Uhm yeah. Wake me up when we see some serious resources backing this.

There’s some key takeaways from this… currently just 4 people; it’s a small team basically comprised of a few veterans who have been with Bluehole since the early days, worked on TERA, and who did not like how TERA PC’s development came to a close. Until Krafton PR (KRAPTON) puts out an actual loud throated corporate press release message, glitzy cinematic trailer on a video site, AND MMORPG development is once again noted in their investor relations material, I’ll remain skeptical about this.

Krafton itself wound down investing in MMORPG development long before Elyon was shutdown (I mean what Ascent: Infinite Realm ended up turning into and how Elyon was so bland kind of highlights things). The company lost a lot of that design expertise well before 2020 (TERA development also being treated like a design bootcamp for interns since at least the latter part of the prior decade). It’s been mainly PUBG.

The Bluehole Studio subsidiary (the one that held their MMO IP’s has been basically hanging on by a thread since it’s currently only TERA Console; that seems to held together by duct tape).

Bluehole founder Chang Byung-gyu is still the company (Krafton’s) chairman and probably still has some personal nostalgia for those earlier years when TERA was the companies main revenue source. At the same time, Krafton is publicly traded now on the KOSPI and has to deal with actual non-private shareholders unlike the past.

Besides the Subnautica 2 drama, Krafton also recently acquired Eleventh Hour Games for the ARPG Last Epoch (which kind of has part of that player base naturally concerned). The current team is being given independent control but I think we all know how that works over time.

I’m familiar with Krafton’s acquisitions in the past; the old Bluehole Alliance stuff which eventually morphed into the Krafton Game Union, and later Krafton CI (Creative Identity) before they gave up on that whole thing. Eventually the senior/leads get involved with those projects and well… basically most every acquisition made has not fared well. Krafton Challenges (aka FAILURES) exemplifies this (it is more relevant/funnier when you replace all occurrences of the word challenge with failure/fail). BTW, they failed to include MISTOVER (this was a buy to play turn based RPG Krafton quickly abandoned development on after launching in 2019 – they finally delisted it from Steam and Nintendo 3 years later).

Anyway,that arrangement basically created subsidiary units each responsible for their own P&L but would also allow cross utilization of resources. Bonuses were pretty much based on performance of those individual subsidiaries (PUBG personnel for example would be reaping the bulk of the bonuses given how well it has done). No surprise you will have morale issues in other units with that type of structure…

Here is where the irony exists though. One of the companies earliest acquisitions was Ginno Games (Bluehole Ginno) for Immortal (what became Devilian). One of Ginno Games co-founder is Chang-Han Kim (who is now Krafton’s CEO); he was also the CTO and executive producer for this game they were developing since 2009. Immortal was a Diablo inspired title that became an MMO-ARPG. Bluehole’s official acquisition in 2014 overhauled that with assets from TERA; the game releasing in South Korea in 2014 to large fanfare.

They inked publishing deals with Trion (NA/EU), GoodGames (Southeast Asia), and NHN Hangames China. Thailand launched in May 2015 while a heavily modified/forked version was published by Trion in December 2015. The Chinese version never launched. Meanwhile back in South Korea, NHN Hangames was pulling back on their PC portal and refocusing on mobile (VC funding shift in 2015). September 2015, Devilian and TERA PC’s publishing with Hangames ended. TERA was picked up by NEXON but Devilian had no takers so Bluehole Ginno acquired the player data from NHN with the plan to restart (this never happened).

Instead, Bluehole Ginno had signed a large global deal with GAMEVIL to do a Devilian Mobile. PC development in South Korea ended as they worked on this mobile version (which was a mess because the other co-founder, had this misplaced idea that creating a mobile version from the PC code base would be trivial). Only a small skeleton team remained to service the Trion fork (and those updates were slow in releasing and half-baked buggy).

Devilian Mobile did end up launching in the fall of 2016, did the usual mobile front loaded cash grab, and ended up shutting down by November 2017. The PC versions shutdown in March (Trion) and May (GoodGames though their server had been mostly offline for the 6 months prior due to technical issues) 2018.

