China's NetEase falls over 12% after Blizzard announces partnership termination

Asian Tech Press (Nov 17) -- Chinese gaming giant NetEase Inc. (9999.HK) fell more than 12% Thursday after Blizzard Entertainment Inc. announced it was terminating partnerships with it.

U.S. game developer Blizzard Entertainment, a division of Activision Blizzard Inc., said in a statement Thursday that it will suspend most of its Blizzard game services in mainland China, including World of Warcraft, Hearthstone, Warcraft III: Reforged, Overwatch, the StarCraft series, Diablo III, and Heroes of the Storm, as its existing licensing agreements with NetEase expires on Jan. 23, 2023.

The co-development and distribution of Diablo Immortal involved a separate agreement between the two companies.

In 2008, Blizzard Entertainment entered into licensing agreements with NetEase covering the distribution of those Blizzard games in China.

Blizzard Entertainment noted in the statement that the two firms have not yet reached a deal to renew the agreements that is consistent with Blizzard's operating principles and commitment to players and employees, and will suspend new sales in the coming days, with Chinese players to receive details of follow-up arrangements soon.

NetEase said Thursday, "NetEase has been doing its best to negotiate with Activision Blizzard in the hope of moving forward with the contract renewal. After lengthy negotiations, we are still unable to reach agreement with Activision Blizzard on some key terms of the partnership."

"We very much regret that Activision Blizzard has announced the partnership termination in advance today, and we will have to accept this decision. NetEase will continue to fulfill its responsibilities and serve our players until the last minute," the Chinese company added.

In reaction to the news, NetEase fell more than 12% at HK$99.50 a share Thursday morning.

The main reason for the termination was the failure to negotiate a price, with Blizzard putting forward high terms for the renewal of the contract that NetEase could not accept, Chinese media reported Thursday, citing sources familiar with the matter.

The reports also noted that several Chinese game companies have become potential interested parties in negotiations with Blizzard, including Tencent, Perfect World, Bilibili and others.

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