South Korea’s game industry generates more export revenue than the country’s music, film, television, animation, and advertising sectors combined — and still receives less than seven percent of the government’s content industry budget. On Tuesday, the Ministry of Culture, Sports and Tourism moved to address that imbalance directly, unveiling a new funding track that would multiply the per-project grant ceiling six-fold for the studios most likely to produce the next generation of globally competitive Korean games.

(Exchange rate as of July 28, 2026; all Korean won figures are converted to US dollars at the live mid-market rate of ₩1,465 per dollar. Conversions are approximate.)

The announcement came at a policy forum held at the National Assembly Members’ Office Building in Seoul, titled “The Role of the Game Industry and Strengthening Policy Status for the K-Culture ₩400 Trillion Era.” Choi Won-seok, director of the Game Content Industry Division at the Ministry of Culture, Sports and Tourism, outlined a multi-part agenda covering production support, AI integration subsidies, indie grants, export promotion, anti-piracy enforcement, and a production tax credit battle that has stalled in the Ministry of Economy and Finance.

Per-Project Grants Would Rise From $341K to $2M Under FY2027 Proposal

The centerpiece of Tuesday’s announcement is a new budget track targeting what the Ministry calls the junggan heori (중간 허리, “middle waist”) of the industry — studios developing games with production budgets between ₩10 billion and ₩50 billion (approximately $6.8 million to $34.1 million).

Under the current system, the maximum government grant per game project is approximately ₩500 million (approximately $341,000). The new track, if approved in the FY2027 budget process, would allow grants of up to ₩3 billion (approximately $2.0 million) per project — a six-fold increase. Choi confirmed the Ministry is in active negotiations with the Ministry of Economy and Finance, and that the proposal would be submitted for inclusion in next year’s spending plan.

Budget approval is not guaranteed. The FY2027 plan requires negotiation with the Ministry of Economy and Finance, followed by National Assembly approval, both expected in fall 2026. The forum was itself designed in part to build legislative backing before that window opens.

Games Account for 60% of Korea’s Content Exports but Just 7% of Its Content Budget

The structural case for the increase was laid out by Song Jin, head of the Policy Research Division at the Korea Creative Content Agency (KOCCA), using data from the 2025 Korea Game White Paper published in March 2026.

Korea’s game industry posted ₩23.85 trillion (approximately $16.3 billion) in domestic revenue in 2024, up 3.9% year-on-year. Exports reached $8.5 billion in 2024, a 1.3% increase, and accounted for 60.4% of South Korea’s total content export revenue of $14.1 billion. South Korea holds the world’s fourth-largest game market by revenue, behind only China, the United States, and Japan.

Despite that contribution, games received just ₩112.3 billion (approximately $76.7 million) out of the current total content industry budget of ₩1.6177 trillion (approximately $1.10 billion) — a 6.9% share. The Ministry has set a K-Culture market target of ₩400 trillion (approximately $273 billion) by 2030, with cultural exports targeted at $110 billion. KOCCA modeling presented at the forum estimated that reaching those targets without additional policy investment would be difficult even with annual budget increases of 10%.

Song Jin told attendees that government spending functions as a catalyst rather than a substitute for private capital: every $100 million increase in Korean content exports is estimated by KOCCA to generate approximately $570 million in broader production ripple effects and $202 million in downstream exports from related industries such as food, beauty, and tourism.

What Gacha Concentration Did to Genre Diversity

The medium-budget development segment is particularly vulnerable because it falls between two existing support structures. Indie developers — studios with under ten people or a few projects — can access grant programs and incubators. The largest publishers, including Nexon, Krafton, Netmarble, and NCSoft, can self-finance large projects or tap capital markets. Studios developing games with budgets of ₩10 billion to ₩50 billion ($6.8M–$34.1M) face development timelines measured in years, mounting labor and outsourcing costs, and historically limited access to production financing — all while competing against global titles on increasingly crowded platforms.

Choi Won-seok named the over-concentration on massively multiplayer online role-playing games built around gacha monetization mechanics as a compounding factor. The gacha model — in which players spend money on randomized virtual item draws — generates reliable revenue for studios that build around it, but it has concentrated Korean game development capacity in a single high-margin genre. Labor costs represent 62% of game production budgets in Korea, rising to 66.7% when outsourced work is included, according to research presented at a separate National Assembly forum in March 2026. Studios that can generate consistent revenue through MMORPG gacha have fewer incentives to invest in unproven genres or original intellectual property.

