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[Interpreted] Good day, everyone. And welcome to Nexon's 2020 First Quarter Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Maiko Ara, Head of Investor Relations and Corporate PR. Please go ahead.
Hello, everyone. And welcome. Thank you for joining us today. With me are Owen Mahoney, President and CEO of Nexon; and Shiro Uemura, CFO. Today's call will contain forward-looking statements, including statements about our results of operation and financial condition such as revenues attributable to our key titles, growth prospects including with respect to online game industry, our ability to compete effectively, adapt to new technologies and address new technical challenges, our use of intellectual property and other statements that are not historical facts.
These statements represent our predictions, projections and expectations about future events, which we believe are reasonable or based on reasonable assumptions. However, numerous risks and uncertainties could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Information on some of these risks and uncertainties can be found in our earnings-related IR documents.
We assume no obligation to update or alter any forward-looking statements.
Please note net income refers to net income attributable to owner of the parent as stated in Nexon's consolidated financial results. Furthermore, this conference call is intended to provide investors and analysts with financial and operational information about Nexon, not to solicit or recommend any sale or purchase of stock or other securities of Nexon.
A recording of this conference call will be available on our Investor Relations website, www.ir.nexon.co.jp/en/ following this call. Unauthorized recording of this conference call is not permitted.
I'd now like to turn the call over to Owen.
Thank you, Ara san. And thank you all for joining Nexon's first quarter 2020 earnings conference Call today. Before we get into the -- discussing our results, I'd like to acknowledge the horrifying global impact of the COVID-19 crisis. Our first thought is to all our employees, our partners and our customers around the world who have been affected by this terrible virus. In the early stages of the crisis, Nexon instituted various measures such as travel bans and work-from-home policies to protect the global workforce.
As of today, a few of our employees were directly affected, and in Korea and China, where local officials took strong and decisive actions, most of our employees are back at the office, while adhering to strict rules on health and safety.
Throughout the COVID-19 crisis, Nexon has been spared the turbulence due to minimal physical contact with consumers. Unlike most other segments of the leisure and entertainment industry, online games enables millions of people to come together virtually with their friends while still practicing social distancing. There are 3 fundamental assumptions which guide us and which are particularly relevant now.
First, we are in an industry that is not exposed to disruption from COVID-19. On the demand side, online games already assume social distancing that millions of people from around the world connect and play in a virtual, not a physical world. On the supply side, unlike linear entertainment like TV and movies, which face shocks to their production capability, game developers can work effectively from home, developing new content and providing live services to players around the world without missing a beat. And when we produce new content, games have content leverage. An hour of new content offers several hours of entertainment for the consumer as opposed to linear entertainment in which narrative content rarely translates to more than an hour of consumption.
Second, our focus on deeply immersive online games in virtual world will become increasingly powerful. Technology advances now make virtual world experiences available to everyone around the world through advances in mobile and cloud. An increase in total addressable market of at least 10x from just a few years ago. And as travel and leisure become potentially unaffordable or infeasible due to geopolitical or economic issues, virtual world stand out as a highly compelling and robust alternative. All of this is being demonstrated in our business right now.
And third, Nexon has specifically structured an all-weather business to work in any economic environment, rain or shine. Our bench of IP franchises, while not as recognized in the list, are some of the very biggest in the entire global entertainment industry. We have proven time and again that we can grow these franchises for many years on end, and they have provided Nexon with strong and predictable cash flows to fund our all-weather balance sheet, which in turn provides us with strategic flexibility to strengthen and grow our business.
In short, while many of the most basic assumptions about our economy, our institutions and our daily lives are now called into question, the robustness of Nexon's businesses is not one of those questions. We are stronger than ever and getting stronger.
Now, I'll turn to discussing our first quarter performance. Uemura san will provide more detail on our Q1 financial results and our Q2 outlook later in his section.
In the first quarter, group revenues were JPY 82.8 billion, which came in ahead of our expectations. The better-than-expected revenues were primarily driven by the strong performances across our portfolio in Korea. In China, revenues were in line with our expectations. I'll discuss these more shortly.
During the quarter, we generated EBITDA of JPY 49.9 billion. Our cash position as of March quarter end is JPY 517.6 billion or about USD 4.8 billion.
Our performance in Q1 highlights the strength of our franchises, coupled with our change in strategy last year to focus on a smaller number of bigger franchises that leverage our core strengths as well as the direction of the overall entertainment industry. We expect these benefits to accumulate and grow over time as our strategy plays out in more territories.
Let's start in Korea. In Q1, the MapleStory franchise, which just celebrated its 17th anniversary in Korea, delivered yet another outstanding quarter, generating revenue -- record revenue on both PC and mobile. Constant currency revenue on PC grew 132% year-over-year, following 69% revenue growth in Q1 2019. The mobile version of MapleStory grew 184% in Q1 on top of the 22% growth a year ago. Certainly, this success reflects Nexon's best-in-class live operations, combined with outstanding content updates. Growth in a live game that accelerates to triple-digit levels after 17 years of growth is, to our knowledge, completely unheard of in the online games business.
