growth of the mobile game sector in South Korea reflects how the government gradually lost its authority over the market when the market expanded beyond the boundary of one country. The government tried to maintain its authority to govern a cultural commodity. For that reason, the government attempted to impose moral regulations such as the gam e rating system, the Shut down S ystem, and the regulation on the stochastic item boxes. However, the government had to withd raw because the government could not govern the globalized market. The more the government tried, the more it lost its leverage to govern the mobile game market. Emergence of Mobile Games in South Korea Mobile Telecommunication Market and the First Mobile Games In South Korea, the first generation of the public mobile telecommunication market started after 1984. Korea Mobile Telecommunication Service Cooperation (a subsidiary of the Korea Telecommunication Authority and a government owned cooperation) be gan its commercial business in car phones and paging. Apparently, mobile games had not emerged in the first generation from 1984 to 1993, while the government owned public cooperation
184 monopolized the market, not only because mobile telephone systems were n ot affordable for the general public, but also because phones themselves were not made for games. According to Jho (2014: 43), liberalization of the mobile communication market in South Korea started with the privatization of the government owned Korean Mo bile Telecom (former Korea Mobile Telecommunication Service Cooperation) and the establishment of a second mobile carrier, Sinsegi Tongshin in 1994. The liberalization of the market did not mean that South Korea opened its telecommunication market to multi national companies because the government limited foreign mobile phone manufacturers from entering the South Korean market by setting the local technological standard, Code Division Multiple Access (CDMA). The foreign mobile phone manufacturers did not use the CDMA standard, but instead the global standard of Global System for Mobile Communications (GSM). Nevertheless, establishment of several mobile carriers and their competition in the local market enabled the general public to have a better quality of co mmunication and even local manufacturers to be interested in development of mobile phones (Kim and Park, 2007: 1 25). The first commercialized mobile games were introduced to the general public in 1999 when one mobile carrier, LG Telecom, began mobile gam e services Damagotchi, Blackjack, Quiz Nara, Omok, and Psychological Test were the first mobile games in South Korea (Han, 2004, June 7 th ). ComTus, established as the first mobile game company in 1998, developed games that were operated with mobile phones and released via different mobile carriers. The games, however, were not popular because the usage fee was expensive. Users had to play the games with their phones connected to the Internet. Mobile devices had monotone images, and lacked the technology to process sophisticated game programs. The data transmission speed was
185 slow. Usage fees were calculated by how many minutes their phones were connected to the Internet. Difficulty for Developing Mobile G ames In the early 2000s, some mobile game companies established and started to develop mobile games. However, mobile game companies had difficulties developing mobile games First of all, while mobile games were relatively easier to develop than other complicated game platforms, mobile game companies could not ensure their stable revenues because the market was so new. The video game industry focused on developing online games. Lineage caught the culture. Compared to online games, nascent mobile games had low quality as well as a high price. In 2000, mobile games earned just 2.7 billion Won, which were 0.3 percent of market share of the total video game market in South Korea (The Game Promotion Center, 2001: 22). Most importantly, the mobile game platform had two distinctive entities in the market; the mobile phone manufacturers and the mobile carriers. Without the two, mobile game city was developed to fit with games, mobile games were not able to be developed by mobile game companies. Moreover, without mobile carriers, mobile game companies could not release their mobile games. In South Korea, after 2000, there were three big mobil e carriers: SK Telecom, KTF, and LG Telecom. The three carriers had their own hubs for distributing mobile games: nTOP for SK Telecom, Magic N for KTF, ez I for LG Telecom. Such hubs were used not only for distributing games, but also for using the Interne t. That is, mobile games for mobile carriers were just one miniscule part among their provided various services. Nevertheless, given the fact that these three hubs were only gateways to distributing mobile games, mobile game companies leaned on mobile carr iers.
186 Since the general public acknowledged mobile phones as necessary life equipment, and since the phones were spread into the general public, the customers diversified their demands variously. Mobile games were one of their demands. Many mobile game com panies were established, and started to develop and release mobile games. The scale of the mobile game market grew to 100 billion Won in 2002, and the number of the mobile game developer companies increased from 3 in 1998 to 100 in 2002 (The Korea Research and Development Institute for Game Industry, 2003: 54). Mobile game companies had difficulty developing and distributing their mobile games because of the different technological standards of each mobile carrier. Since mobile phone manufacturers develope d the Virtual Machine technology and included such technology in their mobile phones, mobile game companies could develop their mobile games actively. The Virtual Machine technology was a kind of middle ware that enabled different phone devices to use the same software. It was like Windows Operating System that enabled different PCs to use the same software. However, the problem, which mobile game companies encountered, was that there was no technological standard. Each mobile carrier used different systems from each other. For example, SK Telecom used GVM and SKVM, KTF used BREW, and LG telecom used KVM (Park, 2009: 30). Mobile game companies were required to develop mobile games to match with the systems of each mobile carrier. That is, even though compani es had one game property, they had to develop several different versions of the game in order to enable their game to operate on different Virtual Machine systems.
187 Rapid G rowth of the Industry Establishment of the Local Standard: The Wireless Internet Pla tform for Interoperability (WIPI) Each mobile carrier used different operating platforms. Such different platforms did not have interchangeability. That is, when a game company developed a mobile game which was operated with a platform of carrier A, the co mpany had to develop it again in order to make the game operable with a platform of carrier B. Unfortunately, developer companies did not do so. Rather, developer companies focused on developing their mobile content only for one mobile carrier that had the biggest market share, expecting many more profits (The Korea Research and Development Institute for Game Industry, 2003: 122). If mobile carriers used the same standardized platform, content providers could save costs for repetitive developments because t he same content would be used for different carriers. In 2001, the Ministry of Information and Communication established the Korea Wireless Internet Standardization Forum (KWISF) that three mobile carriers, South Korean mobile phone manufacturers, and the Electronics and Telecommunications Research Institute joined in KWISF, and tried to solve the compatibility problem of different Virtual Machine systems In 2002, KWISF had success developing an integrated local technology standard for mobile phones. While there have been two standards (BREW by Qualcomm and J2ME by Sun Microsystems) in the global market, KWISF developed its own platform, the Wireless Internet Platform for Interoperability (WIPI). The rationale behind development of new platform was to prote ct the South Korean wireless telecommunication market. Moreover, the Ministry of Information and Communication tried to make WIPI as the technological standard in the global mobile market, and thus the government indirectly helped South Korean mobile devic e manufacturers such as
188 Samsung Electronics and LG Electronics to play a leading role in the global mobile market (Kim, 2007, April 18 th ). In 2005, the government set WIPI as a mandatory standard in the Korean wireless telecommunication market (Kim, 2005, March 31 st ; The Korea Research and Development Institute for Game Industry, 2006: 104). WIPI functioned as a legal and technological barrier for foreign phone manufacturers to enter the South Korean market because every mobile device was required to have W IPI. The local standardization policy from the government was successful in achieving the goal of establishing a domestic mobile communication market by isolation of South Korea from the global market. A few powerful transnational mobile phone manufacturer s such as Nokia and Sony Ericsson could sell only a few modified products, which resulted in their failure in South Korea (Jin, 2017: 54). Empowered as Content Providers Mobile games had strengths in terms of cost and time for development, compared to onl ine games. According to a 2005 White Paper for Korean Games (The Korea Research and Development Institute for Game Industry, 2005: 93 94), mobile game companies spent three to six months developing mobile games, and three to five individual developers work ed on the development of one mobile game. Moreover, as subscribers for mobile phones grew, and as mobile device manufacturers released many more high end phones in the market, many mobile game companies were established and started to develop mobile games. In this situation, the mobile game platform grew more because mobile game companies had leverage in the market. Establishing WIPI as the local technological standard allowed the South Korean mobile phone market to grow without foreign mobile companies. M obile content developers could reduce the costs for developing mobile content due to WIPI, and were able to create independent content from mobile carriers because they did not necessarily depend on mobile carriers with
