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The dramatic split between Microsoft and Chinese gaming giant NetEase last year ended a nearly 15-year partnership. This affected not only investors but millions of gamers in China. Reconciliation will be good news for all parties involved.
NetEase and US gaming rival Microsoft, which bought Activision Blizzard last year, said on Wednesday they would bring back popular Blizzard games such as online role-playing game World of Warcraft to China starting this summer. A dispute last year over control of intellectual property led to the pair suing each other, Microsoft ending their partnership and taking the game offline.
NetEase has a lot to gain from reconciliation. Blizzard's titles are very popular in mainland China. Other hit movies include Hearthstone and Diablo III. World of Warcraft alone has more than 3 million players in China. Analysts estimate that NetEase, as Blizzard's game publisher in China, generated as much as 5 percent of its total sales from Blizzard games before ending the partnership.
It is a perfect match. NetEase is looking for growth abroad. Getting their titles on Microsoft's Xbox and other gaming platforms is key. Microsoft needs NetEase too. Foreign game companies must have a local publisher to offer video games in China, which has a $43 billion gaming market. Obtaining new licenses for its games with a new publisher from local regulatory bodies would also have meant delays due to the long approvals process.
Shares of NetEase, which lost more than 14 percent when reports of the breakup were first published in 2022, have risen 9 percent in the past year, although they still trade at a significant discount to their regional peers. .
Having Blizzard game licenses in its portfolio doesn't just boost its bottom line. More importantly, it gives NetEase an advantage over Tencent, its biggest domestic competitor. It also comes at a perfect time as Tencent looks to score its next big hit, after reporting weaker-than-expected revenue growth in the fourth quarter, when game sales were disappointing. Tencent also owns the online multiplayer game Tarisland, which is seen as a direct competitor to World of Warcraft.
The return of Blizzard games to China will help ease investors' concerns that the world's largest online gaming market may be starting to close itself off to foreign games. With Chinese regulators increasing the number of commercial license approvals for new video game titles this year, there is reason to be optimistic about local gaming companies.
june.yoon@ft.com
