For years, Western video games served as cultural touchstones for many young people in China, leaving a generation with fond memories of late nights packed in smoke-filled internet cafes. Now, the next generation may have to make do with a more homegrown selection.
Beginning on Jan. 23, some of America’s most fabled gaming franchises including World of Warcraft and Diablo will no longer be offered in China, ending a 14-year partnership between two of the world’s largest gaming companies.
Blizzard Entertainment, a division of Activision Blizzard, announced on Thursday that it was suspending most of its gaming services in China, the result of the gaming giant’s failure to renew a licensing agreement with its Chinese publisher and internet company NetEase.
The U.S. game developer said in a statement that it could not reach a deal with NetEase that was “consistent with Blizzard’s operating principles and commitments to players and employees.” It would suspend sales to China in the coming days.
Compared with many Western countries, China, the world’s largest gaming market, places more stringent restrictions on its games, regulating their content and monetization methods, as well as placing limits onthe number of new releases through a licensing system. Foreign game developers like Blizzard are required to partner with local Chinese publishers to distribute their games to Chinese customers.
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For over a decade, the two companies renewed their agreement every few years. But now, as China places ever more emphasis on security and state prerogatives over its economy, an earlier era of partnerships with foreign companies is in doubt.
In August of last year, Beijing imposed a crackdown on games that made already strict limits even tougher. Those rules barred Chinese children and teenagers from online gaming on school days, and limited them to one hour a day on weekend and holiday evenings. China also placed tougher restrictions on gaming licenses.
Those rules were part of a wider government crackdown that has pulled some of China’s most valuable technology companies including NetEase closer to central government priorities such as antitrust and data security.
In NetEase’s news release, William Ding, the chief executive, cited “material differences on key terms” as the reason for the partnership’s dissolution. He added that he would ensure that players’ data and assets were well protected.
The fallout is unlikely to have a strong impact on the two companies’ bottom lines, said Chenyu Cui, an analyst at the research consultancy Omdia.
“NetEase’s online games business has generated more revenue from mobile games,” she said. Other games such as Naraka Bladepoint, the Westward Journey series and Justice are its most lucrative products. The company reported that the percentage of total income in 2021 from Blizzard games was in the “low single digits.”
Blizzard, too, appeared to have limited impact from the decision. Its biggest revenue generator, Diablo Immortal, an online role-playing game codeveloped by NetEase, is excluded from the agreement. Licensing agreements made up 3 percent of Blizzard’s net revenue in 2021, according to its quarterly report.
But investors remained jittery. In Hong Kong, NetEase shares dropped 9 percent on Thursday.
The breakup with NetEase does not necessitate Blizzard’s exit from China, analysts said. Before partnering with NetEase in 2008, Blizzard worked with a distributor called The9. The American game developer could find another Chinese gaming publisher, such as Tencent, which could reissue Blizzard games in the country.
But new partnerships appear uncertain. Xi Jinping, China’s leader, has ensured that private companies in China hew closely to the Communist Party’s priorities, even at the cost of Western collaborations.
For a generation of gamers and Chinese e-sports players, the departure of such American staples as World of Warcraft and Overwatch will leave a deep cultural mark, says Daniel Ahmad, a senior analyst at Niko Partners.
“Especially among those born, for example, in the ’80s and ’90s, they grew up playing Blizzard PC games in China,” he said. “Even if they don’t play it anymore, they’ll still be aware that this was a big, big shift in the space.”
That shift already began to crystallize on the Chinese internet. Shortly after Blizzard’s announcement, the news went viral on Weibo, China’s Twitter-like platform, with one hashtag garnering 340 million views. In the comments, those who had grown up playing Blizzard titles expressed their shock and sorrow, recalling their fondness for American games they had loved and cherished for over a decade.
Olivia Wang contributed reporting.