189 WIPI. The South Korean market needed protections against the powerful globalized market, and the local technological standard had an important role in enabling the domestic industry to have viability by imposing a barrier to foreign phone manufacturers and foreign content developers. For dom estic content providers, the technological standard also had an important role in growing the marking, enabling content providers to have the ability to leverage in the competition between mobile carriers. Furthermore, the open wireless network policy gav e mobile game companies leverage in the mobile game market. After mobile carriers started their telecommunication business for the general public, wireless networks had been closed by such mobile carriers because mobile carriers dominated gateways to conne ct to wireless networks. In such a wireless network structure, mobile game companies as content providers were dependent on mobile carriers. That is, a wireless network was not an environment for fair competition (Jang et al., 2006: 97 98). Therefore, in 2 rights to wireless networks in order to ensure fair competitions in the mobile market. With the wireless subordinate to mobile carriers because of such gateways, were now able to create independent websites so that users could download their mobile games ind ependently. That is, the and the effect was like an anti trust policy ensuring fair competitions in the market. Moreover, mobile game companies were able to grow them selves, diversifying their game distribution channels that enabled them to have a leverage in the mobile game market ( The Korea Research and Development Institute for Game Industry, 2006: 107)
190 From the beginning of 1999 to 2008, the mobile game industry grew rapidly because of 10 percent every year. Some big mobile game companies had more than 10 billion Won in revenues (Korea Creative Content Agency, 2009: 81). Th the local technological standard caused foreign companies (both mobile device manufacturers and mobile game developers) to have a difficulty in South Korea because the local standard made a barrier for foreign compan ies to enter into the South Korean mobile market. Therefore, under the protection from the government, the South Korean mobile game market could make its local ecosystem. Challenges from the Global M arket Smartphone s bile phone that features various functions other than voice communications, having a touchscreen interface, Internet access, and an operating system capable of running downloaded applications. Smartphones offered better user friendly functions to customers After 2008, the South Korean mobile game market encountered environmental changes with respect to smartphones in the global market. First of all, smartphones substituted existing basic mobile devices. As sm artphones were popular in the South Korean mobile market, the Korean mobile manufacturers and mobile game developer companies did not actively and rapidly cope w ith. Second, the open market, which refers to an application market of smartphones regardless of mobile carriers and phone manufacturers, merged the local mobile game market into the global game market directly. The South Korean mobile game industry, which
191 once effective in making the industry grow, was now ineffective. While the So uth Korean mobile device manufacturers dominated the local market due to the global mobile phone market shifted to developing smartphones instead of feature phones In 2007, Apple released the well known iPhone that had the i OS as its operating system (Apple, 2007, January 9 th ). Google started to develop the general purpose mobile operating system, or Android, by establishing the open handset alliance with several global phone manufacturers (the Open Handset Alliance, 2007, No vember 9 th ). This global market transition put pressure on the closed local market. The pressure to transition from feature phones to smartphones reflected how the three entities in the South Korean mobile market consumers, mobile carriers, and phone ma nufacturers acknowledged smartphones. First of all, consumers wanted to use smartphones, especially iPhones. Apple could not officially release the iPhone in the South Korean market because the iPhone did not have WIPI. However, individual consumers, who purchased an iPhone in a foreign country, could use it in South Korea after obtaining the KC certificate that meant the Korea Communications Commission verified radio frequency requirements for applied mobile devices ( Lee, 2009, October 14 th ) Second, as individual consumers were interested in interests in introducing smartphones to the South Korean market also grew. Because iPhones were popular in the global market, mobile carriers expected that iPhones would increase t heir market shares Mobile carriers competed with each other in order to obtain exclusive sales rights from Apple. Lastly, the South Korean mobile phone manufacturers seemed unwelcoming to the entrance of the iPhone in the South Korean market because then t he market would be widely open to foreign big mobile phone companies, meaning
192 that the South Korean companies would lose their dominance in the domestic market. Samsung Electronics and LG Electronics, however, did not acknowledge this, and criticized the l ocal growth for the domestic phone manufacturers in order to enhance their competitiveness in the world market. The manufacturers had to embrace the market changes Thus, Samsung Electronics and LG Electronics started to develop their own operating systems for their system. By requests from such market entities, in December 2009, the Korean Communications Commission officially abolished the protection policy that all communication devices in South the regulation to facilitate mar WIPI policy hampered the entire mobile market in South Korea because the policy was likely to have a side effect that South Korean mobile companies would not be able to cope with changes in th e global market. Therefore, they would gradually lose their competitiveness. As a result of the abolition of the compulsory WIPI policy, the barrier of entry to the South Korean mobile market was lowered, causing the inflow of foreign made smartphones. Thu s, an environment in the South Korean phone market, where foreign phones and South Korean phones could compete, was formed. At the same time, the abolition of the policy opened the way for South Korean companies to expand their businesses to the global mar ket. In short, the abolishment of the WIPI policy resulted in opening the domestic mobile market to foreign smartphone manufacturers for to smartphone in the S outh Korean mobile market.
193 The Open Market Smartphones introduced a new content distribution market, called the open market, in South Korea. The open market caused mobile phone content providers such as mobile game developer companies to have a new distri bution structure that was different from the structure of mobile content indust ry in South Korea grew. Before smartphones, network providers or mobile carriers were favored in the mobile content market because mobile carriers dominated the distribution channel for mobile content. and users had to download any mobile content through such hubs. Thus, before smartphones, content providers were submissive to mobile carriers. Moreover, mobile content took a long time from development to consumption because the distribution channel comp rised various stages (Lee, 2010: 11). On the contrary, the open market created a virtual marketplace of applications of smartphones that developers directly sold their applications to consumers The open market was economically efficient because it did no t need various stages in the distribution channel. Any market. Basically, the market supported its openness, and lowered the barrier of entry. The market platform holders, Apple and Google, encouraged this by developing open software development toolkits. With such toolkits, developers could create any applications, and simply request Apple and Google that developers sell their applications in the open market. Unles s applications had critical errors such as technological malfunction, infringement of copyright, or problematic content, Apple and Google enrolled applications in their marketplace. Therefore, the
194 open market weakened the rights of mobile carriers with res pect to mobile content by providing The open market provided South Korean mobile game developers (either game companies and individual developers) an opportunity to mak e a breakthrough. However, mobile games in the open market were not available to South Korean consumers because mobile games in the open market raised an issue with the game review system by the Game Review Board Under the Game Industry Promotion Act, all games in South Korea were required to have a certain rating from the Game Review Board. Mobile games in the open market became unlawful because they had no ratings. Thus, Apple excluded the game category in its AppStore (Korea Creative Content Agency, 201 0: 93). Google opened the game section within its Android Market in South Korea, but the Game Review Board threatened Google Korea to block the Android Market if Google did not abide by the existing game review system (Gwon, 2010, March 11 th ). Google had t o exclude the game section of its Android Market (Kim, 2012: 69) The new marketplace was opened, but the existing regulation from the government restricted the ( Choi, 2010: 8 ; Korea Creative Content Agency, 2010: 93). Revision of the E xi sting Game Review S ystem Mobile games in the open market were blocked from South Korean customers because Apple and Google excluded the game category in their open markets. However, this measure was not effective in stopping mobile games in the open market from being distributed to consumers. Smartphone users could play mobile games anyway, using unofficial and some illicit ways. Blocking of un reviewed mobile games, rather, prompted unintended illicit behaviors for smartphone users ( Ahn 2010, May 27 th ). The South Korean government encountered a serious problem for the mobile game sector that the existing local regulation conflicted with the globalized market. The government