This particular studio (Bluehole Ginno was on the ropes but Chang-Han Kim pitched a bunch of ideas (in blindfold, throw dart at board, and see what sticks fashion). One of those was talking with ARMA modder Brendan Greene (PlayerUnknown) for a battle royale type of game and the rest became history with PUBG. Bluehole Ginno which handled the development of PUBG eventually became PUBG Corporation (with Chang-Han Kim as its CEO), Bluehole, Inc restructured/rebranded to Krafton, and Chang-Han Kim was eventually made CEO of Krafton.

If you managed to read this entire thing, this is really the “readers digest” version of this. There’s way more drama involved. I personally have no confidence with Krafton doing any sort of follow on to TERA correctly because their entire corporate leadership and structuring is beyond a mess (let alone not having the kind of designers and team in place to properly do MMO’s, let alone people who had direct involvement with OG TERA to know any better).

Thus I see this article on Inven as hopium inspired versus something with the actual full backing of Krafton’s “leadership”. And I already know how CH Kim runs things (for the record, I believe on the software engineering side, he’s competent; he was a top KAIST graduate). I do question his overall business acumen though as CEO; that Subnautica 2 drama for example is cracked including Krafton’s corporate legal/PR messaging (it’s like those crazy PUBG lawsuits they filed in the past).

P.S. If any major industry site that covers gaming/MMO’s decides to cover this oddball posting from Inven, they REALLY ought to connect with media sources in the South Korean gaming industry and work with them to get clarification DIRECTLY from KRAFTON (this actually goes for ANY KMMO that plans to eventually makes it way to the west).

Why? You are NOT going to get the information from the subsidiary folks (they don’t get all of that from corporate in South Korea). There is a distinct business culture difference; you will need to speak to an actual South Korean (the ones who are actual management/authorized to provide a more accurate/source worthy note). This isn’t racist; it’s just how lot of the business organization is done in what is an ethnically homogenous country as most Asian countries are.

Note: I personally don’t believe this is even worthy of dropping an tip to MassivelyOP (they are the only site I’ve been willing to send tidbits to since their roots are in bloggers covering games). UPDATE: I missed their August 5th posting for some reason; they had posted a short regurgitation of the Inven article with absolutely no additional research/trying to reach out to some South Korean gaming media about this (sadly, they’ve become no different from what I had written about before).

For those who don’t know, just because something appears on Inven (KR or Global), does not mean the information is accurate. Sure, Inven is an influential site for gaming. These webzine postings are often times made to sound more important (word “reporter” used for example) because some of this is about “shoot first before verifying all sources for accuracy”. South Korea’s equivalent of Wikipedia covers some of this.

Basically, the tepid comments in response to this webzine post highlights it didn’t gain any traction (the lack of a KRAFTON press release regarding all of this is telling and as I noted above, I will only believe the company is getting back into MMO development again is if it is a huge part of their IR prospectus).

Service termination notice (Google translation below)

This leaves SEA as the remaining region that still has Elyon in service via Asiasoft’s Playpark portal (the game re-launched there in July 2022 after initially being the first region to launch the original Ascent: Infinite Realm version of the game in open beta back in April 2019).  No one should be surprised when this region is sunset by the first half of 2024 (the game just sucks okay).

This also cements the future for the Bluehole Studio subsidiary (Krafton’s “legacy” MMO development studio) which now has only this region for Elyon, and TERA Console (which as I’ve written ad nauseum, is on its own life support where it too, will likely be shutdown somewhere in the 2024 time frame).  As noted previously, Krafton has telegraphed (via their investor relations material) their focusing away from MMORPG development.  Translation: this studio subsidiary is living on borrowed time itself and just like how the company doesn’t really pay much respect to its roots, I expect the Bluehole moniker to go away once ELYON SEA and TERA Console are shuttered.

This news should surprise absolutely no one; Kakao Games Europe announced they will be terminating the service of Elyon on December 7, 2022 (after discussion with Krafton) due to low player retention rates (as well as the inability to meet many of the other metrics).  Elyon NA/EU launched back on October 20, 2021.  As I noted initially, the game didn’t really have a long term future in NA/EU, and would not have anywhere near the longevity that TERA had (despite all of its own issues over its decade plus run on PC).

