Hello everyone, welcome to NEXON's earnings conference call. 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 operations and financial condition, such as revenues attributable to our key titles, growth prospects, including with respect to the online games 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 owners 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. An authorized recording of this conference call is not permitted. I'd now like to turn the call over to Owen.
Thank you, Kawai-san, good afternoon, everyone, welcome to NEXON's third quarter 2022 earnings call. I'll start with a summary. Today, we are reporting NEXON's best Q3 ever. During our discussion, Uemura-san will provide guidance that represents NEXON's highest Q4 revenue ever. Achieving that guidance would mean NEXON is experiencing its highest annual revenue ever in 2022. We have by far our best pipeline of new games ever. In a global business environment that is best described as ugly, particularly for tech and media companies, 2022 is shaping up to be a tremendous year for NEXON, and our confidence in 2023 has only grown. Our vision for deeply immersive virtual worlds, backed by a highly experienced team of live operators and a robust and growing tech stack for building and operating large-scale virtual worlds, is generating consistent growth and profits.
The business we will review with you in the coming hour represents safety and growth in a turbulent entertainment and technology world, a world that is increasingly aspiring toward the vision of virtual worlds that NEXON has been pioneering and evolving for over two decades. Our third quarter was highlighted by record-setting revenue, up 28% year-over-year. This strong performance was driven by solid growth from our live virtual worlds, which we refer to as forever franchises, and the performance of key new virtual worlds on mobile. Dungeon Fighter Mobile launched seven months ago in Korea and continues to generate consistent revenue. As a result, the Dungeon Fighter franchise has grown meaningfully overall in Korea thanks to the addition of mobile on top of the PC business.
HIT2, a new mobile game that launched in August, is off to a great start, contributing revenue significantly above our expectations. Importantly, our central thesis about mobile has been playing out as we planned it. While much of the industry has continued to treat mobile as a low-end computing device that allows only simple gameplay, we anticipated the rapid advances in GPU and networking power on mobile, well past what PC or console was capable of even a few years ago. That means our focus has been on delivering a PC-level experience to mobile, which translates to PC-like retention of players. That in turn means vastly better unit economics, and the number of such players is an order of magnitude larger than the PC installed base, literally billions of people around the world.
As a result, the post-IDFA issues that have plagued so many other companies in mobile have not been a factor for us, as our games have higher retention rate and monetize at greater level than casual titles. Our business on mobile has instead been accelerating with ballooning retention rates and expanding lifetime values. We think these strong metrics bode well for our future performance. In addition to our successful new mobile products, several of our existing virtual worlds generated record-setting revenue thanks to our robust live operations capability backed by our growing technology stack. In Q3, Korea MapleStory, one of our longest lasting virtual worlds, achieved 47% growth year-over-year, nearly reaching its highest Q3 ever. Mabinogi delivered 66% growth year-over-year, its highest quarterly revenue ever, 18 years after launch.
FIFA Online 4 accelerated its recent strong performance, growing significantly year-over-year and delivering a third straight quarter of record-breaking revenue. The performance of these virtual worlds demonstrates several very important attributes of a healthy online games business. First, the commonly held mental model of product life cycle, or PLC for short, is wrong. We are commonly asked when MapleStory will go into decline and end. It was the most asked question in our IPO roadshow 11 years ago. Today, MapleStory in Korea is four times the size it was at that time. This is why we call these virtual worlds forever franchises. They are designed to be just that. Second, each virtual world goes through cycles of ups and downs as we make the world bigger, add new experiences, and experiment with new content.
That means the decline in one quarter or one year is usually followed by further growth and all-time highs later. Third, our portfolio provides stability. If one franchise shows a short-term decline, another usually outperforms and makes up the difference. These three components add up to the opposite of a hits-driven business. The idea that our business is hits-driven is a misnomer, held over from the traditional games business and linear entertainment that has mistakenly been applied to NEXON's business of deeply immersive and long-lasting virtual worlds. Next, I'd like to share our progress on NEXON's powerful pipeline of new games in development. I'll start with THE FINALS , a unique fast-paced shooter in development at our Stockholm-based Embark Studios. We conducted the game's first public alpha test in September.