195 egulations could not cover the mobile game sector which caused the environmental changes due to moral regulations regarding the game rating system could be operat ed for the local market, but likely conflicted with the globalized market (Korea Creative Content Agency, 2011: 848). As stated above, in South Korea, all game content was legally required to get an age rating grade by the Game Review Board. However, smart either an individual developer or a mobile game company. Mobile games only had to be registered with the open market which is located not only in South Korea, but also globally. The open market enabled the mobile game industry to grow more. However, the existing moral Finally, the government made a compromise for the collision problem between the local regulation and the globalized market. In 2011, the government amended the Game Industry Promotion Act system. In the case of mobile games that the Game Review Board could not cover due to the market assume the authority to review game content (the Office of Legislation, 2011b). That is, Apple and Google could review mobile games in their open markets. In doing so, th e government clarified that it had not made any exemptions from the existing game review system, but expected reliable entities of market platform holders to review games autonomously, while the government maintained the existing framework of legal review system on video games. Also, the government elucidated that the Game Review Board was still in charge of reviewing mobile
196 games in the open market that were not suitable for adolescents (the Office of Legislation, 2011b). Mobile games, which the open mark distributed in the South Korean market because market holders regulated such mobile games autonomously. The self game review system. Apple and Google, as open market holders, reviewed game content in the autonomous reviews on mobile games (Korea Creative Content Agency, 2012: 785). Therefore, in the en d of 2011, Apple and Google restored the game category in their AppStore and Android Market, and mobile games in the open market were legally distributed in South Korea (Korea Creative Content Agency, 2012: 96). In sum, smartphones and their open markets caused environmental changes in the South Korean mobile game market. Smartphones rapidly substituted feature phones. The open market gave the mobile game industry an opportunity to grow. The mobile game market with its market expansion induced prospected p rofits to game companies. Some online game companies, which struggled with market saturation, advanced into the mobile game development. Moreover, the open market offered the simplified process for marketing mobile games. Mobile games, unlike online games which needed a local publisher, could easily advance into the global market through the open market. Expansion of the Shut down S ystem to the Mobile Game Sector Emerging smartphones in South Korea, and allowing the open market for mobile games, also raised an issue related the Shut down S ystem. While mobile games were popular, the issue mplement of the Shut down S ystem, could reach. However, unlike with online game sector, the government failed to expand
197 its regulative policy to the mobile game sector, realizing that it was unable to impose the local moral regulation to the globalized market. As discussed in Chapter 5, in 2011, the govern ment implemented the Shut down S ystem to all online games in South Korea through the amendment of the Juvenile Protection Act In the policy making process, the Shut down S ystem created inter ministerial conflict between the Ministry of Gender Equity and Family and the Ministry of Culture, Sports, and Tourism. Th e two Ministries not only vied for leadership of governing online games, i.e which Ministry would have the authority to govern the moral regulation of online games, but also conflicted o n the details of the Shut down S ystem, i.e. what ages of users were su bjected and under what conditions the system would be in effect. In this confrontation, mobile games were not problem on online games. Eventually, the two Mini stries made an agreement about the jurisdicti onal domain, and the Shut down S ystem was about to be in operation. Coincidentally, when the Congress was about to pass the bill and the two Ministries were prepared to make practical me asures regarding the Shut down S ystem, the mobile game sector in South Korea was growing with smartphones and their open markets. In this situation, the bill came under criticism about the subjected g ame platforms of the Shut down S ystem because the act vaguely defined subjects of 2011a). The two Ministries, apparently, had different ideas about whether or not mobile games On the one hand, the Ministry of Gender Equity and Family
198 regardless of the game platforms (the M inistry of Gender Equity and Family, 2011). Regardi ng the object of the Shut down S ystem, which was to prevent social dysfunction of adolescents, the Ministry of Gender and Family had a view that all network games, which might induce such problems, should and Tourism, 2011). The Ministry of Culture, Sports, and Tourism basically agreed wi th the object of the Shut down S ystem, but believed that its implementation should be reduced becau se the Shut down S ystem might hamper the growth of the South Korean video game industry. Clearly, the two Ministries had different scopes about th e Shut down S implementation (Kim, 2011, March 8 th ; Jeong, March 28 th ). The inter Ministerial conflict abo down S ystem seemed to be solved when the Office of Legislation made an authoritative interpretation of the bill. The Office out mobile games. The conflict abo ut the extent of the Shut down S ystem policy showed no signs of re for passing the bill. hee Choi, chairman of the Gender Equity and Family Committee in the Congress, asked the Office of Legislation for an authoritative interpretation. And t he Office of Legislation presented an interpretation in March 2011. According to the authoritative interpretation from the Office of
199 to games that were provided real time through online networks regardless of the game platforms (Song, 2011, March 3 rd ). With the authoritative interpretation, it looked like the bill was settled with the viewpoint of the Ministry of Gender Equity and Famil y. Eventually, the two Ministries made another agreement about the mobile game sector, and thus the Congress passed the bill. The agreement was not about including mobile games in the Shut down S ystem, but about exempting m obile games from the Shut down S y stem. According to the amended Juvenile Protection Act the government gave the mobile game sector a grace period of two years before the implemen tation of the Shut down S ystem (the Office of Legislation, 2011a). The explicit reason of exemption was that t he government needed to determine whether or not mobile games also have the same effect of overindulgence problem on adolescents (Kang, 2011, March 31 st ). Without any scientific proof about the relationship nce problem, the government could not take the risk o f criticism that the Shut down S ystem covered games unnecessarily. Furthermore, the two Ministries had to conclude the exemption against the authoritative interpretation of the bill because the governme nt did not have practical measures to implement of the policy to the mobile game sector. That is, even though the Shut down S ystem was in place for the mobile game sector, the government would lose its authority to govern the mobile game sector because the mobile game market was already globalized. Due to smartphones and the open market, the South Korean mobile game market rapidly merged into the global mobile game market. Even though South Korean mobile game companies developed mobile games and released th em in the open market, such mobile games were not only consumed in the local market. The government could insist on implementing of the moral regulation, but quickly lost its control. In sum, the decision of exempting m obile games from the Shut down S ystem had a
200 reason: the government acknowledged the necessity of moral regulation, but it was impossible to implement the moral regulation practically. Expansion of the M ob ile Game M arket Connecting Mobile Games to Social Network P latforms Smartphones and wir eless networks in South Korea caused social network platforms to proliferate, especially instant messengers such as KakaoTalk. These instant messengers had an influence on the mobile game market with the development of social network games in the globalize d mobile game market in South Korea. Targeting South Korean smartphone users, KakaoTalk was a generic version of WhatsApp, an instant messenger that was one of the applications for smartphones having certain function of messaging between users without a us age fee for using text messages. Kakao Cooperation, a small venture IT company, developed and released KakaoTalk in 2010. Right after the release of the application, KakaoTalk readily became popular as shown in Figure 6 1 Some analysis evaluated that Kaka oTalk facilitated the South Korean users to transition from feature phones to smartphones because the application enabled users to avoid a usage fee from messaging (Byun et al., 2012: 152). Figure 6 1 The number of active u sers of KakaoTalk, Source: DaumKakao, Investment R eports 2010 through 2016. 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 45,000,000 2010 (start) 2010 (end) 2012 2013 2014 2015 2016
201 platform. KakaoTalk was popular, but not profitable because the application was free to use. Kakao Cooperation was struggled wit h its deficit and thus tried to find a new profitable business. Kakao Gaming was a new gaming platform that mixed the social network service of KakaoTalk with mobile games. KakaoTalk had already many users, so mobile games with KakaoTalk were expected to b e profitable. However, there were few mobile games that fitted with Kakao Gaming features. The development of mobile games was nascent, and social network games were not yet proven as profitable business among mobile game companies. Only seven mobile game companies had a willingness to provide their mobile games to Kakao Gaming. Thus, Kakao Gaming started with the total ten mobile games in July 2012: Viking Island, Rhythm Scandal, and Chaos & Defense by Wemade Entertainment Co., Aqua Village, and Jewal Cras h by Barunson Creative, Bully 2 by NextApps, Anypang by SundayToz, Space Pang Pang by CrazyFish, Crossword Puzzle by BlueWind, and Drawing Quiz by AwesomePiece ( Jeong, 2012, July 30 th ). game industry in South Korea a chance to find a new business area, the social network mobile game business. Needless to say, Kakao Gaming made Kakao Cooperation turn a profit. Among the ten initial mobile games, Anipang for Kakao became popular. Anipang fo r Kakao was known as the first successful mobile game in the South Korean mobile game market, showing 20 million downloads in 74 days from the release date (Ramstad, 2012, October 9 th ; Park, 2012, October 13 th ). It meant that more than 66 percent of smartp hone users downloaded and played the game (Lim, 2012, October 12 th ).