That leaves Krafton’s Bluehole Studio subsidiary basically with just Elyon KR and SEA (which are also not in a healthy state) and TERA Console as their remaining offerings (until their other projects are completed).  This will put further pressure on this subsidiary to deliver results until their new offerings are ready; a challenge in itself with neither title generating significant revenues (this will be apparent in their Q1 2023 filing).

And I again have to repeat; Bluehole Studio does not have any TERA (or MMORPG) PC follow up in the works; that ship has sailed.  They don’t even have a solid plan for their blockchain/NFT initiative (I initially thought they might do a quick TERA based NFT cash grab, but that seems unlikely now).  The projects they are working on are a console shooter (Project BLACKBIRD) and two mobile titles (Project FF and Project Whale).  It is not clear yet which subsidiary studio is handling Project Windless (currently known as UNANNOUNCED PROJECT).

What I am expecting in the future (2023/2024 timeframe), is that both Elyon (KR and SEA regions) and TERA Console to be shutdown once these newer projects actually launch, and Bluehole Studio will likely be reorganized/rebranded/have new objectives (since it is currently designated as their MMORPG arm; a genre they are no longer focusing on/investing in based on their investor relation material).

There’s so much freakin misunderstanding about the dire state of affairs with the Bluehole Studio subsidiary (as of 4Q 2021), that it isn’t even funny.  TERA Console (which Bluehole Studio oversees in all regions) is NOT safe from closure in the future once the team exhausts content that has been produced for the PC version.  The company has not issued any official public statement reassuring TERA console players of anything (they remain silent for obvious reasons because they likely have not received any real guidance from company leadership).

Their last financial filing were the end of fiscal year 2021.  Krafton became a publicly traded company in the summer of 2021 (so effectively only 2 quarters of public reporting; however, they did include their numbers pre-dating the IPO in order to provide year over year comparisons to appease the financial community.  Their consolidated statement of income speaks for itself.

The overall trend of PC revenues has been declining, while mobile unsurprisingly has been increasing.  Console revenues are also in decline and represent a very small percentage of the companies revenues.  The PUBG franchise represents the majority of the revenues in each of those segments.  If you remove PUBG completely from the picture, it’s not a pretty sight for Bluehole Studio (the PUBG Studio subsidiary is the one making all of the money in each platform segment).

With financial performance like this, it does not take a genius to read between the lines with Krafton and Bluehole Studios silence regarding TERA console.  Translation: they have a small but captive audience on console so the intention is to leverage already produced content from the PC version to milk that player base until that already produced content is exhausted. As of April 2022, they are on patch 95 (which is deceiving since it is in no way close to the equivalent of the PC version).  Yes, it is not on a one-for-one basis since there are deviations in the design and content.  The point is they are drawing out what they can and could milk this out for up to 2 more years especially if they increase the level cap to 70.  The problem is that most of it is pure trash.  This is a GIGO (garbage in garbage out) situation with trying to leverage designs and systems from PC patches v80 and on (this is when the level cap was increased to 70; console has not gone down that rabbit hole yet).

While part of Krafton’s press release about the termination of TERA PC’s development highlighted their plans to continue working on Elyon, part of that is because they have a investment partnership with Kakao Games (they put money into that for the exclusive publishing rights in Korea and NA/EU).  So of course they aren’t going to knife it yet. But that flaming piece of garbage failed quickly (not helped on the western side of things with Kakao Games Europe being highly incompetent as a publisher).  In the mean time, the Bluehole Studio subsidiary has a couple of money consuming projects in the works.    And they are also planning to jump in to the play-to-earn blockchain/NFT segment leveraging who knows which IP (they will likely asset flip TERA in this area just like they did with TERA on mobile).

Elyon is simply a placeholder until they can get one of these other projects out the door.  I have my doubts any of them will pan out, and will end up becoming another one of Krafton’s CHALLENGES where through “trial and error” (aka put blindfold on and throw a dart at the dartboard), they will try to make themselves a “distinguished game production company and ceaseless challenge to produce the finest games”.  Excuse me, but what corporate idiot wrote this crap?  They aren’t even hitting the mark now.