Typically, when readying a major launch, an online game operator will conduct an early alpha, followed by one or more beta tests in the months leading up to the full launch. Our objective for the alpha was to test the core of the game and the server code in a live environment. 10 times our anticipated demand signed up for the alpha despite our minimal marketing, and during the test, it became the most followed game on Steam. This clearly indicates the high interest in a shooter that breaks new creative ground in a genre that has recently become stale. Performance of the test was much better than we anticipated, especially for an alpha. There were no major bugs in the game, and the server performance was very smooth. Remember, there was significant never-before-tried technology in this game, including server-side destruction. Player feedback was extremely strong.
Players told us overwhelmingly they enjoyed the game. Server-side destruction, which enables a deeply immersive and realistic experience that has not been implemented in any other game before, was especially well-received. Based on the positive feedback of the alpha and anticipated large audience, we want to expand our content plan at the time of launch to ensure strong player retention over time. We also want to develop out additional meta-game elements to ensure player longevity. Increasing the volume and polish of that content is where our focus is between now and the high-polish public beta, which we expect in Q1. Next, I'd like to update you on KartRider: Drift, a wild arcade driving experience on mobile, PC, PlayStation, and Xbox. Feedback from players during our recent cross-platform test has been positive.
The remainder of the work prior to launch is about polishing the experience, which is matchmaking, fine-tuning the controls and balance across platforms, and making business model tweaks and additions. We plan to start the preseason globally in January, followed by official launch in the first half of 2023. Our launch pipeline for the coming 12 months is the most robust in our history, with major new virtual worlds on all platforms and in all regions. They represent a variety of genres and play styles, but the common thread is that they are deeply immersive multiplayer online experiences designed to last a long time. Some key upcoming titles include TalesWeaver: Second Run to be released on mobile in Japan in Q4. KartRider: Drift in the first half will be available on PC, mobile, and console. THE FINALS from Embark on PC and console. Veiled Experts from NEXON Games on PC.
ARC Raiders from Embark for PC and console. Warhaven from NEXON Korea on PC and console. The First Descendant from NEXON Games on PC and console. Mabinogi Mobile from our devCAT studio in Korea. This is the strongest pipeline of new releases in NEXON's history. Our execution on these new virtual worlds, in addition to continuing to deliver on our existing portfolio, will provide a step function increase in our financial performance over the next several years. With that, Uemura-san will provide more detail on the quarter and the outlook for Q4, and I'll return briefly to summarize our thoughts about NEXON's growth and the road ahead.
Thank you, Owen. Now I'll review our Q3 2022 results. For additional details, please see the Q3 2022 investor presentation available on our IR website. We achieved record-breaking quarterly revenue. Group revenues were JPY 97.5 billion, up 28% year-over-year on an as-reported basis, and up 16% year-over-year on a constant currency basis. Our performance was driven by the growth of major titles, FIFA Online 4 and MapleStory in Korea, and contributions from new titles, Dungeon Fighter Mobile and HIT2. Overall, our top-line performance was within the range of our outlook. HIT2 and Mabinogi exceeded our expectations, while Dungeon Fighter Mobile and MapleStory in Korea were lower than planned. By region, revenues from Korea, Japan, North America, and Europe, as well as rest of world, were within the range of our outlook, while revenues from China came in lower than expected.
Looking at the total company performance by platforms, mobile revenues were within the range of our outlook, while PC revenues were lower than expected. Operating income was up 6% year-over-year and within our outlook of JPY 31.5 billion. Net income, which exceeded our expectations, was up 14% year-over-year to JPY 43.3 billion. This was mainly driven by an FX gain of JPY 26.4 billion related to the depreciation of the Korean won and Japanese yen against the US dollar and its corresponding impact on US dollar-denominated cash deposits. Let's move on to results by region. Revenues from our Korea business were JPY 62.8 billion, representing record-breaking quarterly revenues in Korea. This performance was within the range of our outlook. On a year-over-year basis, revenues increased by 56% on an as-reported basis and by 43% on a constant currency basis.
