On a narrow street in Seochon, Seoul, a small game room still carries a sign reading “Since 1988.”
Behind the glass are machines that belong to a very different era of gaming: joysticks, buttons, screens, driving controls and physical cabinets.
For Koreans who grew up during the 1980s and 1990s, the electronic arcade — the oraksil — was one of the most important places to experience video games.
Before broadband internet, high-performance PCs and smartphones, a player often had to physically go somewhere to play the newest game.
Then Korea changed.
The PC bang arrived. StarCraft arrived. Broadband arrived.
Gaming moved from the joystick cabinet to the keyboard and mouse, and eventually from the PC bang into smartphones and powerful computers at home.
But artificial intelligence may now create an unexpected reversal.
The next major gaming interface may once again require the player to physically enter a place.
From Joysticks to PC Bangs
Video-game machines began appearing in Korea during the 1970s, while arcade culture expanded much more visibly during the 1980s and 1990s.
The interface was simple but physical.
- Move a joystick
- Press buttons
- Turn a steering wheel
- Step on pedals
- Move to music
- Compete with the person standing beside you
Games such as shooting titles, racing games and fighting games transformed the arcade machine into a physical interface between the human body and the digital world.
The early 1990s became an especially important period for competitive fighting games. Later, rhythm games such as Dance Dance Revolution, Pump It Up and EZ2DJ added even more physical movement.
But by the end of the decade, another business model was exploding.
1998 Changed Korean Gaming
The rise of the Korean PC bang was closely connected with the development of broadband internet and network gaming.
Historical research on Korea's internet industry shows that PC cafés expanded extremely rapidly during the late 1990s. By the end of 1999, Korea had approximately 15,150 internet cafés.
StarCraft, released in 1998, became one of the major drivers of that expansion.
Instead of competing against the person standing beside an arcade cabinet, players could now compete with hundreds of thousands of people connected through networks.
That was an enormous technological advantage.
| Gaming Era | Main Interface | Main Experience |
|---|---|---|
| 1970s–1990s Arcade | Joystick, buttons, wheel, pedals | Physical local gaming |
| Late 1990s–2010s PC Bang | Keyboard, mouse, headset | Online multiplayer and esports |
| 2010s–Today | Smartphone, PC, console | Always-connected personal gaming |
| Next? | Voice, body, vision, haptics and AI | Physical interaction with intelligent characters |
Korea Now Has 14 Times More PC Bangs Than Arcades
The latest Korea Creative Content Agency game-industry data shows how dramatically the market changed.
South Korea's game industry generated approximately KRW 23.85 trillion in revenue in 2024.
| 2024 Korean Game Industry Indicator | Data |
|---|---|
| Total Korean game market | KRW 23.8515 trillion |
| Mobile games | 59.0% |
| PC games | 25.2% |
| PC cafés | 9.5% |
| Console games | 5.0% |
| Arcade games | 1.2% |
| Arcade game centers | 0.2% |
| PC cafés | 7,243 establishments |
| Arcade centers | 515 establishments |
There were therefore roughly 14 PC cafés for every arcade center operating in Korea in 2024.
The revenue difference is even larger. PC café operations accounted for about 9.5% of the Korean game market, compared with only around 0.2% for arcade-center operations.
The traditional arcade has clearly become a niche business.
But something interesting is happening beneath those numbers.
PC Bangs Are Shrinking — Arcades Have Not Completely Disappeared
According to the previous Korea Creative Content Agency white paper, Korea had approximately 7,773 PC cafés and 505 arcade centers in 2023.
One year later, PC cafés had fallen to 7,243 — a decline of approximately 6.8%.
Arcade centers moved in the opposite direction, increasing slightly from 505 to 515.
This does not signal a major arcade revival.
But it suggests something important:
Physical gaming still has value when the physical experience itself cannot easily be reproduced at home.
The Old Arcade Had a Fundamental Economic Problem
A traditional arcade cabinet is a relatively inefficient computing platform.
One machine occupies physical space and frequently performs only one primary function.
A racing cabinet is a racing cabinet.
A shooting machine is a shooting machine.
A fighting-game cabinet normally runs a fixed game.
Meanwhile, one PC can run hundreds of games simply by changing software.
The PC bang therefore won partly because software became more valuable than the physical machine.
AI could change that equation again.
AI Is Transforming the NPC
Traditional non-player characters are largely scripted.
A developer determines what the NPC can say, where it moves, what triggers its actions and how it responds to the player.
Once players understand the script, the illusion disappears.
Generative AI changes this relationship.
An AI character can potentially:
- Understand natural speech
- Recognize what the player is doing
- Reason about changing situations
- Remember previous interactions
- Change strategies
- Cooperate with a human
- Respond differently each time
This is no longer theoretical.
KRAFTON Is Already Building the AI Teammate
Korean game company KRAFTON has been developing what it calls a Co-Playable Character, or CPC, together with NVIDIA ACE technology.
The concept differs from the traditional NPC because the AI character is intended to understand a player's situation and cooperate dynamically.
PUBG Ally, for example, can understand voice interaction, interpret the live game environment, coordinate with a player and respond with both speech and game actions.
The system has also been designed with short-term and long-term memory so that the character can retain relevant information about gameplay and the player.
KRAFTON opened PUBG Ally to a public beta in June 2026.
This is an important technological milestone.
If an AI character can understand what a player says and what is happening inside a digital battlefield, the next question is obvious:
What happens when the AI can also see the player's physical body?
Imagine an Arcade Where the NPC Can See You
The next arcade may not look like a row of traditional cabinets.
