Activision Blizzard, the video game developer that owns titles such as World of Warcraft and Call of Duty, will not be renewing its license with NetEase for the distribution of Blizzard games in China as the two parties failed to reach an agreement.
According to Activision’s official press release, the current license is set to expire in January 2023. The deal allows Chinese gamers to access some of the company’s most popular franchises including World of Warcraft®, Overwatch®, and Diablo.
However, Activision clarify that some initiatives between the two companies including the development of Diablo Immortal® will remain active as they are covered by a separate agreement.
The California-based gaming company cited that they were not able to reach terms that were “consistent with Blizzard’s operating principles and commitments to players and employees” as the reason why they failed to renew the NetEase agreement.
Mike Ybarra, the president of Blizzard Entertainment, commented: “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”.
He added: “Their enthusiasm and creativity inspire us, and we are looking for alternatives to bring our games back to players in the future”.
Blizzard expects to brief its gamers in the country in the coming days about how it plans to provide them with access to their beloved titles. In addition, the firm reassured the public that some of its hottest upcoming releases including World of Warcraft: Dragonflight and season 2 of Overwatch are still scheduled to be released later this year.
NetEase Downplays Impact of Non-Renewal
In a separate statement, NetEase stated that they put “a great deal of effort” to negotiate a new deal with Blizzard. However, the company stated that due to “material differences on key terms” they were not able to renew the agreement.
NetEase clarified that the income produced by its licensing agreement with Blizzard accounted for a small percentage of its total net revenues in 2021 and within the first nine months of 2022. “The expiration of such licenses will have no material impact on NetEase’s financial results”, the leadership team commented.
According to a report from Bloomberg News, the financial terms of the agreement may have been just one of the points in which the two parties could not reach an agreement as sources cited that there were differences in topics such as player data and use of the company’s intellectual property.
Shares of NetEase are plunging by more than 9% today following the news while the share price of Activision Blizzard (ATVI) stock was down by less than 1% in pre-market stock trading action.
Microsoft-Activision Deal Keeps Moving Forward in Europe
In January this year, Microsoft (MSFT) reached an agreement to acquire Activision Blizzard for $68.7 billion in an all-cash deal. The deal is being scrutinized by regulators in both the European Commission and the United Kingdom amid concerns that it could give the company founded by Bill Gates an unfair edge and control over gaming titles that are crucial to the success of some of its rival consoles.
Microsoft owns Xbox and most of Activision’s games are also available for Sony’s Playstation. Officials from the Redmond-based tech company have assured regulators that any new releases from their soon-to-be-acquired subsidiary will be available under the same terms for both consoles.
According to a statement from Bobby Kotick published earlier this month, the two companies have advanced their talks with regulators in the EU and the deal has already entered the second phase of the review process. The company still expects to close the deal before Microsoft’s 2023 fiscal year comes to an end in June.
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