FIFA Online 4's PC and mobile combined revenues were at the high end of our outlook, driven by successful events and sales promotions. MAU, paying users, and ARPU all increased year-over-year. As a result, its revenues grew significantly and marked a quarterly record high for the third quarter in a row. MapleStory grew by 47% year-over-year and was close to record-breaking Q3 revenue. The performance, which was slightly below our own high expectations, was driven by year-over-year growth in MAUs, paying users, and ARPU, as well as the well-received summer update events and sales promotions. Mabinogi's revenue grew by 66% year-over-year, which significantly exceeded our outlook, driven by a highly well-received update. For Dungeon Fighter and Sudden Attack, which showed strong performances last year, as expected, revenues decreased. All-in, PC revenues in Korea increased by 40% year-over-year.
As for the mobile business in Korea, revenue from HIT2, which launched on August 25th, exceeded our expectations as we were able to attract many core MMORPG players while also achieving a PC-like high retention rate. Dungeon Fighter Mobile's revenue was below our outlook due to a decrease in its active users. In response, we conducted a level cap release on September 28th and adjusted the game balance. As a result, we are seeing an improvement in active users now. We will continue to closely monitor the game and stably operate it. On a year-over-year basis, mobile revenues in Korea increased by 93%. Contributions from HIT2, Dungeon Fighter Mobile, and Blue Archive, as well as growth of FIFA Online 4 M, were partially offset by revenue decreases in The Kingdom of the Winds: Yeon, V4, and KartRider Rush+.
On a quarter-on-quarter basis, mobile revenues increased by 16%, primarily driven by a contribution from HIT2 and a revenue increase in FIFA Online 4 M. Revenues from our China business were slightly below our outlook, representing a 14% decrease year-on-year on an as-reported basis, and a 27% decrease year-on-year on a constant currency basis. Dungeon & Fighter came in at the low end of our outlook, and MapleStory was below our expectations. For Dungeon & Fighter, revenue decreased year-on-year as expected due to a tough comparison with the strong performance in Q3 2021, driven by that year's summer update and new initiatives. Active users decreased in Q3 as the effect of the level cap release conducted in June did not last as long as expected. We continue to focus on increasing user engagement over near-term monetization.
This resulted in ARPU decreasing more than planned and Q3 revenue coming in at the low end of our outlook. The number of active users in October has recovered to last year's level, driven by these initiatives. On a quarter-on-quarter basis, MAUs and paying users decreased following the level cap release, while ARPU increased due to seasonality. On a year-on-year basis, MAUs, paying users, and ARPU decreased due to a tough comparison with the strong performance in Q3 2021. Revenues from Japan increased by 13% year-on-year, driven by the growth of Blue Archive and a contribution from CounterSide, despite revenue decreases from Traha and V4. Revenues from North America and Europe increased by 10% year-on-year, driven by the growth in MapleStory and contributions from new games, despite revenue decreases from MapleStory M and Choices.
Revenues from the rest of world increased by 28% year-over-year, driven by the growth in MapleStory and contributions from new games. Moving on to our FY 2022 fourth quarter outlook. In Q4, we expect significant growth from FIFA Online 4 and continued growth from major existing titles, including China Dungeon & Fighter and Korea MapleStory. We expect strong contributions from HIT2 and Dungeon Fighter Mobile, as well as TalesWeaver: Second Run, which is scheduled to launch in Japan in the fourth quarter. We expect record-breaking Q4 revenues in the range of JPY 75.5 billion-JPY 83.7 billion, representing a 39%-54% increase year-on-year on an as-reported basis, and a 27%-41% increase year-on-year on a constant currency basis.
We expect our Q4 operating income to be in the range of JPY 7.5 billion-JPY 14 billion, representing a 153%-369% increase year-on-year on an as-reported basis, and 116%-311% increase year-on-year on a constant currency basis. I'll discuss the details on this shortly. We expect net income to be in the range of JPY 5.5 billion-JPY 10.1 billion, representing a 75%-54% decrease year-on-year on an as-reported basis, and a 79%-60% decrease year-on-year on a constant currency basis. The year-on-year decrease in net income is due to a JPY 14.6 billion deferred tax asset and JPY 3.2 billion FX gain that we recorded a year ago. As you know, our guidance doesn't factor FX gains or other events such as deferred tax assets. In Korea, we expect growth from FIFA Online 4 and MapleStory, and solid contributions from HIT2 and Dungeon Fighter Mobile.