The market consequences are now measurable. Mobile games account for 59.0% of Korean game revenue. PC game exports fell 6.3% in 2024, while console exports grew 15.1%, pointing to an industry that is already reorienting toward global tastes — but without adequate institutional support for studios capable of producing console-competitive content.

Domestically, the player base is shrinking. A 2025 KOCCA survey of 10,000 Korean game users found the overall game participation rate had fallen to 50.2% — the lowest point since data collection began in 2015, and down from a pandemic-era peak of approximately 74% in 2022. The survey found a compound annual contraction of 6.8% over five years. When respondents were asked why they no longer play games, 44% cited lack of time, 36% cited declining interest, and 34.9% cited new hobbies.

The real test of the mid-tier funding package is not whether the grants will be allocated, but whether they will produce non-MMORPG original intellectual property that can compete globally — before the domestic usage rate falls further and the budget window narrows.

A Broader Package: AI, Indie Studios, and Export Vouchers

The new production funding track is the headline measure, but the Ministry presented a wider set of programs at the forum.

Indie game expansion. KOCCA currently spends approximately ₩9 billion (approximately $6.1 million) annually supporting around 130 indie studios. Choi said the FY2027 target is to expand that to 200 or more companies, pending budget authority approval and National Assembly sign-off.

AI transformation subsidies. The Ministry launched a dedicated AI Transformation (AX) support program in FY2026, allocating ₩7.5 billion (approximately $5.1 million) to help 500 game companies integrate generative AI tools into their workflows. The program addresses a structural gap: while KOCCA data shows Korean game companies have adopted generative AI at roughly double the rate of the broader content sector — approximately 70% penetration — most of those adopting tools are larger studios. Smaller studios lack the in-house research teams to evaluate or deploy AI efficiently.

Export vouchers. The existing “Game Plus” export voucher program provides ₩100–200 million (approximately $68,000–$137,000 each) to roughly 40 companies annually, for a total spend of approximately ₩6 billion (approximately $4.1 million). The Ministry plans to expand the program and extend the Korean pavilion presence at global events beyond its current coverage at Gamescom, ChinaJoy, and Tokyo Game Show to include Latin America and Southeast Asia. A new ₩2.45 billion (approximately $1.7 million) pre-launch market-testing program, launched this year, funds local user evaluations in target markets before a game’s commercial release.

Policy finance. In June 2026, the Ministry co-established a ₩120 billion (approximately $81.9 million) game-focused investment fund with Nexon. The fund — composed of ₩60 billion from the Ministry and ₩60 billion from Nexon Partners — is structured to provide capital across growth stages, from seed investment for early-stage developers to follow-up Series A funding. Lee Jung-hun, CEO of Nexon Partners, said at the June launch that the domestic early-stage development market has been “facing a situation where even promising developers struggle to raise funds due to a cooling investment climate.” The Ministry is also exploring a new small-loan program offering approximately ₩500 million (approximately $341,000) per recipient to cover extended labor and operating costs during multi-year development cycles.

Youth employment. A new game company internship program, currently supporting 40 young hires, is planned to scale to triple digits next year.

The Production Tax Credit Remains Stalled

One major policy priority did not advance on Tuesday — and Choi Won-seok returned to it repeatedly. A proposed production cost tax credit for game development has remained outside the Korean tax code despite the fact that equivalent credits already apply to film, broadcast video content, and webtoons under the Restriction of Special Taxation Act.

The Ministry estimates the credit would reduce tax revenues by ₩1.5–1.7 trillion (approximately $1.0–1.2 billion) over five years, or roughly ₩330 billion (approximately $225 million) annually. That figure is the Ministry of Economy and Finance’s primary objection. Ministry modeling argues the credit would generate ₩2.255 trillion (approximately $1.54 billion) in production stimulus and ₩1.455 trillion (approximately $993 million) in value-added effects over the same period, with a stated benefit-cost ratio of 1.26.

The structural barrier is that existing R&D tax credits reach only about 2.1% of game companies, because eligibility requires dedicated research facilities, specialist headcount, and formal R&D departments that most studios cannot maintain. A dedicated game production tax credit — which would be project-based, matching the actual structure of game development — has not yet been enacted. A National Assembly bill (No. 2212301, accepted August 2025) to expand the video content tax credit to gaming content has entered deliberation but has not passed.

Assemblyman Kim Jae-won of the Fatherland Innovation Party, who addressed the forum, called for tax support alongside IP protection and global marketing assistance. Cho Young-gi, chairman of the Korea Game Industry Association, cited post-pandemic domestic market stagnation and intensifying global competition as reasons for urgency.

