The Monday Interview

July 13, 2014 12:12 pm

Owen Mahoney of Nexon: a US geek at the helm of a Japanese game developer

APRIL 17, 2014 -TOKYO, JAPAN: Owen Mahoney, CEO of Japanese online game maker NEXON pose for camera at the company HQ. (Photo / Ko Sasaki )©Ko Sasaki

Fun and games: Owen Mahoney says artistic skill will underpin ‘freemium’ pioneer Nexon’s global ambitions

If a tech geek could design a dream CV, it would probably look a lot like Owen Mahoney’s. He earned spare cash as a teenager in San Francisco selling early Apple PCs, worked for a dotcom start-up, and led mergers and acquisitions at Electronic Arts, the global gaming company, for almost a decade. Now as the new chief executive of the ambitious Japanese gaming company Nexon, he has seen it all.

“I have developed some strong opinions on what makes a good game,” he says. “One of the advantages of having been involved in the same industry for such a long time is that it has helped me to see patterns emerge.”

The softly spoken 47 year old is in the communal meeting area of Nexon’s Tokyo headquarters in the Shinkawa district, furnished in the style beloved of trendy tech companies: funky cushions, low lighting and a huge screen where employees can fight each other to the virtual death during coffee breaks.

Three months into the new job, after four years as chief financial officer, Mr Mahoney’s priority was to hold “town-hall style” meetings with employees across Japan, China, South Korea and the US, largely to reassure them that he is a dedicated gamer. “A lot of people know me as the finance guy and are surprised to see me as the creator guy,” he says. “Everyone was very curious as to whether I knew anything about games or whether I just knew about numbers.”

For Mr Mahoney, gaming deserves respect as an art form. He admires Japanese figures such as Shigeru Miyamoto, the Nintendo creator of enduring games such as Super Mario and the Legend of Zelda series – “the Steven Spielberg, the Pixar of our industry”. Mr Mahoney emphasised to his team that “creating great art is the only demonstrably consistent way to build a great entertainment business”. Nexon’s best-known games include MapleStory, Combat Arms and Mabinogi.

Helped by a life-long obsession with Japanese history and fluency in the language, Mr Mahoney is a rare example of a foreign executive at the top of a Japanese company.

But Nexon has always been un­usual. Founded 20 years ago in Seoul, its Korean founder Kim Jung-Ju uprooted the company’s headquarters to Japan in 2005 in order to compete in the same market and be in the same city as the companies he admired so much, Sega, Nintendo and Taito, which are now rivals.

Vindictus screen

Owen Mahoney believes that games such as 'Vindictus' deserve respect as examples of an art form

Nexon was a pioneer of the “freemium” gaming business model, making games free to play and then charging players for additional virtual items. Much of its success is down to the increasing ubiquity of internet access and mobile devices, which has broadened the appeal of casual gaming away from its traditional nerdy image, with players more willing to shell out for a more interesting game they can play on their tablet or smartphone. “My older sister plays casual games now but she wouldn’t be caught dead [doing so] when she was younger,” Mr Mahoney says.

Annual revenues at Nexon grew 43.3 per cent last year to Y155.3bn ($1.5bn).

The CV

1966, San Francisco

UC Berkeley, Asian Studies

1996 Joins dotcom start-up PointCast
2000-2010 Head of corporate strategy at Electronic Arts
2010 Joins Nexon as chief financial officer
2014 Appointed chief executive

Family: Divorced, two sons
Interests: Kiteboarding, skiing, chess

Now his task is to look beyond the home market to Europe and the US so the company can extend its freemium model, its speciality being free online games that can be played on mobile devices but which are also immersive – that is, highly engrossing, in richly imagined worlds.

But to make this work Nexon needs to keep the players – it had a monthly average user count of 55.9m in the first quarter of this year – keen.

This will involve a twin strategy of adapting games to suit regional tastes and also scooping up games makers worldwide – Mr Mahoney’s old speciality from his days at Electronic Arts.

The challenge also harks back to his difficult days at PointCast, one of the first news aggregators, in the early days of internet expansion. It was his “personal Vietnam”, says Mr Mahoney, at least partly because of the effect of slow internet speeds in the US.

Joining EA after the dotcom bubble burst, his role was to help the US games company break into online gaming from its base of boxed and console games. It had spent about $400m building online features for existing packaged games and making new games for online only, but with limited success. The biggest stumbling block was the US’s relatively slow internet speed, compared with Japan and South Korea where the governments had invested heavily in providing high-speed networks.

By now, Nexon was the second-biggest games company in Korea, so Mr Mahoney decided to pay it a visit. He had already met Mr Kim informally, and liked him, when he was building PointCast’s business in Asia.

The trip was a revelation. Nexon was more amateur and yet more successful. Its small office in Seoul had a big space with cheap PCs from Taiwan for the server room, with a team of developers “experimenting like crazy” on free-to-play games.

Their level of creativity and experimentation in their game development was unlike anything I had seen in the west

“Their level of creativity and experimentation in their game development was unlike anything I had seen in the west,” Mr Mahoney says. He could not help comparing that buzz with the legions of expensive EA consultants earnestly studying how to boost its online business.

Nexon’s earliest developers had stumbled on the freemium concept when a paid-for game with falling player numbers was offered for free because it was due to be withdrawn. User numbers rocketed, its lifespan was extended and the idea of charging for items such as personalising a character’s appearance took shape.

He says he emailed his executive team: “I’ve seen the future and it is going to be Nexon”, in a rare moment of hyperbole. “And it was roundly ignored.”

That did not stop him trying to buy Nexon for EA three times. “Come and work for us instead,” was Mr Kim’s response each time. “I finally got smart and agreed,” says Mr Mahoney.

One of his first jobs was to oversee the company’s initial public offering in 2011, the biggest in Japan that year.

Although its new status as a listed company means there is less time to call passing executives in for an impromptu game-testing session in his office, it has given Nexon the firepower to scoop up other Japanese games developers. When it partnered in a publishing deal with Florida’s Shiver, Nexon signalled its intention to extend beyond Asia. The group has around $1bn-$1.8bn to do deals “across the world and across sizes”.

Nexon developer teams regularly visit the Seoul offices and sometimes Tokyo to learn how to incorporate idio­syncrasies of the free-to-play business model into the games they design: essentially how to identify when players may want to spend a little to have more fun, while not frustrating them or driving them away by asking for money too often.

They are also schooled in adapting games to suit regional tastes: tattoos are taboo for Japanese characters, Europeans like scary warriors and in the US version of MapleStory, players can marry each other in a Vegas-style shotgun wedding and be serenaded by an Elvis impersonator.

“The latter didn’t cross over to other cultures,” he remarks drily. Even a man equally at ease in both Asian and US boardrooms recognises there are sometimes cultural limits.

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