Consequently, we are looking for revenue in Korea to be in the range of JPY 51 billion-JPY 55.4 billion, representing a 62%-76% increase year-on-year on an as-reported basis, and a 51%-64% increase year-on-year on a constant currency basis. As for the PC business, we expect FIFA Online 4 to grow significantly year-on-year, driven by the continued year-on-year increases in active users and paying users. We also expect MapleStory to maintain its strong momentum and to grow year-on-year. While we expect year-on-year growth from Dungeon & Fighter and Mabinogi, we expect Sudden Attack's revenue to decrease compared to its strong performance in Q4 2021. Consequently, we expect PC revenues in Korea to increase year-on-year. Regarding the mobile business in Korea, we expect Q4 revenues to significantly increase year-on-year. We expect strong contributions from HIT2 and Dungeon Fighter Mobile.
In addition, we expect year-on-year growth in FIFA Online 4 M and FIFA Mobile. We expect these to be partially offset by year-on-year revenue decreases in Blue Archive, V4, KartRider Rush+, and The Kingdom of the Winds: Yeon. Turning to China, we expect revenues from our China business to be in the range of JPY 13.1 billion-JPY 15.2 billion, representing a 15%-34% increase year-on-year on an as-reported basis, and flat to 16% increase year-on-year on a constant currency basis, driven by the anticipated increase in Dungeon & Fighter's revenue. For Dungeon & Fighter, we adjusted the game to be more user-friendly, and as a result, the number of active users in October has recovered to the last year's level. Based on current positive trends, we expect Dungeon & Fighter's revenue to increase year-over-year. Looking forward, we are focused on engagement, particularly retaining existing players and attracting returning players.
In Japan, we expect revenues in the range of JPY 2.7 billion-JPY 3.5 billion, representing a 10%-44% increase year-over-year on an as-reported basis, and a 5%-37% increase year-over-year on a constant currency basis, driven by the new release of TalesWeaver: Second Run in Q4. In North America and Europe, we expect revenues in the range of JPY 4.1 billion-JPY 4.5 billion, representing a 17%-8% decrease year-over-year on an as-reported basis, and a 32%-25% decrease year-over-year on a constant currency basis. We anticipate decreases from Blue Archive and Choices. We expect revenues in the rest of world in the range of JPY 4.6 billion-JPY 5.1 billion, representing a 13%-25% increase year-over-year on an as-reported basis, and a 4%-14% increase year-over-year on a constant currency basis, driven by contributions from new games.
In Q4 2022, we expect operating income to be in the range of JPY 7.5 billion-JPY 14 billion, representing a year-over-year increase of 153%-369% on an as-reported basis, and a 116%-311% increase year-over-year on a constant currency basis.
An increase in revenue is expected, which will contribute to an improvement in year-over-year operating income. However, compared to Q4 last year, we expect increases in costs due to business growth as well as upfront investments in talent and marketing as we prepare to release a number of major new properties in the coming quarters. First, we expect increased variable costs due to a revenue increase. Second, we plan to increase headcount in anticipation of launches of several major new virtual worlds, as well as accrue bonuses for outstanding financial performances. Third, we plan to make investments in marketing for certain virtual worlds that have shown high returns around key events and updates, such as FIFA Online 4, MapleStory, and HIT2. We expect these marketing investments will pay returns well into the future.
The high end of operating income is expected to increase year-over-year on a constant currency basis as a revenue increase will be larger than cost increases due to upfront investments. Overall, in Q3 2022, we achieved record high quarterly revenues. Our performance in Q3 reflects the strength and focus of our live game operations to improve user engagement, which led to growth across multiple major titles including FIFA Online 4, Korean MapleStory, and Mabinogi. Our mobile business also grew significantly, driven by the successful release of HIT2, which exceeded our expectations following the successful launch of Dungeon & Fighter Mobile in Q1. In Q4 2022, we managed our operations for stability and growth in our major titles and new mobile games, including HIT2 and Dungeon & Fighter Mobile, through appropriate updates and carefully managed daily operations. We expect year-over-year growth from China Dungeon & Fighter.
