Activision Blizzard ends gaming deal with China’s NetEase

Blizzard Entertainment’s booth at Chinajoy Expo in Shanghai, China on 2/8/2019.

CFOTO | Future Publishing | Getty Images

Activision Blizzard and Chinese gambling company NetEase are ending their 14-year licensing deal, a move that will result in the closure of successful game franchises like World of Warcraft and Overwatch in China.

The deal, which was first signed in August 2008, now expires in January 2023 after the two companies failed to agree on renewal terms. World of Warcraft, a massively multiplayer online game, is very popular in China.

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Hong Kong-listed NetEase shares fell 9% on Thursday.

In a statement, NetEase CEO William Ding said that Blizzard and NetEase had “material differences on key terms” during the contract negotiations.

“We are honored to have had the privilege of serving our players over the past 14 years and shared many precious moments with them during that time,” Ding said.

“We will continue our promise to serve our players well until the last minute. We will ensure that our players’ data and assets are well protected across all our games.”

This means Chinese gamers will no longer be able to play titles from blockbuster franchises like World of Warcraft, StarCraft, Hearthstone, Overwatch and Diablo, which US tech giant Microsoft is acquiring in a $69 billion deal to buy Activision Blizzard becomes.

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Sales of new Blizzard games will be suspended in mainland China “in the coming days,” Blizzard said. Upcoming releases for World of Warcraft: Dragonflight, Hearthstone: March of the Lich King and Season 2 of Overwatch 2 will continue as usual later this year, it added.

“We’re very grateful for the passion our Chinese community has shown over the nearly 20 years we’ve been bringing our games to China through NetEase and other partners,” said Blizzard President Mike Ybarra.

“Their enthusiasm and creativity inspire us, and we’re looking at alternatives to bring our games back to players in the future.”

NetEase said the net revenue and net profit contribution from Blizzard’s licensed games was “a low single-digit percentage” of total sales and profits for 2021 and for the first nine months of this year.

The end of the agreement “will not have a material impact on NetEase’s financial results,” the company added.

The release of the highly anticipated mobile and PC game Diablo Immortal in China will not be affected as this is the subject of a separate agreement between the companies.

The game’s release had been delayed beyond June 23 after problems with network and performance optimizations.

Thursday’s move comes at a sensitive time for China’s games industry, which is just emerging from a month-long freeze on regulatory approvals. The industry has come under intense scrutiny amid broader regulatory tightening for China’s domestic tech companies.

— CNBC’s Arjun Kharpal contributed to this report.

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