FIFA ONLINE 4 had a terrific start to the year, growing significantly year-over-year and delivering record quarterly revenue. Dungeon&Fighter in Korea, a 14-year-old franchise, received a new major content update in January ahead of the Chinese service. The update was very well received by our players in Korea, and revenue grew 53% year-over-year on a constant currency basis, well ahead of our expectations.
Q1 was also a strong quarter for Sudden Attack. This franchise, which launched in Korea in 2005, grew 52% year-over-year on a constant currency basis. This was driven by the successful introduction of the new season pass, new characters and successful Lunar New Year sales promotions.
V4, the new mobile MMORPG we released in Korea last November also exceeded our expectations, driven by the successful content update and promotions. Following the successful introduction in Korea, we expanded the geographies and launched the game last month in Taiwan, Hong Kong and Macau. As a result of these strong performances, we've achieved our highest quarterly revenue in Korea.
Revenue from our China business was within the expected range, driven primarily by Dungeon&Fighter on the PC. We launched 2 well-received content updates in the first quarter as the game delivered within our forecast. However, many PC cafes in China closed due to COVID-19, which negatively affected our ability to increase engagement and recapture churned users to the levels we had hoped for. When looking at the much anticipated March update, it was well received by our players, generating great revenues from our existing base and driving improved engagement.
In short, even with the temporary impact of PC cafe closure in China, our performance was in line with our expectations. Return to growth for the game is developing as we had expected, and we continue to be optimistic about the health of the game over its long-term growth.
Now, I'd like to briefly update you on some of the operational changes we made to our global business. In April, we appointed Simon Cheong as Global Chief Operating Officer. Prior to this, Simon served as our Chief Business Development Officer. In North America, we assigned Kenny Chang as the Head of Nexon America. Kenny has held various leadership positions across the Nexon Group, most recently, he served as Head of Nexon Europe.
We also placed a new leader, Chan Park, to rebuild our PC and mobile business in Japan. Chan has significant experience in both the Japanese game market and in online games. We believe the leadership changes will further strengthen our global operations and align our global teams to execute on our group strategy.
Turning to our new games. We are making significant progress with our development pipeline that strongly reflects our focus on deep online multiplayer games on multiple platforms. First is KartRider Rush+. KartRider Rush+ is the mobile version of our beloved racing game KartRider. First launched in China in 2013, the game received a major update last July, which significantly deepened the online experience. Since that update, the game has been performing well in China, and yesterday, we launched it in all other global regions, excluding Japan and Vietnam. We expect the mobile KartRider will add many more fans to this 15-year-old franchise, which has a fan base that exceeds 380 million registered users on the PC platform alone.
Second is FIFA MOBILE. In March, we announced a new publishing agreement with Electronic Arts to launch and operate a new FIFA MOBILE standalone game in Korea. In addition to FIFA ONLINE 4, we'll service this new game to deliver an authentic soccer experience, which can be played on mobile devices. We recently completed the closed beta test and will launch the game this year in the Korean market.
Last but not least, Dungeon&Fighter 2D Mobile. The mobile version of Nexon's biggest multibillion-dollar franchise and one of the biggest franchises in the entire global media industry. In February, we completed the second closed beta test, and the results were very encouraging. We have continued to further polish the game in tech. And together with our local partner, Tencent, we'll be releasing the game to the Chinese market in the summer of 2020 with their highest level of game marketing and operational support. While this is slightly later than our original launch schedule, which was in first half 2020, we're extremely happy about how the development is progressing. We have already preregistered more than 34 million players since preregistration began in late December. We are thrilled to bring Dungeon&Fighter deep, immersive, multiplayer online world to a massive audience on mobile platform. This represents enormous opportunity for Nexon.
Each of these games D&F 2D Mobile, FIFA MOBILE and KartRider Rush+ reflects our deeply held conviction that advances in platform technology represent a massive growth opportunity for Nexon.
Now deeply immersive virtual worlds can be experienced, not just on the few hundred million game playable PCs in the world, but on a several billion recent model, iPhone and Android devices that are finally able to support a fully online virtual world. These workstation level devices in billions of consumers' pockets, unlock Nexon's total addressable market. As innovators in virtual worlds and online games, we are highly focused on seizing this historic opportunity.
And our teams are hard at work on several major launches we will be talking about later in the year. One is KartRider Drift, the next-generation of our online PC game that will be cross platform. The other is the first game from Embark Studios, the team in Stockholm, Sweden, we acquired last year. We think their first game represents a new generation of online games in the West as well as a massive advancement in technology of game making.