While we experienced a dip in active users in Q3, we now are seeing a recovery in that number in Q4 as we took appropriate measures in live operations. In addition, we expect to launch KartRider: Drift and Embark Studios' first title, THE FINALS, as well as several other major new virtual worlds in 2023 and beyond. We believe that NEXON could accelerate our future growth by layering these titles on top of our strong revenue base. Last, I would like to provide an update on the shareholder return. Regarding our three-year JPY 100 billion share repurchase policy that we announced on August 9, 2022, today the board of directors approved an execution of JPY 50 billion share repurchase in the marketing starting from tomorrow, November 10, to April 19, 2023.
As for the remaining JPY 50 billion, we plan to complete the share repurchase authorization by August 2025 at the latest by considering several factors, including investment opportunities, financial constitutions, as well as the market environment. This concludes my comments, and back to you, Owen.
Thanks, Uemura-san. To summarize our presentation, today, we reported NEXON's best Q3 ever, in which we grew 16% on a constant currency basis. Our Q4 guidance represents NEXON's highest Q4 revenue ever. We expect to grow between 27% and 41% on a constant currency basis. Achieving that guidance would mean NEXON is experiencing its best year ever in 2022, with top-line growth between 17% and 20% on a constant currency basis. We have by far our best pipeline in our company's history. With that as a backdrop, I'd like to talk a bit more about our reason for executing JPY 50 billion of the JPY 100 billion authorization of our open market share buyback now. As you heard today, we are extremely confident about the performance of our existing live virtual worlds, as well as our pipeline of new online games.
If just one or two of these new titles hit, they would represent a step function change in our revenue and earnings power on top of the stable growth of our live virtual worlds. That step function change would make NEXON a meaningfully larger company in the near future. As you know, we don't give annual guidance, as performance of new games is notoriously difficult to forecast, especially when they break new creative ground as these games do. As operators of our business, we play the upcoming games extensively, can review all the feedback from our player tests, and can see the KPIs, and it's fair to say that we have very good reason to be excited about our pipeline. Because we have several major new launches about to happen, we don't have to depend on any one of them, even though our confidence in each is high.
We're putting our money where our mouth is. We think now is a very good entry point for us to buy our own shares, and we want to buy a significant amount of these shares before these key new virtual worlds launch. With that, Uemura-san and I would be happy to take your questions.
Thank you, Owen. Next, we would like to open up the lines to live Q&A. Q&A session will be conducted with Japanese English or English Japanese consecutive interpretation. Please be noted that interpretation will come between your questions and our answers. Please hold for interpretation before you hear our answer.
Our answers will also be followed by interpretation, please hold until the interpretation finishes before moving on to the next question. For those of you who have more than one question, we will take your questions one by one. Now, we would be happy to take your questions.
Today, we will accept questions from the conference call participants. If you have a question, please press the star key followed by the digit one on your touchtone telephone keypad. Once again, if you have a question, please press the star key followed by the digit one on your touchtone telephone keypad. When we receive your input, you will hear the voice guidance. If you do not hear the guidance, please press the star key followed by the digit one on your touchtone telephone keypad once again. We will begin taking your questions shortly. Please hold on for a moment.
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The first question is from Mr. Seyon Park from Morgan Stanley. Please, Mr. Park.
Thank you for the opportunity. I have two questions. The first question, I guess, is about China. I think there has been a lot of concerns about China, not specific to NEXON, but I think just the industry overall. We have actually seen very weak trends on mobile. I think compared to those concerns, the trends that we are seeing with Dungeon & Fighter doesn't seem to reflect any of that weakness. Yes, it is down year-on-year, the guidance for the fourth quarter also seems to be quite strong. I just wanted to get a little bit more color on whether you are seeing any changes, I guess, in terms of gamers' consumption patterns or behaviors which would impact the trajectory for Dungeon & Fighter in China. That's my first question. The second question is regarding the Embark titles.
I guess the timing of THE FINALS, if the beta test is in 1Q, would it be fair to assume then that a commercial launch is somewhere beyond that, second quarter and beyond? Given, I think the explanation you had given in the prior earnings call, would that imply that ARC Raiders would be more likely a second half 2023 launch? Thank you.
