NetEase Response and Impact of Blizzard Shutdown in China
vor 9 tagen
Local publishing partner NetEase has issued a response following Activision Blizzard's announcement that game services in China would be shutdown this coming January, and we're examining the leadup and impact of the tumultuous decision which will impact hundreds of thousands of Chinese players.
Activision Blizzard Statement
Activision Blizzard announced in a press release today that most Blizzard game services in mainland China will be suspended due to a failure to renew their licensing agreement with publishing partner NetEase Inc. Upcoming releases of Dragonflight, Hearthstone, and Overwatch 2 will proceed as planned, but new sales and game services will be suspended on January 23rd.
Blizzard Entertainment, Inc. announced today that it will be suspending most Blizzard game services in mainland China due to the expiration of the current licensing agreements with NetEase, Inc. on January 23, 2023. This includes World of Warcraft®, Hearthstone®, Warcraft® III: Reforged, Overwatch®, the StarCraft® series, Diablo III®, and Heroes of the Storm®. Diablo Immortal® co-development and publishing is covered under a separate agreement between the two companies.
Blizzard Entertainment has had licensing agreements with NetEase since 2008, covering the publication of these Blizzard titles in China. The two parties have not reached a deal to renew the agreements that is consistent with Blizzard’s operating principles and commitments to players and employees, and the agreements are set to expire in January 2023.
We will suspend new sales in the coming days and Chinese players will be receiving details of how this will work soon. Upcoming releases for World of Warcraft: Dragonflight, Hearthstone: March of the Lich King, and season 2 of Overwatch 2 will proceed later this year.
“We’re immensely grateful for the passion our Chinese community has shown throughout the nearly 20 years we’ve been bringing our games to China through NetEase and other partners,” said Mike Ybarra, president, Blizzard Entertainment. “Their enthusiasm and creativity inspire us, and we are looking for alternatives to bring our games back to players in the future.”
Activision Hints at Dissolution
We were previously warned about growing troubles between Activision and NetEase earlier this month, by way of a paragraph buried halfway through
Activision's Third Quarter Financial Results Report
. Treated almost as a throwaway statement, it didn't even mention NetEase by name, and downplayed the impact by noting the market as only ~3% of ATVI's consolidated net revenues, though that doesn't quite tell the whole story.
Investor Earnings Report
Currently, we have licensing agreements with a third party covering the publication of several Blizzard titles in China. These agreements, which contributed approximately 3% of Activision Blizzard's consolidated net revenues in 2021, expire in January 2023. We are in discussions regarding the renewal of these agreements, but a mutually-satisfactory deal may not be reached. We continue to see substantial long-term growth opportunities for our business in the country. The co-development and publishing of Diablo Immortal is covered by a separate long-term agreement.
In truth, China is not a huge market for the entirety of Activision, as many of its games have had a difficult time establishing a foothold in that region. Tencent serves as the local publishing partner for most of their non-Blizzard games, but Candy Crush was
shut down earlier this year
trouble reaching the same amount of popularity
it enjoys in the west, leaving only Call of Duty showing serious success. The same isn't true for Blizzard Entertainment specifically, however, for which the China is a major market due to the long-term popularity of World of Warcraft, Hearthstone, Diablo, and Overwatch.
This makes the loss of China as a market not only devastating for Chinese players, who are now left wondering what, if any, steps will be taken to secure a new operations partner in the region, but also a potentially huge loss of revenue for Blizzard Entertainment specifically. The last time Chinese players experienced a disruption of services, upon switching publishing partners from The9 to NetEase in 2009, they were stuck in The
for more than a year after the rest of the world had moved onto
Wrath of the Lich King
issued a their own announcement
, echoing the difficulties in renewing their licensing agreement and Activison Blizzard's decision to end cooperation between the two companies.
NetEase responded that it has been doing its best to negotiate with Activision Blizzard, hoping to advance the contract renewal. After lengthy negotiations, we are still unable to agree on some key terms of cooperation with Activision Blizzard. We are very sorry that Activision Blizzard announced the termination of cooperation in advance today, and we will have to accept this decision. NetEase will continue to perform its duties and serve our players until the last moment.
Notably, Diablo Immortal, which was developed jointly between Blizzard and NetEase, is covered under a separate agreement and therefore
should not be shut down
alongside other services in January, although the inability for the two companies to reach an amenable agreement doesn't bode well for its future either.
that NetEase is already feeling the effects, falling 14% in Hong Kong after the announcement, its biggest intraday fall in more than a year, while local Chinese tech firms are selling fast.
More details will likely follow in the coming days, but for the time being it seems as though everyone is losing. Blizzard Entertainment is certain to lose revenue and a major foothold in the region, NetEase loses access to a powerful western partner, and Chinese players could lose access to Blizzard until and unless Activision secures new operations... though any disruption of service could prove long enough to ruin World of Warcraft's aging popularity entirely.
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