With that, I will turn the call over to our CFO, Uemura san. Thank you.
[Interpreted] Thank you, Owen. Now let's move on to the Q1 results. For additional details, please see the Q1 2020 investor presentation available on our IR website. First, I would like to inform you that we have reclassified 2 regions, which were formally categorized as North America and Europe and Others. In Q1 2020, we reclassified these regions to North America and Europe and Rest of World.
Recently, the regional characteristic between North America and Europe had increased similarities as we provide the same services to our customers in these territories. Therefore, we have decided to reclassify the reporting segmentation to provide more clarity to our performances. Prior year's financial performances have also been restated in accordance with the new reporting segmentation.
Now on to the Q1 results. Revenues were JPY 82.8 billion, down 11% year-over-year on an as-reported basis and down 6% year-over-year on a constant currency basis. These results exceeded our outlook primarily driven by the strong performances of our major PC and mobile titles in Korea.
Looking at the total company results on a platform basis. Both PC and mobile revenues exceeded our outlook. Operating income was JPY 41.5 billion, which was within our expected range. Revenues exceeded our outlook and costs, including HR costs, were lower than our plan. However, these were partially offset by a JPY 6.1 billion impairment loss primarily on Nexon GT's goodwill and Pixelberry's game IP.
Net income was JPY 49.9 billion, which exceeded our outlook largely driven by an JPY 18.7 billion FX gain, related to the depreciation of the Korean won against the U.S. dollar during the quarter and its corresponding impact on U.S. dollar-denominated cash deposits.
While revenues from our China business in Q1 decreased year-over-year, the performance was within our expected range. On a local currency basis, China Dungeon&Fighter's revenue was in line with our expectations. We introduced the Lunar New Year update on January 14. This included limited time offer Dungeons as well as Avatar Package offerings and continued until April 9. As we had anticipated, this year's Lunar New Year update was well received by our players. However, sales from its Avatar Package offerings declined compared to the year ago quarter when Dungeon&Fighter had a higher base of users and paying users.
Since late January, due to the spread of COVID-19, PC cafés in a number of regions in China have suspended their operations. We launched a new key update, which addressed the primary feedback that we had received from our players on March 19. This update included the Level Cap Release and the Third Awakening, which allows players to gain new skills for their characters. The primary focus of the update was to increase the engagement of the existing players as well as to regain the churned users. However, the closure of PC cafes negatively affected the game's momentum. However, the update received great reviews from the existing players, which led to better user engagement following its introduction.
Based on our analysis on our players, including their participation in the in-game events related to the key update prior to its introduction, we believe that there are players who have not been able to return to the game after introduction of the March update due to the closure of PC cafés. We expect the number of users as well as other KPIs will continue to recover as PC cafés reopen and their businesses return to their usual cadence.
While MAUs and paying users decreased quarter-over-quarter due to the negative impact of the shutdown of PC cafés revenues and ARPPU increased due to typical seasonality. MAUs decreased year-over-year primarily due to the churn of users in the second half of 2019 as well as the reduced number of bots following the implementation of a stricter measure to Verify player identity. Due to the shutdown of PC cafés and its corresponding negative impact on active users, we did not experience a major improvement in the number of paying users since the second half of 2019.
Game users decreased year-over-year and remained at low level. Revenues and ARPPU also decreased compared to Q1 2019, when we had strong sales from Lunar New Year package offerings.
In Q1, revenues from our Korea business exceeded our outlook primarily driven by stronger-than-expected performances of our major PC titles, including MapleStory, FIFA ONLINE 4, Dungeon&Fighter, and Sudden Attack as well as mobile titles including V4, MapleStory and FIFA ONLINE 4M.
MapleStory's Q1 revenue exceeded our expectation driven by sustained momentum following the successful winter update, which had continued from the end of last year as well as the January sales promotions. User metrics, including MAUs, paying users and ARPPU increased year-over-year. The game's revenue grew 132% year-over-year on a constant currency basis, marking its highest quarterly revenue in Korea.
MapleStory has recorded double-digit growth for 5 consecutive years since 2015 and consistently grew for a remarkable seventh consistent year. Its revenue is up more than 11x compared with the Q1 2013 performance.
FIFA ONLINE 4's revenues also exceeded our expectations driven by the well received Lunar New Year package offerings and promotions. Q1 user metrics, including MAUs, paying users and ARPPU increased year-over-year. Combined PC and mobile revenues grew significantly versus a year ago. FIFA ONLINE 4 also achieved record high quarterly revenues in Q1.
On January 9, ahead of its release in China, we introduced a major update for Dungeon&Fighter in Korea. This included a Level Cap Release and the Third Awakening. The update received positive reviews by our players and generated improved user metrics. The positive momentum continued throughout the quarter, resulting in the games revenue exceeding our expectations and growing 53% year-over-year on a constant currency basis.