202 Table 6 1. Anipang Anipang is a social network game in which users compete with each other in the social network setting. A small venture company, SundayToz developed the game in 2009. H owever, the game became popular when the game operated with Kakao Gaming platform in July 2012. The game featured the causal puzzle genre. One game session lasted one minute. Within one minute, players were supposed to swipe the screen to move animal chara cters around and line up three identical characters in either a horizontal or vertical line as shown in Figure 6 3 (the mechanics were similar to those of Candy Crush Saga ). Anypang boasted 30 million downloads and a peak of 10 million daily active users a fter its release. Each game session needed one heart, and one heart was restored every eight minutes. Users could purchase such hearts with an in game purchase, or receive them from their friends in KakaoTalk. As one mobile game on the Kakao Gaming platf orm was a huge hit, many mobile game companies began to pay attention to developing social network mobile games which operated in Kakao Gaming platform. Dragonflight for Kakao developed by NextFloor and Windrunner for Kakao developed by Wemade Entertainmen t Co. continued Anipang mobile games also had more than 20 million downloads in 2013. Kakao Gaming platform grew a big market for mobile games that had more than 400 game developer companies and more than 600 mobile games in the pla KakaoTalk, was trusted to indicate games in the mobile game market that would likely be successful (Korea Creative Content Agency, 2014: 128). Figure 6 2 A game s cene of Anypang (develope d by SundayToz) [Reproduced with permission from SundayToz, 2009 by SundayToz.]
203 the mobile game market, establishing itself as a considerable publishing platform for mobil e games. Connecting mobile games to social network platforms was successful, and led the mobile game industry to grow fast. According to the national survey, as early as 2012, almost 61 percent of South Korean users who had smartphones played mobile games, and South Koreans spent on average one hour a day playing mobile games (Korea Creative Content Agency, 2013). Furthermore, the mobile game industry increased its revenue of 0.8 trillion Won (89.1 percent of 0.42 trillion Won (Korea Creative Content Agency, 2013: 66). In 2013, the growth of the industry accelerated. The mobile game industry increased its revenue to 2.3 trillion Won, reflecting 190.6 percent of the growth rate (Korea Creative Content Agency, 2 014: 126). However, Kakao Gaming did not make economic viability for the mobile game industry. When Kakao Cooperation, as an intermediate platform holder, dominated the publishing business in the South Korean mobile game market, and many more mobile games were released through Kakao Gaming platform, the market situation became worse for mobile game developer companies. As stated above, KakaoTalk made a new revenue structure in the mobile game industry in which mobile games were free to download, but made th eir profit by in game disadvantage as many similar commodities were available in the same platform. The revenue sharing structure of Kakao Gaming platform featur ed this disadvantage for developer companies. In the open market, open market holders such as Apple and Google received 30 percent of revenue from the game sale, and the developer company shared the rest. In Kakao Gaming platform, Kakao Cooperation additio nally shared 21 percent of revenue,
204 meaning that the developer company received only 49 percent of revenues of mobile game sales (Hong, 2014: 41). It was not that disadvantageous for mobile game developer companies when the market was in the initial stage, i.e. there were a few mobile games available in Kakao Gaming platform, because their mobile games generated a considerable amount of revenues. However, as Kakao Cooperation dominated the mobile game market in South Korea, and as many more mobile games wer e directed toward the Kakao Gaming platform, the revenue for developer companies decreased because all KakaoTalk users did not play all mobile games in Kakao Gaming. In this situation, developer companies that focused too much on developing their mobile ga mes for Kakao Gaming platform hesitated to provide their games to Kakao Cooperation, and went back to the open market ( Korea Creative Content Agency, 2015: 106). The Stochastic Item Box One profit source that mobile game companies created was the in game purchasing method. Games were free to play, but users were able to purchase additional items or certain functions if they wished. These items and functions were sometimes simply aesthetic and added nothing to gameplay beyond visual effects, but other items and functions gave game characters special effects from faster experience gaining to bonus in game currency to powerful equipment. In game purchasing involved small transactions but tempted users to spend real currency in video games. In particular, the mobile game industry used the stochastic item box for making a profit. The stochastic item box (also called the random box, the loot box or lucky box) refers to certain goods that contains a game item but consumers do not know what items are in the box unt il they purchase and open the box. Sometimes, the box has a valuable and rare game item which makes game playing easy. More often, the box has typical or worthless item. The stochastic item box featured similar mechanisms to the lottery in a sense that cus tomers did not expect or know the
205 result of their transactions. Users did not know how many of each kind of box existed. Mobile game users had to rely on their luck. For this reason, customers kept purchasing the stochastic item box until they got game ite ms they wanted The stochastic item box raised three issues. First of all, customers were not satisfied with containing a valuable item. Customers wanted to purchase t he item box because valuable items with the stochastic item box because most boxes had items that users did not want. Thus, users wanted developer companies to reveal the probability of the stochastic item box. Second, there were unnecessary transactions. Customers purchased many stochastic item boxes to increase their chances of getting valuable items. Even though each transaction was involved a small amount o f money, total transactions were considerable because users purchased the stochastic item box over and over again until they found the items they wanted. Also, open market holders did not regulate in game purchasing methods, and did not limit the maximum a mount of purchasing of each mobile game user. Like purchasing Lottery tickets, the stochastic Third, through the stochastic item box, adolescents could be exposed to gambling. Mobil e game companies used the stochastic item box as their main profit making methods, restrictions. As stated above, the stochastic item box featured similar cha racteristics to Lottery which was strictly prohibited for adolescents. Nevertheless, adolescents had access to unlimited gambling through purchasing such boxes.
