Home > News content

Who has been affected by the end of NetEase Blizzard's 14-year cooperation?

via:新浪科技     time:2022/11/18 23:04:39     readed:86

Reporter/Zhang Min

Reporter Trainee/Liu Zhao

On Nov 17, news of the end of cooperation between NetEase and Blizzard Entertainment was trending. Blizzard Entertainment said that the current license agreement with NetEase will expire on January 23, 2023, and will suspend most of Blizzard's game services in mainland China. Affected by the news, NetEase opened down in the Hong Kong stock market on November 17, and closed at HK $103.50, down 9.05%.

NetEase Blizzard officially parted ways

In August 2008, NetEase and Blizzard entered into a proxy agreement to acquire the exclusive rights to operate StarCraft II and Warcraft III. Since then, NetEase has successively acquired the operation rights of Blizzard Entertainment's World of Warcraft, Diablo III, Hearthstone, Overwatch, Heroes of the Storm and other games in mainland China, and the agency agreement has been smoothly renewed.

However, after 14 years of cooperation, both parties have changed forever. On November 8, 2022, Activision Blizzard announced Q3 financial statement for 2022, showing that the agency agreement signed by the company in China will expire in January 2023. Currently, both parties are discussing to renew the agreement, but the final result may not be satisfactory to both parties.

Blizzard Entertainment, a subsidiary of Activision Blizzard, announced on Nov 17 that it would suspend most of Blizzard's game services in the Chinese mainland due to the expiration of its current licensing agreement with NetEase on Jan 23, 2023. "No renewal agreements have been reached that are consistent with Blizzard's operating principles and commitments to its players and employees. These agreements will expire in January 2023," the statement said.

"We have been bringing our games to China through NetEase and other partners for nearly 20 years, and we are deeply grateful for the enthusiasm shown by the Chinese community," said MikeYbarra, President of Blizzard Entertainment. We are inspired by their passion and creativity and are looking for alternatives to bring our games back to our players in the future."

In response to Blizzard's statement, NetEase replied to the Securities Daily reporter, "The company has been doing its best to negotiate with Activision Blizzard, hoping to push forward the renewal of contract. After prolonged negotiations, Activision Blizzard and Activision Blizzard were unable to reach an agreement on some key terms of the partnership. The company regrets that Activision Blizzard has announced the end of the partnership and we have to accept this decision. NetEase will continue to fulfill its duties and serve players until the last moment."

On the afternoon of November 17, Shanghai Wangzhiyi Network Technology Development Co., LTD., the operating body of Blizzard Entertainment in mainland China, also officially announced that due to the expiration of the agreement with its partner Blizzard Entertainment, World of Warcraft, Hearthstone, Overwatch, Diablo III, Starcraft II, Warcraft III: Remastered, and Heroes of the Storm, which are operated by Shanghai Eyi Network Technology Development Co., LTD in mainland China, will cease operation at 0:00 on January 24, 2023.

It will not have a material impact on NetEase's performance

Benefiting from the vast game market in mainland China, the initial cooperation between NetEase and Blizzard Entertainment was very successful. The Chinese market accounted for a large share of Blizzard Entertainment's global revenue, and the global synchronous operation model reached by Blizzard and NetEase later enabled Blizzard to gain more market share for its games.

With the development of self-developed games, the popularity and reputation of Blizzard Entertainment series, and the summary of relevant research and development and operation experience, NetEase gradually surpassed Shanda and became the second largest game manufacturer in China.

However, due to the increasing longevity of its games and market conditions, many of Blizzard's games are losing players. In addition, the continuous release of new games in the market has caused Blizzard's games to decline in word-of-mouth rankings. In spite of this, Blizzard Entertainment has been slow to develop new games. Not only have no new IP products been released for five years since 2017, but the highly anticipated Overwatch 2 and Diablo 4 games have not been released as scheduled. Even under the influence of COVID-19 and other factors, the carnival, the most anticipated carnival for Blizzard Entertainment players every year, has been suspended since 2021.

On the evening of November 17, NetEase announced that the net revenue and net profit of these licensed Blizzard games in 2021 and the first nine months of 2022 accounted for a low percentage of NetEase's total net revenue and net profit, only in the low single digits. The expiration of these licenses will not have a material impact on NetEase's financial results.

"The benefits of Blizzard Entertainment's termination of its cooperation with NetEase are limited." Chen Cong, a game practitioner and pan-entertainment investor, told Securities Daily, "In recent years, Onmyoji, the Fifth Personality, Light Encounter, Tomorrow After and other games independently developed by NetEase have been well received, especially Onmyoji, which has become a hit. Blizzard Entertainment hasn't had a lot of good games in recent years."

Activision Blizzard reported a 10% year-over-year increase in net revenue for the third quarter of 2022, citing the launch of its Diablo mobile game in China in July. These figures prove that the Chinese market is generating significant revenue for the company. The financial statement also noted that the agency games signed with NetEase will only account for 3% of the company's net revenue in 2021.

During NetEase's third quarter earnings call, NetEase Chairman and CEO Lei Ding responded to the termination of the partnership with Blizzard Entertainment by saying, "We were very eager to continue to represent Blizzard Games. We worked very hard to do so, but the negotiations were far more difficult than expected. The key core terms, including long-term operations and player rights, were proposed by Blizzard and are unacceptable to us."

Jiang Han, a senior researcher of Pangu Think Tank, said in an interview with Securities Daily, "Currently, China's game industry has formed a relatively complete industrial pattern, in which NetEase games occupies the leading position. Losing the agency operation right of Blizzard games will have a certain impact on NetEase, but the impact will not be too great. NetEase has invested a lot of business. There are a lot of game categories, so the impact is limited."

Several game makers are vying for Blizzard's rights

For Blizzard Entertainment, the trickier thing now is to find an agent in the Chinese market as soon as possible. After all, for Blizzard Entertainment, such a large consumer market is obviously difficult to give up.

"At this time, it can be revealed that there are more than one domestic game vendors vying for the rights to represent Blizzard Entertainment in China, but it appears that Blizzard Entertainment has not made a final choice." "Said an employee of a gaming company who declined to be named.

On the investor interaction platform, many investors consulted many listed companies in the game industry, such as Giant Network, Glacier Network, Perfect World, Fast You Technology, Shengtian Network, Boosi Software and Shunwang Technology, regarding the new agent operator of Baofeng Entertainment. Shun network technology said that the company and Blizzard in advertising marketing cooperation, game cps and other in-depth cooperation. For Blizzard NetEase formal "break up" will affect the company's business, Shun net technology related people said that the company's business is independent operation, this matter will not affect the company's business. The person said it was unclear whether Shunwang would seek Blizzard's rights to represent the company in China. In addition, game maker Miha You has denied that it will take over Blizzard's operations in China.

"Blizzard Entertainment cannot give up such a big consumer market as China, but it can increase its profit level by charging high fees by terminating the partnership. Under such circumstances, the so-called termination of cooperation is not a real termination, but a retreat to advance. Once the Chinese company has paid sufficient fees to Blizzard Entertainment to achieve the expected level of profits, the agency agreement will be concluded." Jiang Han said.

translate engine: Youdao

China IT News APP

Download China IT News APP

Please rate this news

The average score will be displayed after you score.

Post comment

Do not see clearly? Click for a new code.

User comments