Sudden Attack's revenue also exceeded our expectations and grew 52% year-over-year on a constant currency basis, driven by the successful introduction of the "New Season Pass" ad and characters as well as the successful Lunar New Year promotions. As for the mobile business, V4 performed stronger than our expectation, driven by the successful major update introduced in early February.
MapleStory M's revenue also exceeded our expectation driven by the successful introduction of new characters and item sales. On a constant currency basis, revenue grew 184% year-over-year, and the gain generated its highest quarterly revenue of all time.
MapleStory has grown double-digit for 3 consecutive years since the service began in Korea in October 2016. Q1 2020 revenue was more than 5x, greater than 3 years ago, Q1 2017, which was shortly after the game launched. Due to these strong performances, both our PC and mobile businesses in Korea grew year-over-year, resulting in an increase in our business. Revenues from our Japan business were slightly below our outlook.
On a year-over-year basis, while we benefited from MapleStory M, which launched in Q2 2019, this was more than offset by decreases in a, Dynasty Warriors: Unleashed and OVERHIT, all of which launched in 2018 as well as the disposition of gloops, which was completed in February. Consequently, revenues decreased year-over-year.
Revenues from North America and Europe in Q1 was down year-over-year due to declines in Choices, Darkness Rises, and AxE. However, this performance was better than we had expected at Choices and MapleStory, both exceeded our outlook.
Revenues from Rest of World exceeded our outlook primarily driven by the stronger-than-expected performance of MapleStory. On a year-over-year basis, MapleStory's revenue increased. In addition, we also benefited from World of Dragon Nest, which launched in Southeast Asia on January 8 as well as V4, which launched in Taiwan, Hong Kong and Macau on March 25. However, these were more than offset by the deceleration of AxE, MapleStory M and Moonlight Blade. The yen appreciation also negatively impacted the as-reported performance, resulting in Q1 Rest of World revenues to be flat year-over-year. However, revenues were up on a constant currency basis.
Now, turning to our Q2 2020 outlook. In the quarter, we expect the Chinese yuan and Korean won, both major currencies in our business, to depreciate against the Japanese yen, and therefore, to negatively impact the as-reported basis performance of our results.
For Q2 2020, we expect revenues in the range of JPY 59 billion to JPY 64 billion, representing a 10% to 19% increase year-over-year on an as-reported basis, and a 16% to 26% increase year-over-year on a constant currency basis. We expect revenues in Korea and China to increase versus the year ago quarter. We anticipate that revenues in Japan, North America and Europe will decrease, and that revenues from Rest of the World will be roughly flat versus Q2 2019.
We expect our Q2 operating income to be in the range of JPY 21.9 billion to JPY 26.2 billion, representing a 69% to 102% increase year-over-year on an as-reported basis and 80% to 115% increase year-over-year on a constant currency basis. I'll discuss the details of this shortly.
We expect net income to be in the range of JPY 20.3 billion to JPY 23.7 billion, representing a 6% to 24% increase year-over-year on an as-reported basis and a 13% to 32% increase year-over-year on a constant currency basis.
Turning to China. We expect revenues from Dungeon&Fighter, our key PC online game to increase year-over-year, resulting in our China revenues to be in the range of JPY 21.3 billion to JPY 23.8 billion, representing a 0% to 12% increase year-over-year on an as-reported basis and a 6% to 18% increase year-over-year on a constant currency basis. We introduced the Labor Day update for Dungeon&Fighter on April 23. This update includes a new content release, events and Avatar Package offerings. In addition, we will release the 12th Anniversary update in June.
Following the key update in March, which generated better engagement amongst the existing users, our KPIs, including active users and paying users improved. As a result, we expect Dungeon&Fighter Q2 revenue on a local currency basis to be roughly flat year-over-year, even compared to the high base set in Q2 2019. Also we expect to record a one-off royalty income related to Dungeon&Fighter in Q2.
In 2014, we began selling some game items for Dungeon&Fighter on Tencent's QQ platform, with the communication platform as we increased our sales channels. Sales generated on the QQ platform are small as compared to traditional in-game sales. For this reason, we do not reconcile the sales and royalty for operational effectiveness. However, we recently reviewed those sales for the past 6-year period. As a result, we expect to recognize an estimated adjustment of JPY 2.3 billion royalty income related to the sales from QQ platform. Including this JPY 2.3 billion royalty income, we expect Dungeon&Fighter's revenue in Q2 to increase year-over-year. We will launch Dungeon&Fighter 2D Mobile in the summer of 2020. Accordingly, we have not included its royalty income in our Q2 outlook.
Turning to our Korea business. For MapleStory, we have started the 17th anniversary event in late April, and it's off to a good start. We expect the game's strong momentum to continue into Q2 as its revenue yet again grows triple digits year-over-year. We also expect our other major franchises, including FIFA ONLINE 4, Sudden Attack and Dungeon&Fighter to post year-over-year growth.