206 Concerns about the stochastic item boxes grew. In response, the government tried to implement another moral regulation, the so game industry failed because the industry suggested the self regulation In Ma y 2015, congressman Wootaek Jeong as the chief author of the bill proposed an amendment to the Game Industry Promotion Act game companies were required to disclose the information about the stochastic item box in their mobile games. The information had to contain what types of game items could be obtained from the stochastic item box, and the probability of obtaining them, when companies sold the boxes (the Office of Legislation, 2015). The proposed bill received fierce resistance from the industry. The industry argued that the bill would make the industry lose its driving force to grow by bringing back excessive regulations. Moral regulation from the government would cause the private se ctor to be unable to govern itself, even though the government agreed with the self regulation Also, because the discrimination between South Korean companies and foreign companies operating in South Korea. However, such arguments from the industry came to encounter harsh condemnation from mobile game users who demanded the disclosure about the stochastic item boxes. The condemnation among users went viral after S outh Korean game users learned that the Japanese Game Association decided to disclose of specific probabilities for the stochastic item box offered in Japanese games. With the situation proven unfavorable to the industry, the Korea Internet and Digital Ent ertainment Association (K IDEA) announced a voluntary scheme to regulate the
207 stochastic item box (the Korea Internet and Digital Entertainment Association, 2015). The scheme was to be in effect for all member companies in K IDEA in June 2015. The voluntary scheme involved in disclosing the information on the stochastic item boxes that were offered in all games rated for teens as well as for all ages. All subjected games were required to disclose what types of items could be obtained from the box and under w hat probabilities, as shown in Figure 6 3 Figure 6 3 Disclosed i nformation o n the stochastic item b ox in a mobile g ame, Summon ers (developed by ComTus) [Reproduced with permission from ComTus, 2014 by ComTus.] As the industry implemented th e self regulation regarding the item boxes, the Congress discarded the proposed bill. However, debates about the stochastic item box are still ongoing now. The self regulation from the private game association was marginally effective. The scheme was not m andatory, but voluntary. Each game company could decide whether they would abide by the self regulation or not. Moreover, games for adults were not regulated by the scheme. The self regulation would not apply to non member game companies of the association According to the Ministry of Culture, Sports, and Tourism (the Ministry of Culture, Sports, and Tourism, 2016), the rate of complying with the self regulation among game companies dropped from 93 percent in December 2015 to 88 percent in May 2016. 158 g ames
208 abided by the self regulation on the stochastic item box, but only 27 games, or 17 percent of them disclosed the information on the stochastic item box to the public. Most of them did not reveal the exact probability, but disclosed the range of probab The self regulation from the private industrial association did not prove to be effectiveness. Result of Regulation on the Mobile Game Platform I have never wanted supports from the government What do I want? It is simple. I as an individual game developer w ant to live fairly and s quarely ( an anonymous individual developer 2014). moral terms, the development and growth of the South Korean mobile game market as a result s moral regulation could not work as the local market was globalized. In order to induce fair competition in the market, the government, first privatized the public company and set the domestic technological standard for making a barrier to entry into the industry could develop, and following the development of mobile phones, the South Korean mobile game industry also emerged. However, the global market changes led the government to remove the local policy government lifted its domestic policy, and thus the domestic market rapidly globalized. As the mobile game industry grew, the government acknowledged that it needed to implement the moral regulation on mobile games. The government tried to impose several regulations, but could not strictly regulate the local industry because the domestic mobile game industry already was into the
209 market became an infinitely competitive market. The mobile game sector could grow with the global market change s, but came to struggle with rapid market saturation. Many mobile game companies were established. Online game companies started to develop mobile games as well. Foreign big mobile game companies entered into the South Korean market. In the market, similar mobile games were available and competing with each other. Mobile game development needed more investments and marketing in order to differentiate it from other games. When the economy of scale worked in the mobile game market, the gap between big major c ompanies and small minor companies became wider. Big corporations with the capital and distribution capabilities are able to develop and launch games and hol d on tight to the market, where as the capabilities to keep up. In 201 2 and 2013, mobile games that developed by small mobile game companies held top places on the sales chart, due to the popularity of social network games. SundayToz, the developer company of Anypang was an exact example. As Anypang became popular with 10 m illion users playing everyday, SundayToz was able to increase its revenue of 23.8 billion Won in 2012 to 47.6 billion Won in 2013, and to 144.1 billion Won in 2014. This remarkable growth, however, was not continued when other mobile game companies release d similar mobile games On the other hand, big online game companies expanded their businesses to the mobile game sector. Nexon, and Netmarble, the leading compani es in the online game sector, released mobile games and made their profit in the mobile game sector. Nexon started developing mobile games in March 2015 Heat dominated the South Korean siderable investment in mobile game development and
210 aggressive marketing, Nexon ranked the top mobile company in terms of revenue making in 2015. Netmarble also exceeded one trillion Won in sales for the first time and ranked second after Nexon in 2015. Ne launches and gaining popularity of Marble in 2013 and Seven Nights in 2014 (Korea Creative Content Agency, 2016: 90). A s the economy of scale works in the mobile game market and as big game companies become interested in the mobile game development, the gap between major and minor companies are widening. The mobile game industry was led by the big three, Nexon, Netmarble and NC Soft based on the sales in 2015. The sales of t he big three accounted for 60 percent of investments from developer companies, resulting in the blockbusterization phenomenon also in the mobile game sector. It became di fficult for small and mid sized mobile companies to develop comparable mobile games because of lack of work force and considerable capital. Bigger companies tended to expand their mobile game development to hedge one or two mobile arket. However, smaller companies had to invest all they had on one or two games, which were not guaranteed a success
211 Table 6 2. Timeline The i ndustry Year The government (e conomic) The g overnment ( m oral) Introduction of the first public mobile telecomm unication devices 1984 1994 The Ministry of Information and Communication privatizes the government owned telecommunication company Introduction of the first mobile games 1999 2001 The Ministry of Information and Communication establishes the Ko rea Wireless Internet Standardization Forum 2002 The Korea Wireless Internet Standardization Forum develops the Wireless Internet for Interoperability (WIPI) 2005 The government sets WIPI as a mandatory standard The global market changes smartpho nes 2008 Mobile games in the open market expose the problem with the review systems of the Game Review Board Apple and Google open their open markets in South Korea, excluding the game category 2009 The Korean Communications Commission abolishes the WI PI policy Apple and Google restore the game category in their open markets 2011 The government exempts mobile games from the game review system The government tries to expand the Shut down System to the mobile game sector fails to implement, the gove rnment exempts mobile games from the Shut down System Social mobile game platform emerges Kakao Gaming Anipang for Kakao becomes popular 2012 The Korea Internet and Digital Entertainment Association starts self regulation for member companies 2015 T he government tries to regulate the stochastic item box fails to implement
212 CHAPTER 7 CONCLUSION S It has been more than four decades since the first video game appeared in South Korea. Throughout this time, the South Korean government has actively enga ged in the development of the video games industry, and in the consumption of video games in the market. Nevertheless, the existing literature about the South Korean video game industry has paid little attention to the role of the government in steering th economic policy, which helped the online game industry grow, but this government policy was generally understood as a backdrop for industrial growth. This dissertation instead placed the role of the government at the center of the development of the South Korean video game industry. We are at an opportune moment for understanding the effects of government regulation across various game platforms in South Korea. South Korean case in this disserta tion has provided an example of active involvement by the government in attempting to regulate social problems related to video games. This example has political implications for current debates about excessive game playing. Recently, t he international hea lth community indicated that gaming disorder addictive disorder in the same category as drug abuse. Conc ern about the negative health effects of gaming disorder is now sparking debates about video gaming across the globe (Scutti, 2018, June 18 th ). The World Health Organization denies this disorder has political implications for individual countries (Bogost, 2018, June 28 th ). In actuality, though, video game policy in any given country depends on the way in which video games are conceptualized there, and video games might have substantial political implications for some countries. This was evident across my ca se studies of
213 various game platforms in South Korea. The South Korean government has implemented regulations such as the Shut down System, and initiation of measures for treatment of game addiction. Thus, it is apparent that South Korean government regulat ions challenge the World This dissertation had two main goals. First, it contributed to political economy literature on the South Korean video game industry, wh ich has largely been neglected in International Relations. Understanding the development of the South Korean video game industry is important to understanding the global video game market, in which South Korea is now a leading country. Second, it analyzed the development of the South Korean video game industry by focusing on the role of government regulatory frameworks across various game platforms, addressing a deficit in existing literature, which mostly focuses on online games. By examining industry gove rnment relations and reactions with regard to video game regulatory frameworks, the research here contributes to broader theoretical debates on the role of the government in the market. This conclusion summarizes findings, discusses the theoretical implica tions of government regulation of the video game industry, and considers this dissertation s limitations and a few directions for further research. Summary of Arguments The main research question of this dissertation was: Why did South Korean government re gulations by and large fail to achieve their intended goals from 1980 to 2016? Each game platform in the South Korean video game industry was analyzed via the following subquestions: First, why did the government regulate video games? What regulations did the South Korean government implement, under what conceptualization of video games? Second, how did the video game industry respond to the imposed regulations? How did the industry develop video
214 games and how were video games consumed in the market? Third, what impact did the dynamics of regulations and associated responses have on the video game market? Regulation This project analyzed how the South Korean video game industry has been governed from 1980 to 2016, with an emphasis on the role of the governm ent. Despite significant differences in political and economic realities among game platforms, they shared a commonality in that the government has attempted to regulate the video game industry across all game platforms. That is, the government has played an active role in the development of South Korean video games. This dissertation defined regulation as an identifiable and discrete mode of governmental econom ic activities in both the development and operation of video games. The government has influenced the video game industry and market by using various regulatory measures adopted via legislation, ministerial policies, and initiatives. In the case of arcade games, for example, the government used existing legislation, the Amusement Places Act to regulate the newly emerged game platform. For console games, the Ministry of Culture and Sports implemented the Review Policy for New Media to review game content. The government amended the Act on the Promotion of Communication Network Utilization to provide public education on developing PC software, including PC package games and several ministries, such as the Ministry of Commerce, Industry, and Energy, the Mini stry of Information and Communication, and the Ministry of Culture and Sports, implemented development plans and projects for the PC package game industry. For online games, the government supported the industry by providing the national Internet network t hrough policies such as Cyber Korea 21 and subsidies to online game startups. Last, for the mobile game
215 platform, the Ministry of Information and Communication set technology standards (the Wireless Internet Platform for Interoperability) to protect the lo cal telecommunication market and to empower mobile game companies against mobile carriers. These examples showed that the government regulation has played an important role in video game development. Moral and Economic Regulation The regulation of South Ko rean video games was broadly divided into two categories based on the nature of regulative activity. The government implemented regulation with an intention to produce an identified outcome or outcomes according to defined moral standards or economic purpo ses. Moral regulation is designed to produce socially desirable outcomes by restricting the industrial economic behaviors that may increase the occurrence of undesirable activities in society. In moral regulation, certain industrial behaviors defined as pr oblematic by the government are discouraged through prohibitions, disincentives, and command and control economic competence and the market efficiency. In economic regulation, industrial performance in the market is encouraged by providing economic incentives such as subsidies, infrastructure development, and the setting of technological standards. Video games in South Korea were recognized as a cultural commodity, but they were also treated as a source of economic profit. At different time periods, these two values led to policy debates. As described in the case studies, the government considered policy debates between cultural impacts and economic growth in the soc iety, identified which values were most important, and formulated regulations to achieve intended outcomes. It is important to see that demonstrated in the case s tudies. Different modes of regulation have been implemented across various game platforms in South Korea, as shown in Table 7 1.