Additionally, none of us have any idea what their contractual agreements are when it comes to the return on investment angle, or how long the publishing contract is for.  But make no mistake, it’s as dead as TERA PC is (and will have none of the longevity that TERA PC at least had) and is just living on borrowed time at this point (especially since the Bluehole Studio subsidiary is sinking, and will require an infusion from corporate HQ as well as a potential secondary offering by Krafton to cover the studio).  But sure, TERA console is fine (if you are wearing blinders).

So I have to go off on this tangent regarding this “TERA console is fine” thing and had to ask where that was coming from?  The source is from a YouTube content creator (Sarumonin) that I found out, used to work closely with the TERA console team.  I rarely call out folks (specifically content creators) by name on this blog like this, but I had to after I watched his prior video about the TERA PC Japan closure, and had to stop myself from posting a comment because his statements (that now look naive) failed to look at the broader picture beyond that being publisher related.  Sure, that is a given in general if you are ignoring other pieces of information.  Krafton was already releasing their financial records publicly where anyone could see problems outside of PUBG.  And then one could just look at the glacial cadence of content updates on TERA PC to know this wasn’t going to hold the player base.  But yeah, let’s stick our heads in the sand and ignore the tidbits of information that doesn’t take much reading between the lines, to understand what is going on.

Many others including myself, knew the shoe was going to drop with all the of the other clues (Taiwan closure, Japan closure, Gameforge’s TERA Thalers bonuses).  Some of us were way more clued in with all of Krafton/Bluehole’s corporate shenanigans once PUBG took off.  But because content creators with a decent sized following tend to have their words taken with more authority, I can see how a large group would take his pronouncement of speaking with a Bluehole Studio console personnel (who told him that TERA console and the team is fine), as authoritative, when it is clearly not.

I have to also be blunt; he doesn’t represent Bluehole in any official capacity except in whatever former role he had working with that team.  He mentions that, yet people still go off elsewhere making it sound like an official press release.  That is where the irresponsibility comes from.  There’s still a lot of stuff I do not talk about even though most all of my corporate NDA’s have expired.  But other smaller content creators have been using his quote as if it were an actual official press release statement from a Bluehole representative (as of this entry, the company has yet to formally put out any press release reassuring console players about TERA on console).  That is outrageously misleading in my book especially when it comes to a now publicly traded corporation like Krafton.  I wouldn’t quote an Apple Store employee on info gleaned from the often times accurate rumor mill due to supply chain leaks (because you can’t use that as being anything close to official; I know having worked for them on the enterprise side when they used to have a business enterprise division, that only top level executives are in the know while everyone else is on a “needs to know” basis when it comes to major product releases).

This is where Krafton personnel in general have a lot to learn because they operated in a clown like irresponsible fashion while still private.  A Bluehole or Krafton spokesperson should be the one on the record (with full name and company position) making a statement.  The fact that it has been crickets is what speaks volumes.  I’m saying it now; TERA Console is NOT fine due to the Bluehole Studio subsidiaries financial predicament (where most of the operating expenses was employee compensation); I will be surprised if they milk it out for another two years (let’s just say the “enhanced graphics version for the latest generation consoles, had better hit it out of the ball park, and that it puts a noticeable blip into the console revenue column for Bluehole Studio because Elyon isn’t going to be of any real help with the numbers on the PC side going forward, and won’t be able to cover for the revenue drop off once TERA PC closes).

While that old umbrella brand has vanished, there is still the same degree of cross over and resource sharing (it’s also an effective cost cutting measure with the now standard practice of requiring less people, to do more).  The above listing (in terms of their ordering) is also intentional since Krafton is pretty much all about PUBG now (that is how their investor relations reports and financial statements read like now).  All of the short statements written under the studio names are BS because the company puts out a lot of garbage designs and code (quality and excellence are oxymorons).