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Thank you for your question. I, Uemura, will respond to the first question, and the second question will be taken by Owen. Regarding the situation in China, it is indeed true that our record of Dungeon & Fighter in China does not look that great. It does not mean that the Chinese market is changing, nor the user behavior is changing. The situation is attributable to our own situation. As I have mentioned before, it is very important to manage well the daily operation of PC online games. We have to continue conducting high quality updates. If we can conduct these two, theoretically speaking, it will be a forever franchise. For the past few years in China, Dungeon & Fighter has not been recording the performance that we have enjoyed in the past. We will be able to return the game back to its growth trajectory.
Needless to say, Dungeon & Fighter is a very important title for us in China, and we want to conduct stable operation and be very cautious in conducting the day-to-day operation so that we will be able to maintain the gain and return it back to the growth trajectory in the long term.
This is Owen. Thanks for your question. Regarding THE FINALS, as we mentioned in our prepared remarks, we expect the public beta to be in Q1. We haven't made any announcements beyond that. Just to be clear about what the beta means, as we say, it's a high polish beta and it's a public beta. This is not an early test. This is something that's rather complete and very filled out. That's our plan there. The development continues to move very quickly. As for ARC Raiders, we haven't made any updates, but I would not assume that the timing of THE FINALS impacts the timing of ARC Raiders. Those are operated as separate and distinct projects.
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Thank you. Looking really forward to seeing the new title.
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Thank you. We are, too.
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Excuse me. The question is from Junko of Citigroup Global Markets Japan. Please.
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Thank you very much. This is Yamamura from Citigroup. My first question is about
How do you proceed to launch your future new titles? In other words, I'd like to ask more about what is the timing that you would have in mind. It is quite difficult for us in the capital market to really anticipate what could be the right timing for this. I understand if it's like a mobile title, there would be these verticals, structures that we'd be able to look at. When it comes to some of your previous successful titles, including MapleStory as well as Dungeon & Fighter, I do believe it did take some time before we'd be able to see some tangible success. Of course, I'm not saying that's bad in itself. I think that is how we should expect, and I do believe that it does have good in itself.
This also raises the concern that perhaps the tenure or the duration of this advanced investment would become longer than what we would expect. In other words, I do believe there could be some of the difference in the understanding of the timeline that you'd be looking at for success and the timeline that we in the capital market would be looking at before it would be called as a success title. I wanted to hear about what your view is from that perspective.
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If I may continue my second question.
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I said I would like to answer one by one.
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Thank you for that first question. I understand that your question is what is the timing that we would see the success of a specific, especially new titles? Of course it does depend on which genre we're talking about as well as what kind of expected steps that we'd be taking. Just like you just mentioned, if it's about mobile games, we do usually would have this initial start to ramp up, then afterwards, after some time, there would be some churn, some users who will be leaving the game. The question is, where can we really stabilize the performance? The situation could be different if we're talking about PC or console games. This is exactly where we are very good in operating.
Of course, even if the first user population does not meet our expectation, we know we'd be able to take time so that we'd be able to do the correct marketing, do the correct operation, do the updates. That's how we have been able to really see success and enhancement of each title over the 10 - 20 years course of time. It really depends on what kind of marketing, what kind of promotion we'd be doing, and seeing when the investment we've made would be harvested. Each title, of course, we internally do have our expectation as well as for the growth curve and how we'd be able to capture the revenue performance. We always do keep in mind of ROI when we try to make any advanced investments.
As long as we'd be able to operate the game as we plan, we know that we'd be able to have this very successful game.
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Thank you very much. My second question is, what is your outlook or what is your expectation in terms of your margin and profitability as you look into the mid and long term? You did mention earlier that, for example, in the marketing expense for Q4, you expect there's JPY 10 billion worth. Of course we do have to look at, for example, the currency impact. My question would be, is this JPY 10 billion going to be allocated to several titles, or is this going to be more focused into a single specific title? For example, I raise this question because when I look at, for example, your titles like Dungeon & Fighter, I think the type of the trend that you would find could be a bit different from other peers.
For example, other peers, if they go for more multi-platform, that usually enables them to find a better margin of profitability. In your case, it seems like the more you try to go for a multi-platform, then, for example, your highest type of margin could in the end start to slim down to more to an average level closer to your peers. That is why I wanted to ask, for example, even if you see the margins start to decline, do you feel it's okay if your absolute operating profit still would be strong and growing? Again, it's really about what your intention is or what is your expectation to especially your mid-to-long-term profitability.
