US publisher Blizzard pushes ahead with suspension of games in China after NetEase rejects 6-month extension of partnership

NetEase says it rejected the offer because it was ‘unfair’ that Blizzard was negotiating with other companies for a three-year term at the same time
Operations of popular Blizzard games on the mainland, including World of Warcraft and Overwatch, will be suspended from January 23

Video gaming

Ann Caoin Shanghai

Published: 9:00pm, 17 Jan 2023

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US video game publisher Blizzard Entertainment will next Monday suspend the operations of World of Warcraft and its other popular online games in mainland China, following failed talks with NetEase for a six-month extension of their licensing agreement.

Hangzhou-based NetEase rejected the proposed extension offered by Blizzard last week, according to a statement on Tuesday posted by the US firm’s local office on Chinese microblogging service Weibo. The short-term extension was an option under the two companies’ most recent deal in 2019.

“Unfortunately, NetEase is unwilling to extend the game service for six months based on the existing cooperation terms, while we are looking for a new partner, so that everyone can continue to play during this time,” the Blizzard post said.

NetEase and Blizzard, a subsidiary of video game holding company Activision Blizzard, separately announced last November that their 14-year licensing agreement on the mainland – covering several Blizzard-developed titles including World of Warcraft, Overwatch, Hearthstone and Diablo III – will conclude on January 23 because the two sides could not reach a new deal.

Chinese internet and video gaming giant NetEase has moved on from its relationship with Blizzard Entertainment after turning down a proposed six-month extension of its licensing agreement with the US game publisher. Photo: Shutterstock

Blizzard’s six-month extension offer, however, was made after the local team responsible for operating its games on the mainland was disbanded. Most of that team under NetEase affiliate Shanghai EaseNet Network Technology was already laid off, while others were transferred internally, according to a South China Morning Post report last week, citing three people familiar with the matter.

NetEase issued a statement on its official WeChat account late Tuesday, saying it rejected the offer because it was “unfair” that Blizzard was negotiating with other companies for a three-year term at the same time. NetEase said Blizzard’s actions were “outrageous, inappropriate and not in line with business logic”.

It also denied a Chinese media report on Tuesday that said the end of the 14-year partnership was due to NetEase’s intention to seize control of the intellectual property of Blizzard titles.

Despite its latest setback, Blizzard said in its Weibo post on Tuesday that it “will not give up” and will work hard to find a new partner that “shares the same beliefs” on how to best serve its users in mainland China, the world’s biggest market for video games.

Blizzard’s hopes of landing another licensing agreement with a different Chinese partner reflects the continued importance of the vast mainland market to the global video gaming industry.

“We believe that Blizzard will announce an agreement with a new partner after January to relaunch its games in the country, but we don’t expect the titles to go live in 2023 due to the stringent regulatory process,” Niko Partners, a market research and consulting firm covering Asia’s video gaming market, said in a report published earlier this month.

China’s video gaming market recorded total revenue of 269.5 billion yuan (US$40.1 billion) last year, down 10.3 per cent from 2021, with the total number of gamers slipping 0.33 per cent to 664 million, according to a report from the Gaming Publishing Committee of the China Audio-Video and Digital Publishing Association, the country’s semi-official gaming industry trade group.

Still, Blizzard’s statement on the failed negotiations with NetEase was received poorly by tens of thousands of its mainland users, who complained about the situation on Chinese social media. It became the top trending topic on Weibo.

“The [Shanghai] team has been disbanded, and you waited two weeks before negotiating with them to postpone [the suspension of services]?” a post by Weibo user “Ziranjuan” asked Blizzard. “If you really are concerned about local players, why didn’t you do that earlier?”

Another Weibo user, with the handle “Naxiaodu”, posted a more emotional message to Blizzard. “Since you fired the first salvo to end the partnership, this made me want to never play any Blizzard game again. Shame on you!”

To help assuage fears about lost game data when its local services are suspended, Blizzard said in its Weibo post that a new function will be launched this Wednesday for World of Warcraft players on the mainland to store such data on their own devices.

That followed a request made last month by John Hight, the general manager of the World of Warcraft franchise, for mainland-based players to download their relevant data – “game characters, props and progress” – onto their own devices before the game’s operations are suspended on January 23.

NetEase already has its own data storage service for gamers. In November, the company said that all account data for Blizzard games originating from mainland China would be “sealed”. It promised to “properly handle game data in accordance with the requirements of laws and regulations”.

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