216 Table 7 1. Regulatory modes and a genda Time Target Regulatory m odes Regulatory a genda Main issue a ddressed Groups b enefitted 1980 Arcade Moral Health and s afety ; Gambling Adolescents ; Consumers 1993 Console Moral Cultural c ontent Japanese console game content Consumers 1982 PC package Economic Economic competence of the industry Transition to the information technology society Game developer companies 1996 Online Economic Economic competence of the industry Eco nomic growth based on the start ups Providing an infrastructure Game developer companies 2006 Moral Cultural c ontent Excessive game pla ying behaviors Consumers 2001 Mobile Economic Technology standard Economic potential of the industry Game developer companies 2011 Moral Cultural c ontent Overindulgence problems Gambling Consumers The empirical analysis in the previous chapters focu sed on different game platforms. Each chapter first discussed how the government came up with moral and economic modes of regulation. Here moral regulations are summarized. In Chapter 2, we saw that the government regulated the arcade game platform accordi ng to principles of morality, as there were concerns that the unsanitary physical conditions of the amusement rooms, where games were played, industry, without regulation, could not be trusted to produce socially desirable outcomes. Thus, the government had socially compelling reasons for moral regulation, and enforced standards of propriety at the amusement rooms. In Chapter 3, we saw how the government regulated console ga mes based on moral principles related to cultural content. The government feared the importation of Japanese games would impact South Korean culture because of the legacies of Japanese colonization The government reviewed console game content in South Kor ea using a review system that featured a kind of censoring intended to prohibit cultural content in console of regulation over online and mobile games, as explor ed in Chapters 5 and 6. Online and mobile
217 behavior. In order to prevent socially undesirable outcomes such as overindulgence and gambling problems, the government implem ented the Shut down System and the game rating system. As analyzed in Chapter 4, the government implemented economic regulation over the PC package game industry. PC package games were conceptualized as a source for driving South Korea to embrace the trans ition to Information Technology. The PC game industry, which regulation o f PC package games was intended to promote their economic competence. The online game platform was similarly regulated, as analyzed in Chapter 5. The Ministry of Information and Communication provided a national online network in order to encourage a compe titive market structure for the information technology industry. The Ministry of Culture and Tourism provided subsidies and initiated measures to promote startup businesses. These efforts facilitated economically competent game development by ensuring econ omic viability and efficiency. Finally, in Chapter 6, we saw that the government implemented technology aimed to prevent foreign companies from entering the South Korean mobile game market, and to encourage investment in mobile game development against mobile carriers. In sum, this dissertation found that the South Korean government has implemented regulations over the video game industry. In these regulations, the government had an intention to a chieve certain outcomes that could be divided into two kinds of regulative modes moral and
218 economic Thus, t he government has played an important role in the development of South Korean video games. Challenges in Regulat or y Implementations This study suggested that three factors related to the regulator influence the effectiveness of video game regulation: lacuna in regulation, competition between ministries, and lack of monitoring. Government regulation in South Korea exhi bited these problems, and this, combined with societal and industrial resistance to regulation, led to unintended outcomes. First, the government fails to set boundaries around regulation. When designing and implementing regulation, the government as regu lator considered the target of regulation, and the range of tools and methods to use. Regulation had clear objectives and frameworks for implementation to ensure maximization of economic and social benefits, and minimization of undesirable costs. However, the South Korean case showed that the regulatory ideals were not easily achieved, because the government often lacked sufficient information. This resulted in under inclusivity, that is, the conduct that should be regulated was actually allowed to escape c onstraint. An example was discussed in Chapter 2, that of the government implementing a locational management framework for amusement rooms. This regulatory framework intended to address the health and safety of patrons, but left industrial development and vending practices unregulated. This contributed to the production of counterfeit versions of arcade games and the emergence of gambling games. A similar problem occurred in government regulation of the console game platform, analyzed in Chapter 3. As was discussed, the Ministry of Culture and Sports introduced a review system on console game content to reduce the possibility of Japanese cultural infiltration. However, the regulation lacked predictability because the criteria for review were vague and lacke d inclusiveness. The review process could not detect whether console game content was plagiarized.