We expect our mobile business in Korea to grow versus Q2 2019, benefiting from V4, which launched in Q4 2019 as well as the new mobile racing game, KartRider Rush+, which went live yesterday. Moreover, we expect FIFA ONLINE 4M to grow year-over-year and MapleStory M to grow triple digits year-over-year, in line with the PC version of MapleStory.
We anticipate both PC and mobile revenue to each grow year-over-year. Overall, we anticipate revenues from our Korea business to be in the range of JPY 27.9 billion to JPY 29.5 billion, representing a 44% to 52% increase year-over-year on an as-reported basis and a 54% to 62% increase year-over-year on a constant currency basis.
In Japan, we expect to benefit from the new mobile MMORPG TRAHA, which launched on April 23. However, we expect it to be more than offset by the disposition of gloops and a decrease in revenue from MapleStory M due to the difficult comparison with Q2 2019, which was right after the game launched. As a result, we expect revenues in the range of JPY 2.3 billion to JPY 2.5 billion, representing a 51% to 46% decrease year-over-year on an as-reported basis and 49% to 44% decrease year-over-year on a constant currency basis.
In North America and Europe, we expect revenues in the range of JPY 4.3 billion to JPY 4.7 billion, representing a 16% to 8% decrease year-over-year on a as-reported basis and a 13% to 5% decrease year-over-year on a constant currency basis. While we expect to benefit from KartRider Rush+, which launched yesterday, we expect this to be more than offset by decreases collectively in OVERHIT AxE in Darkness Rises.
We expect revenues in the rest of the world in the range of JPY 3.2 billion to JPY 3.5 billion, representing an 8% decrease to 2% increase year-over-year on an as-reported basis and a 3% decrease to 8% increase year-over-year on a constant currency basis. We expect to benefit from V4, World of Dragon Nest, which launched in Q1 as well as KartRider Rush Plus, which launched yesterday. However, growth from these titles will be offset by decreases in OVERHIT, Moonlight Blade, AxE, and MapleStory M.
In Q2 2020, we expect operating income to be in the range of JPY 21.9 billion to JPY 26.2 billion, representing a year-over-year increase of 69% to 102%. The primary driver for the higher operating income in Q2 2020 is the year-over-year revenue increase. Other favorable factors include a decreased impairment loss of JPY 3.6 billion recorded in Q2 2019, which will not be repeated in Q2 2020 as well as decreased marketing costs.
Unfavorable factors include an increased variable costs associated with revenue growth. The high end of the range reflects the fact that we expect the impact and positive drivers to be larger than that of negative drivers, resulting in a year-over-year operating income increase.
Lastly, I would like to update you on our outlook on fiscal year 2020 shareholder return. In accordance with the change of dividend policy approved by the Board of Directors in February, we reinitiated a dividend of JPY 2.5 a share in the end of fiscal year 2019. We plan to pay the same dividend per share for the interim and year-end of fiscal year 2020. We will remain disciplined in delivering shareholder value by growing our business globally and maintaining consistent dividends. This ends my comments.
Back to you, Owen.
Thank you, Uemura san.
Before we take questions, let me quickly summarize. While the world is going through unprecedented challenges, the secular shift in the entertainment industry that has already been driving the growth of online games has become even more pronounced. Our teams migrated to working from home efficiently and effectively, allowing us to not only maintain our live service operations but also to continue to create and release new content.
In fact, we just released one of our biggest franchises, KartRider to mobile platforms, including iOS and Android. We have a solid foundation that consists of a substantial IP bench that is bigger or as big as the world's biggest entertainment franchise. Our teams are making great progress on games and services and today, our franchises are stronger than ever.
Growth is Nexon's sweet spot, deeply immersive online games has sharply accelerated. New technology is allowing us to offer PC-like deep multiplayer online games on multiple platforms, including mobile, the world's biggest platform, which expands our total addressable market by minimally 10x.
Finally, our fortress balance sheet provides us with an enormous strategic flexibility that we can use to help accelerate our growth.
With that, we'll open the call to your questions.
[Interpreted] [Operator Instructions]
[Foreign Language]
[Interpreted] So before we go into Q&A, I [ indiscernible] would like to correct what I mentioned in the earlier prepared remarks. I mentioned earlier that our results was below our expectation, but still was within the range that we have been seeing on a constant currency basis. But then I would like to correct myself, even in the as-reported basis, or even in a constant currency basis, our results were slightly below our expectations.
And with that, we'd like to move on to Q&A.
[Operator Instructions]
[Interpreted] This is Yamamura from Nomura Securities. I have 3 questions. And my first question has to do with the sustainability of your Korean, South Korea business. I do recognize that South Korea business has been trending very well from before. But I think you've been able to grow the revenue, especially around PC games during this first quarter.