Anti-Piracy Enforcement Gets Sharper Teeth

The package also includes substantially tougher measures against illegal private servers. Private server operators — who run unlicensed copies of popular Korean online games, particularly older MMORPGs — siphon players and direct revenue from legitimate game operators. The Ministry announced plans to amend the Game Industry Act to allow emergency injunctive takedowns of private servers, introduce punitive damages of up to five times actual losses for operators successfully sued in court, and raise criminal penalties from a maximum of five years’ imprisonment or a ₩50 million fine (approximately $34,000) to seven years or ₩100 million (approximately $68,000).

What Budget Approval Requires

All programs announced Tuesday remain conditional on the FY2027 budget process. Negotiation with the Ministry of Economy and Finance must precede National Assembly approval, both expected in fall 2026. The gap between gaming’s contribution to Korea’s export economy and its share of content policy spending has become a rallying point for the industry and its allies in the legislature.

The K-Culture Value-Up Fund — a separate ₩150 billion (approximately $102 million) investment vehicle announced jointly by the Ministry of Culture and the Financial Services Commission on July 22 — will begin selecting fund managers through August 12, with final general partners to be named in September. That fund, the first time the government’s National Growth Fund has been applied to cultural policy, will invest across AI content, IP monetization, and large-scale content industries.

Whether budget authorities accept a six-fold per-project increase in production support, alongside new loan schemes, an expanded AI subsidy, and an accelerated IP investment fund, will determine how much of Tuesday’s agenda becomes operational by 2027. Korea’s game sector has already proven it can generate global revenue without proportionate policy support. The Ministry’s argument at the forum was that without a structural fix — starting with the funding gap at the missing middle — the industry will keep generating revenue in genres the domestic market is abandoning, and lose the budget window to build the original IP that global tastes are opening up for.

Frequently Asked QuestionsWhat is the “junggan heori” or middle-tier problem in Korean game development?

The term (중간 허리, “middle waist”) describes studios developing games with production budgets of ₩10–50 billion (approximately $6.8–34.1 million) — large enough that indie-style grants are inadequate, but too small and too risky for private equity or bank financing. These studios fall between the startup incubators available to small teams and the capital-market access available to large publishers like Nexon or Krafton. The result is a structural gap that concentrates Korean game development in the large studios capable of self-financing MMORPGs, while the middle-budget segment that typically generates genre diversity and original IP remains chronically undercapitalized.

How does Korea’s game funding gap compare to its tax credit situation?

Korean film, broadcast video, and webtoon production already benefit from a production cost tax credit under the Restriction of Special Taxation Act, with base rates of 5–15% depending on company size, plus additional credits. Game development receives no equivalent credit, and currently only about 2.1% of Korean game companies can access R&D tax credits — because those require dedicated research facilities and departments that most studios cannot establish. A National Assembly bill to expand the video content credit to gaming has been accepted for deliberation but has not passed as of July 2026. The tax credit question is separate from and complementary to the direct grant increases announced Tuesday.

Why is Korea’s domestic game usage rate declining, and how does it affect the funding argument?

A 2025 KOCCA survey found that only 50.2% of Koreans aged 10–69 played games in the previous year — the lowest level since 2015 and down from a pandemic-era peak of approximately 74%. The compound annual decline is 6.8% over five years. Respondents most commonly cited lack of time, declining interest, and new hobbies. Industry analysts link the decline partly to the saturation of gacha-based MMORPG monetization, which has driven away casual players while retaining a committed high-spending core. The Ministry’s mid-tier funding argument is implicitly a bet that genre diversification — enabled by grants to studios that can produce console-competitive, non-MMORPG original IP — can reverse or at least stabilize participation rates before the domestic market contracts further.

Does the new ₩3 billion grant fully cover the development cost of a mid-tier game?

No. At ₩3 billion (approximately $2.0 million), the proposed maximum grant covers a small fraction of a mid-budget game’s typical development cost. A studio targeting the ₩10–50 billion ($6.8M–$34.1M) production range would still need to raise the majority of its budget from the private market, policy finance vehicles like the new ₩120 billion Nexon co-fund, or its own revenue. The grant functions as a proof-of-concept catalyst — reducing early-stage risk enough to attract follow-on private investment — not as full project financing. That is why the Ministry’s parallel push for a production tax credit, an expanded IP investment fund, and a new small-loan program are all part of the same structural argument: no single instrument closes the mid-tier gap alone.