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Thank you very much. First of all, I'd like to answer specifically about the marketing cost that you mentioned. In other words, JPY 10 billion for Q4. Yes, it is going to be used for our existing titles that is doing well. We want to further polish titles especially we'd be talking about polishing MapleStory or FIFA Online for further growth. We also do have newly launched titles, for example, HIT2 and also Dungeon Fighter Mobile, which we'd like to make sure we'd be able to allocate some investments so that we'd be able to have even further growth. At the same time, for the first time after three years, we are going to be taking part in G-Star. There is going to be some marketing promotion expense for that. That in total would amount to JPY 10 billion.
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In terms of your second question, I'd like to go into how we look at our costs. Of course, it's not like we're just blindly making these investments. We are trying to make sure that we control the amount of advance investment we would make. In other words, we always make sure we'd be able to keep the certain ROI. Even if we speak of our HR cost or perhaps our marketing cost, it is going to be spent so that we'd be able to grow top line. In other words, these expense compared to the size of revenue, the proportion, we expect that it would be the same as last year. In terms of the marketing cost, we know that the proportion versus the sales has been like 8%-10% over these five years course of time.
We are going to be doing good cost control as we try to grow the top line. If we'd be able to do that, we do believe we should be able to control our margin to some certain extent. Yes, it is true that our China PC Dungeon Fighter has been able to maintain a very high margin, which has been deteriorating. We do believe we should be able to revamp the figure in the mid-to-long-term. Of course, at this moment we were talking that we're doing really well with FIFA Online or MapleStory, usually if it is our own title, we usually be able to enjoy high margin. Titles like FIFA Online, that is something that would be coming from EA.
The situation will be a bit different in terms of the ease of gaining this profitability. It really depends on which title is doing well when talking about what kind of margin we are looking at the moment. At any rate, the message here is we're not trying to just blindly spend our cost. We want to make sure that whatever cost we spend would contribute to growing the top line.
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Thank you very much.
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The next question is from Mr. Atul Goyal from Jefferies Singapore Limited. Please.
Hi. Thank you very much, Owen and Uemura-san, for the presentation. I've got two questions, both related to the new games pipeline. Firstly, Owen, can you elaborate a little bit more on what exactly was the feedback, given you mentioned there was not much marketing done for THE FINALS alpha test? In which country markets was it tested? What was the feedback from users about its uniqueness? Because from developer standpoint, obviously they all developed something very unique. Can you give some more color on that one? Second question is for Uemura-san about profitability angle, similar to some previous question, but these games are now multi-platform, console, PCs, and mobile. In general, console games typically launch in a quarter and they sell for that year. Whereas your PC games could last 10, 15, 20 years.
In terms of expectations for profitability and the amount of costs that you will book in the first year, can you give us some idea so that we can have a reasonable understanding of what kind of profit assumptions to have for some of these new games that will be coming out in 2023, including THE FINALS, KartRider: Drift, also, if possible, on ARC Raiders, collectively, not separately, obviously. Those are the two questions. Thank you.
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Atul, first, thanks for your question. I will take it first, and Uemura-san will take it second. A little bit more about the alpha test and what we learned in the process. First, as I mentioned, we ran the alpha test. It went better than expected for sure. First, the tech work rate, which is really important. Keep in mind that we've got brand new technology that nobody has ever done before, which is server-side destruction. What is server-side destruction? I'll give you an example, maybe to best illustrate it. Let's say you and I are playing in the same game world, and I'm up with my crew hiding in the second floor of a building, and you and your crew have a whole bunch of explosives.
You can blow up the first floor, and then we fall down, or you blow up the ceiling in the first floor, we fall down from the second floor into the first floor, and then you can attack us all. The first floor collapses, the second floor falls down. That's one example. The technology-
That I'm describing enables something really fun, but what it really enables is emerging gameplay that can only be done with realistic physics, not pre-rendered physics. Emerging gameplay means whole new and unexpected ways to play the game. This is our engine. Nobody's been able to do this before with realistic physics of this type, non pre-rendered destruction, meaning physical destruction. One of the things that the alpha proved is that our tech works. The second thing was the customer feedback was fantastic. They told us that for all the reasons I just mentioned and several others, we are in a very unique category. I'll pause there for translation and then I'll continue.