Now I did recall that Owen mentioned about some of the external factors, including COVID-19. But then was this good growth coming from external factors, including COVID-19? Or is this due to pure organic growth? And I would like to know how you analyze the situation.
[Interpreted] Thank you very much for your question. So in regards to what we're finding in South Korea, you've heard from Owen earlier that, at the moment, we find it quite fortunate that we have not been able to see such a largely serious impact coming from COVID-19. Of course, the situation would differ depending on which title we're talking about. But then I think it is fair to say, overall, we're not finding that large an impact. But then, for example, there was the closure of PC cafés. And so if you talk about titles like FIFA ONLINE or Sudden Attack, people not being able to access their games through, for example, PC cafés were not, of course, a good trend for us in that sense.
But then, some of the titles that you can play from home, we know that students are now finding more time to spend at home. And so maybe that did have some kind of a -- some type of positive impact for us. But then all in all, I think the impact was not that large coming from these external factors good or bad. What I would like to emphasize more is about the strength of our existing major titles. We are -- we do believe our existing major titles are enjoying a very good momentum ever since last year. But then again, the Lunar New Year update was received well, and it is going to be important that we'd be able to keep up -- keep this good momentum. And that's exactly why we were able to enjoy a very good Q1 results, and we're expecting that we should be able to keep this good trend all the way to Q2.
At the moment, we are not able to tell you numbers for Q3 or Q4. But then as long as we'd be able to keep on offering high-quality content update, and as long as we'd be able to keep on doing a very good daily operation, we do believe we should be able to keep a good performance.
This is Owen. I --
[Foreign Language]
Just one other thing to -- or just a couple of points to underscore to what Uemura san said. I'll make it quick. As Uemura san said, and as you noticed, this -- our strong performance in Korea is not a recent phenomenon. We've been able to build powerful franchises over several decades. But we also -- you asked about our analysis. I think another big factor is what we consider or what we're perceiving is a long-term secular shift away from linear entertainment to online virtual worlds. The games industry, as you know, and as we and others have been talking about is already -- on a worldwide business, is already much bigger in revenue than linear media. It's growing at 3x the rate, and it's more profitable.
On the demand side, people consuming obviously people are playing more games when they can't travel, and they can't go to amusement parks and theaters and cruise ships. So that's clearly happening on the demand side. But what's interesting on the supply side, we can run a massive games company, a massive entertainment company from our homes in the games business. We can make content and run our virtual amusement parks from our home, and we're doing that right now.
And when we put out, as I mentioned in our prepared remarks, when I -- when we put out an hour of game content that often or usually translates to multiple hours of content consumption, whereas if you put an hour of game -- of linear entertainment content, you've really only got one hour, it's rare that you'll consume it for more than one hour.
So in the games business, you have huge leverage in your content production. So the health crisis that we're seeing and the work-from-home situation may be certainly bringing these issues into sharp focus, and they may be accelerating these trends long before the health crisis, these were playing out. And our focus is really about virtual worlds for those reasons.
[Interpreted] So my second question is regarding China D&F. You talked about the fact that you did an update in the month of March earlier in the presentation. And you also said that existing user engagement improved in light of the update. I believe the aim of update you had was to attract back the users that have churned last fiscal years. However, how has the existing user engagement been associated to getting people back. What would be your strategy going forward? Are you going to try to continue to get the people who dropped out come back? Or would your strategy be to attract more new users going forward?
[Interpreted] Well, thank you for your second question. With regards to what you've mentioned in your question, yes, that is the case. Where we -- the aim of our March update was to try to lure light and middle users back that have churned before. Just to reflect back to 2019, the first and second quarters were great quarters for this title. And then after we had anniversary events as well as some updates then after, but performance started to deteriorate. And the company felt that we need to spend some time so as to improve our fundamentals and that led to the March update. And once again, just to repeat myself, the aim -- the main aim of the update was to get back the light users who have churned before. As a result, our strategy worked out well. However, there were some parts that were apart from our expectations. This was the part where PC cafés closed down and people who accessed to our games from PC cafés were not able to access during this period of time. So that was deviation. However, overall, I would say that broadly speaking, things went in line with expectations. Ever since the March update, we have been seeing some improvements in our KPIs with some resumptions at PC cafés. We've been seeing user-related metrics improve, and therefore, we are expecting this Q2 to be broadly flat against a good Q2 last year. With regards to what we are expecting going forward, we would like to gradually get our users back so that we can be back on the growth trajectory.
[Interpreted] My third question is sort of related to what Owen was commenting in my earlier question. So I do understand the game industry, the surrounding environment of game industry is very much changing, which was triggered by COVID-19. And it seems like games are becoming more mainstream. It's [ gaining ] more civil rights nowadays. That's how I feel. But then amidst this situation, maybe there is a difference in the titles that have not seen much change in the user base versus titles that is gaining much more support from the users.