It could look more like a small physical arena.
Cameras and spatial sensors could determine where players are standing.
Computer vision could recognize body movement.
Microphones could allow players to speak naturally.
Large displays, projectors or mixed-reality headsets could place virtual characters inside the space.
Haptic equipment could add physical feedback.
The result would be fundamentally different from today's arcade.
A player could enter a room and hear:
“Someone is behind you.”
The player turns around.
The AI character recognizes the movement.
Another NPC blocks the exit.
The player shouts to an AI teammate.
The teammate responds differently according to the situation.
The next group entering the same room could experience an entirely different scenario.
The Machine Becomes a Physical AI Stage
This changes the economics of arcade equipment.
The old arcade machine sold repeated access to the same game.
An AI arcade could sell access to a continuously changing experience.
| Traditional Arcade | AI Physical Arcade |
|---|---|
| Fixed game logic | Generative scenarios |
| Scripted NPC | AI agent |
| Joystick and buttons | Body, voice, gesture and physical controls |
| 2D screen interaction | Spatial interaction |
| Mostly identical replay | Potentially different experience each session |
| Single-purpose cabinet | Software-defined physical arena |
This could become one of the most interesting commercial applications of Physical AI.
The Body Could Become the Controller Again
Modern gaming has continuously reduced the amount of physical movement required from the player.
The smartphone requires only fingers.
A PC uses hands, eyes and voice.
But entertainment venues have one advantage that home gaming cannot easily reproduce: space.
A commercial gaming venue can provide:
- Large walking areas
- Full-body tracking
- Motion platforms
- Large steering systems
- Physical weapons or tools
- Haptic vests
- Moving floors
- Environmental sound
- Wind and vibration
- Large displays and projection
AI can connect all of these systems to intelligent digital characters.
In other words, the arcade may evolve from a place where people operate machines into a place where people physically enter the game.
Why Korea Could Be an Ideal Test Market
Korea has several unusual advantages for this new category.
It already possesses a massive domestic gaming industry.
It has one of the world's strongest broadband and gaming cultures.
Korean companies are active in GPUs, displays, memory, cameras, sensors, robotics and AI.
Companies such as KRAFTON are already experimenting with AI-controlled characters.
Korea also has a dense network of shopping malls, entertainment districts and commercial buildings where location-based entertainment can be tested.
The country therefore contains most of the technologies required for a next-generation arcade ecosystem.
PC Bang Operators Could Also Participate
The future AI arcade does not necessarily need to replace the PC bang.
The two concepts could converge.
A large PC café could allocate part of its floor to physical gaming rooms.
Customers could play conventional PC games for several hours and then purchase a short premium AI experience.
This would allow PC bang operators to generate revenue from physical floor space rather than relying exclusively on hourly PC usage and food sales.
Shopping centers, cinemas, tourist districts and family entertainment centers could use the same model.
There Are Major Obstacles
The technology is promising, but commercial deployment will not be simple.
An AI physical arcade must solve several problems simultaneously.
- Latency: an AI character must respond almost immediately.
- Safety: players moving quickly in physical space can collide with walls, equipment or other players.
- Reliability: a technical failure can stop the entire attraction.
- AI behavior: characters need strict operational boundaries.
- Content: the experience must remain entertaining after repeated visits.
- Capital cost: sensors, GPUs, displays and physical systems can be expensive.
- Throughput: an operator must serve enough customers per hour to justify the real estate.
The winning platform therefore may not be the most technologically sophisticated one.
It will be the system that combines AI immersion with reliable commercial operation.
From NPC to Physical AI Character
The most important shift may ultimately be conceptual.
Today's AI NPC exists inside the screen.
Tomorrow's AI character may understand the physical player outside the screen.
Computer vision tells it where the player is.
Speech recognition tells it what the player says.
A language model interprets intent.
A game engine determines the digital environment.
Speakers, displays, robots, haptics or physical machines create the response.
At that point, the distinction between gaming AI and Physical AI begins to disappear.
DATAAD View
The traditional electronic arcade probably will not return in exactly the same form that existed in the 1980s.
There is little reason to place hundreds of simple joystick cabinets beside one another when consumers already own powerful gaming devices.
But the fundamental idea behind the arcade remains powerful.
People are willing to leave home and pay for an experience that they cannot reproduce at home.
That principle built cinemas, amusement parks, bowling centers, karaoke rooms and arcades.
AI could now dramatically increase the value of the physical gaming experience.
The next arcade may not consist of 50 machines.
It may consist of five intelligent rooms.
Inside each room, AI characters could talk with players, remember them, cooperate with them, challenge them and react to their physical movements.
The joystick was the interface of the first arcade generation.
The keyboard and mouse defined the PC bang.
The touchscreen defined mobile gaming.
The human body itself may become the controller of the AI gaming era.
If that happens, the small “Since 1988” arcade still standing in Seochon may not simply be a relic of Korea's gaming past.
It may also remind us where the next generation of gaming is going:
back into the physical world.
Data Note: The Korea Creative Content Agency classifies arcade games and arcade game-center operations separately. The figures in this article therefore distinguish game/equipment revenue from physical arcade-venue revenue. Future AI arcade scenarios described above are DATAAD analysis rather than current market forecasts.
Sources: Korea Creative Content Agency, 2025 Game Industry White Paper; Korea Creative Content Agency, 2024 Game Industry White Paper; Korea Internet History Project; KRAFTON; NVIDIA ACE technical materials; historical research on Korean arcade and PC bang culture.
Field observation: Seochon, Seoul, August 29, 2026.