Regulatory nod for NetEase offer defuses turf war

PUBLISHED : Tuesday, 16 February, 2010, 12:00am
UPDATED : Tuesday, 16 February, 2010, 12:00am

For millions of internet gamers in China, the Year of the Tiger started with a roar of approval after the latest edition of the popular World of Warcraft series was finally cleared for commercial operations on the mainland.

The General Administration of Press and Publication (GAPP) at the weekend gave the approval to a affiliate, Shanghai EaseNet Network Technology, to offer the expansion pack The Burning Crusade to its subscribers.

The GAPP approval is expected to defuse tensions with rival regulator the Ministry of Culture and help clarify the mainland's dual approval process for new online games, analysts said.

It is also a welcome development for the mainland's 14.6 million registered World of Warcraft users and NetEase, which succeeded The9 in the middle of last year as the franchise's domestic operator and partner of United States-based game developer Blizzard Entertainment.

'We expect the market to react favourably to this good news,' a report from Deutsche Bank in Hong Kong said.

NetEase, the mainland's No3 online games operator, is expected to offer greater competition to market leaders Tencent Holdings and Shanda Interactive Entertainment.

The report, however, noted that 'the benefits of regulatory clarity' far outweigh increased competition in the sector.

Michael Clendenin, the managing director at research and consultancy firm RedTech Advisors (China), said: 'I don't think the government wants to see its family squabbles turned into soap opera fodder in the future.'

In November last year, the GAPP suspended approval and threatened to shut down operations of World of Warcraft after NetEase began operating the game and its expansion pack before the agency's all-clear.

NetEase thought approval from the Ministry of Culture, which it had already secured, was all it needed.

That interpretation was based on a notice issued on September 7 last year by the State Commission Office for Public Sector Reform, which said the Ministry of Culture was responsible for overseeing the animation and online game industries.

But the GAPP, which had been the key regulator for online games since they were introduced on the mainland a decade ago, issued its own interpretation on September 28.

The agency said all games needed its approval.

The Ministry of Culture responded with a press conference a few days later to say the GAPP had overstepped its authority.

Despite the resolution of NetEase's case, uncertainties still remain for the online games sector.

'There's more potential for flare-ups because there will be more regulation, not less, in the coming months,' Clendenin said. 'And in such a fast-growing industry, any bureaucrat wielding an opinion and a little power will want to be heard.'