For example, titles that would be catering to a wide range of the players, people who haven't really tried playing games or people who want to play games with their families, titles who would cater to these users need seems to be picking up. In other words, it's the title that would serve well to that mass market. That's how I take it. But then, for example, in case of Nexon, I do believe we have, for example, a franchise that would have long history, for example, China's Dungeon&Fighter. And I felt like maybe these would be an example of titles that would be -- that would find it more difficult to capture these newer types of users.
But then would there be any changes to your pipeline? As you try to capture these newer users? Or have you ever considered about changing the order of the development of these titles in your pipeline at the moment? We know a lot of things are changing nowadays. And so what I want to know is, has there been any changes to your overall strategy? Thank you.
Thanks for your question. I'll take a stab of answering it as I understand the question. I think the big secular shift that we really see, the big one is this belief that we have it, more and more people are living their lives online in a virtual playground rather than just in a physical playground. And it's one of those things where it's very hard to see in the early stages of this happening, but I honestly feel that we're going to look back at this and see this period right now as a turning point into a time -- into a new world of entertainment in which we start to spend a lot more of our time in a virtual world.
And I think that with quality games, we will not only find very concentrated audiences. That means potentially very limited audiences that go very deep. That can be a great business. We will also find very broad audiences. In our case, we found both. It depends on the game and it depends on -- it also depends on how the game results in a region. So for example, MapleStory has, in many respects, really reinvigorated itself, even though it's been available for quite a long time. A lot of people grew up with it. They've come back to the game. And we've also found a whole new generation of players who never played the game before, but love to play it on mobile because mobile is with them at all times. And now we can deliver that, thanks to the platform providers providing that.
As for Dungeon&Fighter, a similar type of effect is our expectation. We also think that we can focus games like KartRider to a much broader international audience, and we want to bring it to multiple platforms, so we can be where that audience is. In other words, it's not just on PC, on the few hundred million game-playable PCs, but on many, many more game-playable devices.
So in terms of changing of our development strategy, I would say that the fundamental shift that you've seen us do is to recognize our core strength. Our core strength is deeply-immersive online games. We, along with a couple of other companies, more or less invented the whole category. We had the first MMORPG, graphic MMORPG. We have the first free-to-play game. We've been doing it for a long time. We've -- and longer than everybody, we've experimented in a number of other areas, casual, offline games, story-driven games, but really where our heart is, it is an deeply-immersive games, and that's where we're focused.
And then I would say the -- another big thing that we can do to bring this to a wider audience is, we're just very excited about what's happening, with our western strategy with the Embark team. We just did a studio review the other night with the Sweden team, and we're very excited about what to be able to talk to you about that more later in the year.
[Foreign Language]
Our next question comes from Han Joon Kim, Macquarie.
I wanted to follow-up on the delays to the Dungeon&Fighter Mobile release. And now I understand [ most of the ] comment, and it's a matter of months. But I just want to contextualize if this was led by -- or tactical decision to just find the right timing for it or was it led by COVID, it's just a matter of a few months what we see it. And just kind of your sense as to how we can preclude the potential for further delays. [Foreign Language]
[Interpreted] Well, the answer is, like I mentioned earlier, with regards to the impact we're getting from COVID-19 it is not as significant overall. The same thing applies for our development too. So with regards to the delay around D&F 2D Mobile, Dungeon&Fighter 2D Mobile, it's not associated with the impacts from COVID-19 nor is it a tactical decision. Simply put, because we view this as a very important title for us, we wish to ensure that the fine-tuning is done well.
Understood. And then can you just give us a little bit of sense as how we should think about KartRider Rush+ and KartRider: Drift. And I know it's only been about a day, but how we should think about the contribution coming from that? It seems like you've baked it in the second quarter guidance, but it's still very early to do so. So I'm just trying to contextualize how much comfort you have with it, that it will be sustained in enduring a new franchise or it might just assuming to go through a lot more iterations before it becomes a sticky source of revenue.
[Foreign Language]
[Interpreted] Well, thank you very much. And if I may organize a little more before I answer your question. So again, KartRider Rush+ is something that we've just launched in South Korea as well as rest of the other markets. And as for KartRider: Drift, this is something that we still are trying to develop at the moment -- we still are developing at the moment.
And in our Q2 forecast, we have included some numbers in regards to KartRider Rush+. And of course, it is something that we just launched yesterday. At the moment, we are very happy with the results that we're seeing so far. As for the day 1, I think we're able to make a very good start. And at the moment, we have, therefore, included the numbers that we, at the moment, do believe we'll be able to expect in our Q2 figures. Of course, it's not that we try to disclose the details by title by title. So we just give what kind of expectation we have at the moment into your figures. And I hope you'll be able to forgive us to that extent.