In 2021, Bluehole Studio had sales of 19.7 billion KRW ($16 million US) and had 44.9 billion KRW ($36.7 million US) in operating expenses, leading to an operating loss of 25.2 billion KRW ($20 million US).  The subsidiaries largest expenses were employee compensation, performance based incentives (with PUBG’s success, the company grants bonuses based on franchise performance while sharing a smaller bonus amount to employees across the company), and since going public, employee stock compensation.

Back in January 2021, Bluehole took back the publishing rights of TERA from Nexon for the KR region.  Back then, I knew nothing would change on the development side (even though Bluehole was soliciting KR players input for changes during this transition) because the primary focus of the studio at that time was getting Elyon out the door (it finally launched in the west in October 2021); Elyon had launched in Korea in December 2020 and thus was also a priority domestically.  Over the course of 2021, Elyon dropped off the top 50 PC Bang rankings (for a new game, it nose dived fairly quickly).  Krafton’s IPO went live during the summer of 2021 (translation = we are only seeing the tip of the financial picture at Krafton and of its subsidiary units with this audit report).

The accounting firm that performed the audit noted:

Bluehole Studio posted a net loss of KRW 25.4 billion last year, accumulated losses of KRW 25.5 billion, where current liabilities exceed current assets by KRW 18.5 billion. There are significant uncertainties that may raise significant questions such as in the normal course of business, that it may not be possible to recover assets and repay liabilities.  Krafton responded to this concern by stating that they plan to improve their financial structure and secure stable operating capital by raising funds through a capital increase from Krafton, and improving operating cash flow.

The word salad response from corporate headquarters doesn’t even address the root cause issue with Bluehole Studio; IT ISN’T MAKING MONEY FROM THOSE TWO FRANCHISES.  Remember, TERA’s Japan service is closing in less than a week (April 20th) from this posting (and that region was one of the more profitable ones).  Actual major content updates has been slow going which unsurprisingly results in player retention issues.  Krafton has been a good lesson in corporate hubris ever since they struck some gold with PUBG.  The company leadership has no real vision and tried a shotgun approach back in 2019 (multiple versions of the TERA IP on mobile as one example, a social media avatar mobile game that lasted only a few months, and an overpriced at $30 turn based RPG that quickly became abandonware after just 6 months).  The alarm bells raised by this audit also puts all of Gameforge’s recent TERA Thaler bonuses into perspective.  Additionally, with the entire Russia issue with Ukraine, Gameforge will feel an additional squeeze with revenues from the RU region as players there feel the financial squeeze in other areas (for those in this demographic who have not yet fled the country).

Safe to say, Krafton’s future financial disclosures as well as more scrutiny on this particular issue (material information now that it has been reported publicly on Inven), will provide for some interesting “popcorn” eating moments.  Elyon is seeing a fairly large update for NA/EU which again, means that there was little design and development focus on TERA PC and Console (and I already mentioned prior that the lack of any meaningful content updates by the middle of 2022, would translate into longer term revenue and retention issues with TERA).  TERA’s 10th anniversary in the west is coming up in May  (NA launched on May 1, 2012 while EU launched on May 3, 2012); I believe that milestone may lack any oomph to it (but that’s another post for when those dates arrive).

Additionally, the Inven report noted that Bluehole Studios is working on a console shooter project codenamed BLACKBIRD along with two mobile games, Project FF (a character collection RPG which sounds like their half-baked take on Genshin Impact that is mobile only) and Project Whale (it just states this is a casual mobile game based on Unity).  To put it more simply, the subsidiary (along with the lack of corporate engagement and oversight), is ignoring one of their core assets (the TERA IP) while burning through cash developing these new titles that are more than likely to end up failing like some of the past shotgun initiatives.

Corporates (Krafton HQ) solution to that seems to be to just raise more capital via the stock market (forgetting the fact that shareholders will be looking for that ROI).  My personal take is that Krafton CEO Chang-Han Kim (who again got there via being the co-founder of Ginno Games which was acquired by Bluehole for Devilian Online in 2014; was renamed Bluehole Ginno and later became PUBG Corp) is in over his head (brilliant computer programmers aren’t necessarily the best people to lead a large publicly traded company).