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What we learned in the alpha was at first people really enjoyed the game a lot, so they burned through the content at a very fast pace. We learned a lot more about what emerging gameplay opportunities from server-side destruction are, and we want to double down on that. That's the first thing. The second thing is we need to get the play balance right between the different classes and balance the weapons, especially in a world of a lot of emerging gameplay from destruction. The third is we want to add to the meta game to ensure high retention. Those are the three things that we took away from the alpha. We found those things as a result of the alpha, and that's why we run alpha tests. The things that I just described are doable things.
It's not like there's a big creative unknown or a major technical issue that we've got remaining. The alpha was a major milestone for us. Everyone who's played the game wants us to launch it ASAP for sure. We know from experience that getting the content plan and the balance right is going to be the difference between a short-term success and a long-term franchise. The impact on our Q4 and our 2022 is minimal. Our core business of live games, as we said, is growing so nicely. We have the luxury to make the right creative decision for the good of the product. That's what we concluded.
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We're not actually talking about the same business. We make online virtual worlds, not casual games. We build virtual worlds that are designed for years or decades of gameplay. That means our business is about higher retention of players and therefore high LTV. The way that we do it leads to stronger margins, which we target the PC business. One way to describe our approach is that we view it as a way to bring our virtual worlds, which started on PC, to an an audience that's 10 times as big, thanks to the addition of mobile and console. The computing power, as we've said before, on both the networking layer and the GPU layer are what equated to a powerful workstation just a few years ago, but they're in everybody's pocket. It's roughly 10x TAM expansion at this point.
You may have noticed that year-over-year mobile grew for us 40% life to date, the retention numbers and therefore the profit margin numbers are what we hope to see. Although this is a non-traditional approach, we think it's showing great signs of success so far, we think it's going to get better over time.
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Thank you very much.
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We will take the next question from David Gibson from MST Financial Services. Mr. Gibson, please.
Thanks very much. Just one question, although a longer one. I was just wondering if NEXON is looking to develop immersive games for others who have a very strong IP? Perhaps, do you have actually the capacity to do that? Or are you already doing immersive games development for others that have not been announced, perhaps? That's all.
Excuse me, Mr. Gibson, can you please repeat your question again?
Sure. I was just wondering if NEXON was looking to develop immersive games for others who have a strong IP? Or actually, do you have capacity to do that? Or actually, are you already developing games that have not been announced?
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Thanks for your question. This is Owen. The fundamental answer to your question is we really like our own IP. As you've heard us say before, probably part of focus is focusing on our own IP. The good news is we have some of the biggest IP in the entire world. You can see this in our investor deck, but Dungeon & Fighter, for example, has generated well over JPY 20 billion in life-to-date revenue. It's got many players around the world. These are some of the biggest IP in the entire entertainment industry. All the benefits of that accrue to us when we build that out and do that well. We like to do that.
We have, from time to time, decided to work with some external partners, or explore the ability to work with them in ways that we think are really interesting, with people who have great intellectual property and are willing to work with us in a way that makes sense for both parties. Typically, that includes a reasonable sharing of upside and also a very long-term focus because virtual worlds are designed for decades. We made an announcement last year about our partnership with Games Workshop for the Warhammer Age of Sigmar franchise. We haven't talked about it much since then. We've been developing that. It's unusual to do this. Those are special situations for us because we are so much focused on our own intellectual property which is so big.
Thanks very much.
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If I could just add a couple more points here just to give you some benchmarking and just as a reminder. The Dungeon & Fighter franchise has been played by over 850 million people worldwide. That's just a very large number. MapleStory has been played by over 180 million people worldwide. In terms of life-to-date franchise revenue, it's roughly the size of one of Disney's biggest franchise, the Frozen franchise. These are very big franchises. They're big. The second point that I would make relative to this question is, it's our view that one of the most rare commodities in the world right now is the ability to make a game last and grow for decades on end. That's very special indeed.
The opportunity costs are therefore very high. We want to be very judicious and very focused in how we leverage those very specialized capabilities.
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Thanks very much.
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Thank you.
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This concludes the question- and- answer session. Mr. Kawai, 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 investor relations at investors@nexon.co.jp should you have any further questions. We appreciate your interest in NEXON and look forward to meeting with 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.