But then again, KartRider: Drift, this is something that we are developing for launch. And it is the -- it's succeeding game after a KartRider PC version. We're trying to make sure the game, the KartRider: Drift, would come out as a very nice game that could be enjoyed by many players as well. KartRider, therefore, is a very important title, and it is a very important IP for Nexon. And we're trying to make sure that we'd be able to do the development, do the testing, so that we'd be able to launch when we have this good feelings for it. And when we do that, we should, we hopefully be able to give you a little more numbers around this.
Our next question comes from Atul Goyal with Jefferies Group.
Two questions. First, very simple one. What percentage of your users are playing in Internet cafés versus playing at home in China? And then there's a second question about D&F Mobile.
[Interpreted] By the way, with regards to your first question, are you asking about the presentative users that are accessing to Dungeon&Fighter in China from PC cafes?
Yes. Yes. Because you mentioned that there was some negative impact because of PC cafés being closed. So I'm trying to understand what percentage of your users actually access the game in Internet cafés versus their home?
[Interpreted] Well, with regards to the positioning of PC cafés in China, we initially thought that people were playing the game from both PC cafés, where they have some with their friends. And then they also access the game from home. However, in wake of the closures, we were able to understand that there were a certain degree of users who only played at PC cafés. We don't disclose that information. However, we understand the percentage is fairly small. However, there was a degree of users who only access to the game from PC cafés. And the consequence of that was that we weren't able to realize the comeback of light users as much as we expected. That was one of the reasons why we didn't see as many light users come back.
But with regards to the overall situation, the Lunar New Year as well as the March update were well received. And especially after March, when we did the update, we started to see KPIs improve. And as we continue to see the openings of PC cafés are gradually happening now, we believe we'll be seeing improved -- further improvement going forward.
The second question is about the D&F Mobile. This is one of the biggest launches for Nexon. And Nexon shareholders are also waiting for this particular game. I'm confident you have sized [ up ] the opportunity, looked at the entire market size, positioning, et cetera, et cetera. So can you give us some color? Because my own understanding is that besides Honour of Kings, it generates more than $1.5 billion per annum in revenues, most of the games generated less than $1 billion. And obviously, there is competition, but at the same time, because there have not been too many new games in the last about 2 years, there is an anticipation. There is excitement for D&F as well. So there's big opportunity, but at the same time, most games tend to generate less than $1 billion in annual revenues. Can you give us some color -- additional color as to what else we should be looking on both positive as well as on the risk side as well?
[Interpreted] Okay. Thank you very much. Dungeon&Fighter IP is a very important strong IP. And I think this can be said, especially as we look at the China market. Now of course, this mobile version, this new one, is going to be a title -- the version that we have lots of expectations. That is for sure. But then, like I mentioned earlier, we still are at the moment are fine tuning, going through our final fine tuning.
Now at the moment, it's not that we offer guidance for Q3 and onwards. And so please spare me for giving you specific numbers in terms of what kind of scale of expectation do we expect through this mobile version. But then, of course, what we'd be looking at is the performances that we've been finding on the PC version of Dungeon&Fighter game and, of course, how the user base is enjoying the game. And one of the good indicators, obviously, would be the preregistration numbers. And of course, this is a title that is important, not just for us, but it is also a very important title for Tencent, and they gave us the word that they'd be happy to go on the marketing and promotion activity.
And so again, it is going to be a very important title for all of us, ourselves, Tencent as well as, of course, our stakeholders. But then again, please spare me for giving you any specific numbers at this point.
This is Owen. Hopefully, you can hear me, Atul. I'll just add a couple of comments on top of what Uemura san said. I just -- sure, from a broader perspective, just to step back, I think it's important to remember that this is one of the largest entertainment franchises in the world. And so we're taking it very, very seriously. The feedback that we've gotten from the beta test has been we would classify it as quite positive. It's certainly very encouraging.
But we are really playing for the long-term, and so our team has been working really hard to make sure that we get it right and is very, very focused on this right now. So early, the feedback that we've gotten from the betas is very positive, has been quite positive, but we just are very focused on making sure that we have the right amount of content, the right quality and the content, all the technical issues are in great shape. So -- and the team has just been driving really, really hard on this.
[Foreign Language]
[Operator Instructions] This concludes the question-and-answer session. Ms. Ara, at this time, I'd like to turn the conference back over to you for any additional or closing remarks.
Thank you. If there are no further questions, I would like to take this opportunity to thank you for your participation in this call. Please feel free to contact the Nexon IR team at investors@nexon.co.jp should you have any further questions. We appreciate your interest in Nexon and look forward to meeting you, whether it is here in Tokyo or in your corner of the world.
Thank you. That concludes today's conference. Thank you for your participation. You may now disconnect.