219 The second challenge to effective regulation was competition within the government. The case studies examined in this dissertation demonstrated that it was inaccurate to treat the government as a unitary actor seeking to advance regulatory objectives without considering the interests of differentiated actors. Bureaucrats were interested in securing their positions and prominences within the government. To pro mote their own organization within the government, they used regulatory implements to maximize their budgets or to reshape their agencies to focus on the work that they value most (Majone, 1996: 65). The resulting competition caused the implementation of o verlapping and repetitive regulations, reducing the credibility of the was evident across cases in this dissertation. For the PC package platform examined i n Chapter 4, three ministries (the Ministry of Information and Communication, the Ministry of Commerce, Industry and Energy, and the Ministry of Culture and Sports) competed with each other to claim the PC package game sector within their jurisdictional bo undaries. The government was not able to create consistency across their policies, resulting in its inability to effectively promote the PC package game industry. Another example of bureaucratic competition, discussed in Chapter 5, was the two different ga me rating systems for online game content (the Korea Internet Safety Commission and the Korea Media Rating Board). In this case, the Office for Government Policy Coordination did eventually step in to coordinate a unified game rating system. Last, the gov ernment lacked monitoring of compliance with regulation of South Korean video games. The quality of regulation and its effectiveness to deliver intended outcomes is not only based on how regulation is designed, but also on how the regulator enforces regula tion. If regulation was not properly enforced, regulation could not effectively achieve intended goals. In Chapter 2, how the government adopted regulation of arcade games without monitoring was
220 examined. The government implemented the inspection system fo Industry Association. However, the government did not monitor corruption in the Association, resulting in proliferation of uninspected ar cade games in the market. When the government implemented a new regulation that allowed for the gift certificates as payouts of arcade games, the government did not monitor how the gift certificates were issued and distributed, resulting in gambling behavi ors. There was also a lack of monitoring of compliance in the console game platform, as discussed in Chapter 3. The government was concerned primarily with Japanese Japa As discussed in Chapter 4, the government did not monitor market mechanisms that create market failure, such as illegal copying of PC games. This lack of enforcement resulted in a reduction of the game comp viability, which was opposite to intended goals. As was discussed in Chapter 5, the Game Review Board did not have measures to correct the issues t hat were flagged in reviewing online game content. In sum, there we re three challenges i n the South Korean regulatory frameworks across game platforms that impacted the effectiveness of regulations in achieving their intended outcomes. This dissertation c ontended that these challenges in regulatory implementations along with societal and industrial resistances summarized below, led to unintended outcomes. Resistances from the Industry and the Consumers This dissertation also examined how the video game in dustry and its consumers resisted complying with government regulations, even at the risk of punishment. The industry actively resisted government regulation, but mostly the industry and the consumers found creative ways
221 to sidestep government regulation. Although such maneuvers to circumvent regulation were not and the consumers were not only targeted actors forced to comply, but also intended beneficiaries of r egulation. However, they were not just passive actors who complied, but active in responding to regulation. In this sense, how the private sector responded to regulation reflected industry and consumer interests. By monitoring compliance, the government re assessed compliance and address modified goals. If not properly monitored, the reform process yielded unintended consequences in the form of additional social and economic problems. Table 7 2. Responses to regulation Platform Regulation: Notable f eature s Response Arcade Health and safety in the location delinquency; Gambling The industry continues to illegally develop arcade games Console Japa nese cultural content Conglomerates accept; Small sized companies continue to plagiarize Japanese console games PC package Economic competence of the industry; Information Technology development The industry accepts; the consumers illegally copy PC packag e games. Online Economic potential for the South Korean economy; Internet network The industry accepts Excessive game playing; game addiction The industry accepts; the consumers bypass the regulatory system Mobile Technology standards The industry acce pts Overindulgence problems; gambling The global mobile game industry threatens to leave the market management frameworks over arcade games. While government regulation foc used on a concern for the health and safety of patrons, the arcade developer companies illicitly manufactured and distributed arcade games, even though such illicit developments were ultimately a source of
222 problems. When the government focused on gambling problems, the arcade game industry took advantage of leniency in the government regulation to create gambling arcade games, resulting in gambling issues in the amusement rooms. This sidestepping of regulation by the industry was also observed in the consol e game platform, analyzed in Chapter 3. Conglomerates accepted the imposed regulation, while small console game developer companies sidestepped the government moral regulation over console game content. The regulation had loopholes that allowed for the cop ying of Japanese console games and the distribution of these cheaper pirated versions in the market, causing Conglomerates to withdraw from the console game businesses. in its economic interests. The problem here appeared on the side of consumers. The majority of consumers were adolescents who were not interested in how the domestic game industry developed PC package games, but in getting games at a cheaper price or for f ree. Thus, they illegally copied PC games. The industry failed to create a unified front between Conglomerates and small and mid size companies that could address this black market problem. Like the PC package game industry, the online game industry also accepted government regulation, as examined in Chapter 5. The industry was actively involved in improving the quality of regulation by expressing its opinions to the public. However, consumers resisted government regulation such as the game rating system a nd the Shut down System. Here again, adolescents sidestepped Most parents did not know how the system worked, further allowing adolescents to bypass the system Last, the mobile game industry showed more active forms of resistance to regulation, as discussed in Chapter 6. It initially accepted the government economic regulation, but when the industry globalized, it threatened to leave South Korea because the reg ulation hindered further
223 mobile game development. The globalized mobile game industry stopped their services for South Korea by excluding the game category in the open market. In this case, the industry successfully made the government overturn regulation by giving privileges of exemption. External Factors There were two broadly identified examples of factors that impacted the effectiveness of government regulations in the South Korean regulatory framework between 1980 and 2016: the social scandal originati ng from arcade games, and the changing global mobile game market. These were external from mechanisms of regulatory frameworks in that it was not possible to predict their occurrence. However, it is important to address these factors because they contribut ed to the failure of government regulation to achieve its intended goals. First, the Sea Story scandal discussed in Chapter 3 was not related to economic regulation over online games. That is, the scandal was not initially relevant to the online game indu stry, but its impact on government regulation was crucial. Governmental regulation of arcade games resulted in the general public perceiving that the government economic regulation as a failure. While the gambling problem o riginated with arcade games, it a economic rationale over the online game platform. The Sea Story scandal of arcade games resulted in the shifting of regulation to feature stronger moral aspects, such as the expanded game review system for online games, the Shut do wn System, and the measures to treat online gaming addiction. economic regulation set a mandatory technological standard, and protected the local industry by setting legal and technological barriers for foreign mobile game companies. However, this economic reasoning in the government regulation encountered unexpected changes in the global mobile game market When the South Korean mobile game market globalized because of the
224 emergence of smartphones and the open market, the local barriers became obsolete. That is, changing technological standards in the global market caused a serious reduction in effectiveness of regulation. The South Korean case of government r egulation over video games examined in this dissertation showed that government regulation did not achieve its intended outcomes because of failures in implementation and responses from target industries and consumers. Additionally, there were unexpected external factor s such as those summarized above that also invalidated regulations and led the government to reconsider video games in different way. Achieving Intended Outcomes Government regulation over South Korean video games from 1980 to 2016 did not achieve its inte nded goals. Regulation evolved over time due to unintended consequences resulting from the combination of challenges faced by the regulator and responses by the private sector. The regulatory process included interaction between the public and private sect ors, thus it is important to understand not only how the government initiates certain regulations, but also how regulation evolves because of these interactions. Such differences between regulatory intentions and outcomes are summarized in Table 7 3. As di scussed in Chapter 2, the government regulation of the locational management framework for the arcade game industry resulted in the eventual dominance of the black market. gambling problems. However, customers still played arcade games in illicitly operated amusement rooms. Gambling behaviors even increased, and illicit amusement rooms proliferated. As discussed in Chapter 3, the government intended to reduce Japanese cultural infiltration in South Korean culture. However, these efforts were not realized because the
225 in the dominance of the black market. Japanese console game content flourished in the black of the market failure led to the decline of the South Korean console game sector. As discussed in Chapter 4, the government tried to nurture the domestic PC package game industry with economic regulation. However, the relationship between the government and the industry again resulted in a new black market. Bureaucratic competition among government agencies and ying behavior in the market combined to reduce the effectiveness of government regulatory attempts to make PC package game development economically viable. Table 7 3. Intentions and o utcomes Platform Regulation: intentions Outcomes Arcade Prevents socia lly undesirable behavior of adolescents and consumers delinquency; gambling The Sea Story scandal The dominance of the black market Console Prevents Japanese cultural impacts on the South Korean society Counterfeited Japanese console content is distribu ted in the black market PC package Nurtures the economic competence of the industry in the information technology society The black market develops; reduces the economic viability of the industry Online Nurtures the economic potential of the industry for the South Korean economy The industry grows economically Prevents consumers from excessive game playing and gambling No effects on changing playing behavior; reduces the economic viability of the industry in an unstable mar ket. Mobile Nurtures the economic potential of the industry for the South Korean economy The industry grows economically Prevents consumers from overindulgence problem and gambling The government loses its leverage to govern the mobile game market Cha pter 5 traced the development of the online gaming platform in South Korea. The government tried to govern the online game industry according to economic principles, making a national online network for driving the information technology i ndustry as well a s relying on
226 economic development from st artup businesses. T he online game industry actively negotiated to improve online game development, and in turn the sector became economically viable an d efficient. However, due to an external factor the Sea Story s candal, the government shifted its position to regulate online game content to a moral standpoint, imposing the game rating sy stem and the Shut down System Competition within the gove rnment made online game regulation ineffective which combined with adol online game content. This led to the destabilization of the South Korean online game industry. As discussed in Chapter 6, the mobile game platform showed the collision between the domestic market and the global market. Government regulation based on economic principles has received a positive response from the mobile game industry. However, this regulation has proven ineffective because the local technology standard caused the local mobile game market to become isolated from the global mobile game market. Moreover, the globalized mobile game industry resisted government moral regulation intended to protect adolescents from excessive gaming. Due to this resistance, initially imposed regulation was overtu rned and the government lost its leverage to govern the mobile game market in South Korea. Contributions and Implication s Contributions This dissertation engages with three audiences. The first is international political economists, specifically those who are interested in industrial policy and the role of the state in the globalization. As interes t in the crossroads between politics and the economics continues to build, the role of the state in the economic growth that informed the S outh Korean video game sector is a crucial source of information. By focusing on the relat ionship between actors and the dynamics around regulation this dissertation contributes to a broader debate about the role of the state in international political economy The many studie s that have been conducted on cultural
227 industries have so far paid little attention to the video game sector as a leading cultural ind ustry. The analysis here focused on the video game sector in South Korea as a new topic. However, this dissertation addres sed this new topic within existing theoretical lenses about the relationship between the government and the market. The intersection of cultural politics and video games highlights the second target audience: the contemporary community of cultural studies and video game studies. This dissertation investigated the role of the state in the video game sector. Focusing on the regulatory regime over various game platforms in South Korea, the analysis showed the possibility of research based on a new topic within well established theoretical perspectives. This dissertation contribute s to the range of interdisciplinary approaches available to cultural studies by applying them to the South Korean vid eo game history. Currently, video game studies scholars argue that cultural commodities. Video game studies tends to focus on how video game content causes real problems in society. Furthermore, debates between lud ology and narr atology are ongoing in the field. On the one hand, the ludology perspective sees video games as a system of rules, and thus argues that the video game medium features different characteristics from other cultural commodities such as movies. The narratology perspective, on the other hand, considers video games to be a medium of cultural content that exhibits narrative structures that embody our perception of our everyday lives. Debates can be fruitful in consolidating an academic field, but also unproductive in that they can discourage conversations between and among people inside and outside of video game studies. This dissertation attempted to bridge International Relations and video game studies in an interdisciplinary way.
