China has some of the strictest regulations when it comes to video games. Foreign companies wishing to get into the massive Chinese market need to find a partner from the country that will publish their games. Lately, the government has been very stringent in granting licenses for new games.
Blizzard recently announced that it will be shutting down its games in China after it was unable to strike a new deal with the current Chinese license holder, NetEase. The current license expires on January 23, 2023 after fourteen years of partnership between the two companies.
With the expiration of its license, players from China will no longer have access to almost all of the Blizzard games available in the country. Access to World of Warcraft, Hearthstone, Warcraft III: Reforged, Overwatch 2, the StarCraft series, Diablo 3, and The Heroes of the Storm will be suspended after January 23.
Diablo Immortal, which was co-developed by NetEase, is covered by a different licensing agreement. The game will still be accessible after Blizzard shuts down the other games.
Blizzard revealed that it has not been able to reach a new deal with NetEase "that is consistent with Blizzard’s operating principles and commitments to players and employees, and the agreements are set to expire in January 2023."
Blizzard’s President Mike Ybarra acknowledged the player base in the country and its interest in continuing to provide games for the Chinese market. "We’re immensely grateful for the passion our Chinese community has shown throughout the nearly 20 years we’ve been bringing our games to China through NetEase and other partners," Ybarra said. "Their enthusiasm and creativity inspire us, and we are looking for alternatives to bring our games back to players in the future."
NetEase issued its own statement claiming that there were "material differences on key terms" and referenced protecting the "data and assets" of Chinese players.
"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 CEO William Ding explains.
"We are honored to have had the privilege of serving our gamers over the past 14 years and have shared many precious moments with them during that time. We will continue our promise to serve our players well until the last minute. We will make sure our players’ data and assets are well protected in all of our games."
NetEase claims that the expiration of the licensing deal will not have a material impact on the company’s financial results. NetEase further revealed that the net income contribution and net revenue from the deal represent "low single digits" in terms of percentage with regards to the total income and revenue of the company in 2021 and 2022.
Simon Zhu, NetEase’s Head of Partnership, posted a rather blunt message on social media hinting at the parting was not a pleasant one. Zhu said, "One day, when what has happened behind the scene could be told, developers and gamers will have a whole new level of understanding of how much damage a jerk can make."
Blizzard and NetEase canceled a World of Warcraft mobile game that has been in development for three years. The game was reportedly scrapped after a dispute over the financial terms for the title.