Blizzard to suspend game services in China as NetEase licences end

China's massive gaming industry, once marked by unbridled growth, has been heavily bruised by Beijing's efforts to tighten its oversight of the sector, including by reducing the number of gaming licenses given out and limiting play time for teens. Blizzard Entertainment said upcoming releases for 'World of Warcraft: Dragonflight', 'Hearthstone: March of the Lich King', and season 2 of 'Overwatch 2' will proceed later this year.

Activision Blizzard said on Thursday it would suspend most Blizzard game services in mainland China once its current licensing agreements with NetEase end in January. Blizzard Entertainment said it had not reached a deal to renew the licenses with the Chinese Internet and gaming giant that was "consistent with Blizzard's operating principles and commitments to players and employees."

NetEase's share price slid about 14% in morning trading in Hong Kong following the announcement. Hangzhou-based NetEase said in a statement that it was unable to agree on key terms of cooperation after lengthy negotiations, adding, "We will have to accept this decision."

NetEase has become China's second-biggest gaming company behind Tencent Holdings in large part due to its status as Blizzard's publishing partner in China since 2008-2009 when Blizzard ended its deal with The9 Ltd. California-based Blizzard said new sales would be suspended in the coming days and players would receive further details.

The games to be suspended from Jan. 23 include 'World of Warcraft', 'Hearthstone', 'Warcraft III: Reforged', Overwatch', the 'StarCraft' series, 'Diablo III', and 'Heroes of the Storm'. The absence of Blizzard games could cause a 6-8% drop in NetEase's revenue next year, analysts from Daiwa Capital Markets wrote in a research report on Nov. 9.

The estimate is founded on the basis that licensed games account for around 10% of NetEase's total revenue and Blizzard accounts for 60-80% of licensed games. China's massive gaming industry, once marked by unbridled growth, has been heavily bruised by Beijing's efforts to tighten its oversight of the sector, including by reducing the number of gaming licenses given out and limiting play time for teens.

Blizzard Entertainment said upcoming releases for 'World of Warcraft: Dragonflight', 'Hearthstone: March of the Lich King', and season 2 of 'Overwatch 2' will proceed later this year. "We are looking for alternatives to bring our games back to players in the future," Blizzard President Mike Ybarra said in the statement.

NetEase's Nasdaq-listed shares have nearly halved to about $71 from their February 2021 peak of $132.