228 The illustration of the details of the video game history in one country South Korea, will appeal to the third target audience: the informed general public, policy makers, and even individual workers in the sect or. The South Korean case can be read through the lens of how non Western c ountries can promote their cultural industries. As the gl obal market is growing, how c ulture and the cultural industries are treated becomes important. The competition between the domestic market and the globalized m arket in the cultural sector makes it ne cessary that we think about how to effectively prepare for changes in the future. Historical experiences must be audiences some future directions for video game regulation, as discussed below. Currently in South Korea, the public, policymakers, industry officials, and academics are concerned with how the video game industry will continue to develop. Specifically, congressmen, bureaucrats, civic organizations, and industrial associations have discussed how to reform South Korean video game regulation via the Shut down System, the game rating system, and the measure for managing gaming overindulgence. This dissertation suggests that strategic alternatives to video g ame regulation in South Korea apply to broader debates regarding video game regulation, not only because it provides details about the history of the sector, but also because it reveals intervening factors that impact the effectiveness of regulation. Limit ations This dissertation has two main limitations. First it suffered from source limitations. It used four main sources of empirical evidence: official documents from the South Korean government, documents from the private sector, interviews with employe es at various levels in private companies by public media and in current affairs magazines, and interviews conducted for this dissertation with video game company employees and participants in video game associations. This dissertation has tried to gather, organize, and interpret as many primary
229 sources as possible. These official sources about the South Korean video game industry were relatively few and scattered, especially before the emergence of the online game sector. Accessibility to the sources also has been very low. The most problematic sources were documents from the private sector, newspaper and game magazine articles, and interviews. This dissertation assured the credibility of these sources by crosschecking them as much as possible. Nonetheless, many materials are no longer available because not many people are interested in archiving the history of South Korean video games. Moreover, the present study contained only two interviews that were conducted specifically for this dissertation. That is, m any more consistent and credible sources would make this dissertation a more in depth and organized work. The s econd limitation is the difficulties involved in presenting research in a language other than that in which it was conducted. The empirical rese arch for this dissertation was based in the South Korean context and in the Korean language. A sincere and careful attempt has been made to explain meanings, but all translations involve some distortion. Moreover, this dissertation focused on empirical exp lanations, and it was beyond its current scope to provide detailed explanations of the South Korean cultural and social context. That is, for those who are not familiar with the Korean language and society, it might be difficult to fully understand the val ue and its meanings that this dissertation reflects. The goal of this dissertation was to empirically analyze the role of the government in regulating the South Korean video game industry, not to interpret the value or meanings that South Korean video game s have. Furthermore, the South Korean video game industry is still evolving. Thus, the conclusion of this dissertation is not an argument about a phenomenon that has ended, but an argument that is relevant for further discovery. For this reason, the conclu sion of this research should be
230 understood as being open to other possibilities. After a certain amount of time, this research could be modified to include more in depth analysis of the dynamics between actors in the South Korean video game sector. Suggest ions for Future R esearch Two possible future research directions need to be discussed. First, this dissertation has delved solely into the South Korean case of the video game industry. Future studies should examine whether these results are generalizable o r even comparable with other countr ies The video game industries in the United States, Japan, Canada and especially China, for example, have differ ent trajectories Comparison of the political economy of the video game industries in cross national studie s would shed further light on the role of the government in the economic growth of the industry, and give a broader picture of the global video game industry. Furthermore, the video game industry is a cultural industry. Future studies should examine the So uth Korean case for other cultural industries such as movie s and music to see if this And w ith such a cross sectoral comparative research, we can better understand the cultural industry in South Korea, focusing on the similarities and differences across the different cultural sectors. Second, new research questions emerge as a result in this dissertation. How has the government tried to conceptualize and construct South Korean values? How do these constructed values shape the South Korean way of life? What are the influences of these constructed perceptions on consumers? How do the prosumer games in South Korea? The contemporary phenomenon of the emergence of the prosumer would be an especially fruitful topic for further research. consume (play) video games and are involved in game development phase by providing feedback to developer companies. One of the c hallenges that the state faces in the globalization
231 in the media industry is that citizens predominantly engage in consumption in deregulated, privatized, and liberalized environments. In this age of the prosumer, people both produce and consume final prod ucts. Peoples are no longer passive consumers. They produce media messages by writing blogs about video games, broadcasting their game playin g, and actively giving feedback to video game companies Some video game companies directly incorporate consumer fe edback in game development before they release games in the market In addition, and starting in South Korea, the emergence of professional e sport players and the increasing popul arity of individual broadcasts of game playing deserve consideration. These are new trends that can blur the traditional distinction, or fixed boundary, between production and consumption. Given the above possible trajectories for future research into South Korean video games and the industry generally, this study suggests some f oundations for future research. To summarize, a lthough the South Korean government has actively regulated the video game industry with a range of tools and measures, this analysis of government regulation over South Korean video games showed that such gove rnment regulation by and large has failed to achieve its intended outcomes. Intervening factors in influencing the effectiveness of regulation were broadly observed in South Korean case. As the government designed and implemented regulation, lacuna in regu lation, competition between ministries, and lack of monitoring caused a serious reduction in the effectiveness of regulatory framework s over various video game platforms. C hallenges in the regulator combined with respon ses of the private sector caused unin tended outcomes.
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253 BIOGRAPHICAL SKETCH Jongmin Yang was born in Incheo n, South Korea in 1979. He re ceived the Bachelor of Arts in international r elations in 2002 from Seoul National University with a thesis on Completion of Internet Governance: Dynamics for establishing ICANN between politics, economics and technologies n 2005, h e received a Master of Arts in international r elations Cultural Industries and the US Technology Policy He received his PhD in political science from the University of Florida in 2018.