NetEase Inc (網易) and Blizzard Entertainment Inc plan to end their 14-year partnership after January, depriving the Chinese firm of a slice of revenue and suspending service for some of the country’s most popular games.
The Hangzhou-based publishing giant and Activision Blizzard Inc subsidiary failed to agree on an extension to their long-running collaboration, which had encompassed famed franchises such as StarCraft, Diablo, Overwatch and World of Warcraft.
Blizzard plans to suspend most online game services in mainland China from Jan. 23, the US company said on Wednesday.
Photo: Bloomberg
Game sales are also to halt in the coming days.
Beyond financial terms, key sticking points to the NetEase extension were ownership of intellectual property and control of the data of millions of players across China, people familiar with the discussions said.
The affected games represented a low-single-digit percentage of NetEase’s total revenue and profit, the Hangzhou firm said in a separate statement.
“We have put in a great deal of effort and tried with our utmost sincerity to negotiate with Activision Blizzard so that we could continue our collaboration and serve the many dedicated players in China,” NetEase founder and CEO William Ding (丁磊) said in the statement. “However, there were material differences on key terms and we could not reach an agreement.”
NetEase stock fell as much as 15 percent in Hong Kong after the announcement, its biggest intraday fall in more than a year, amid a wider sell-off among Chinese tech firms.
Originally signed in 2008 and last renewed in 2019, the distribution accord has been fruitful for both companies, feeding NetEase with globally recognized hits and giving Activision a gateway into the world’s biggest PC and mobile gaming arena.
China contributed at least 3 percent of Activision’s net revenue last year and is a significant driver of future growth. It accounted for more than US$400 million in e-sports revenue last year and more than 400 million fans. Blizzard has several competitive gaming organizations, such as the Overwatch League, that include Chinese teams.
China’s Internet sector has been radically reconfigured in recent years by a broad government crackdown that put stricter limits on gaming time for youths and halted licensing of new games for months.
Still, NetEase was this summer able to successfully release Diablo Immortal, a mobile role-
playing game tapping one of Blizzard’s prized assets.
Players would still be able to play Diablo Immortal in China after January because that game is subject to a separate long-term deal.
Collaboration with China’s big two game publishers, NetEase and Tencent Holdings Ltd (騰訊), has been the most reliable way for foreign companies to enter and stay in the Chinese market.
Nintendo Co, for instance, uses Tencent as its local distributor for the Switch console and software.
However, even with Tencent’s help, Epic Games Inc last year gave up on its multiyear effort to bring its best-known game, online shooter Fortnite, to the market after failing to get regulator approval.
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