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The purpose of this blog is for my personal use. It serves as my personal diary as I investigate Chinese internet/gaming companies for investment purpose. If you have any comments or disagreement, please give me feedbacks.

Tuesday, April 14, 2009

Is there a breakup between NCTY and Blizzard over WOW license?

One can find my last article talking about NTES and Starcraft 2 here:


It is all over in China right now. For about one month, there are more and more rumors of a breakup between NCTY and Blizzard.

The issue is over whether NCTY will get the license for WOW's latest expansion pact, 「Wrath of the Lich King」. The current license between NCTY and Blizzard will run out by June 2009.

All the time, NCTY had been telling everybody that the negotiation is on-going and going very well. It is just a formality for NCTY to get the expansion pact and continue to operate WOW. The only hurdle is that Chinese government might have some trouble in approving the expansion pact into China.

As matter of fact, NCTY even operate the web site for the 「Wrath of the Lich King」. It's address is: http://www.wowchina.com/wrath and it has the following web page design:

But after 3/30/2009, anybody who click on the link http://www.wowchina.com/wrath would notice that that official Chinese web site had been taken down.

That's when the rumor really started.

But yesterday, all major gaming portals are reporting the newest rumor. One can find those articles here:






The essence of the rumor is that Blizzard will break up with NCTY and let NTES license and operate the WOW after June 2009.

In addition, there really was never doubt that Chinese government will allow the expansion pact (with some modifications).

Again, it is just rumor. As it turns out, the rumor probably comes from an analyst from Pali Research. You can see what that analyst said in the following article (the article is in English):


I don't know whether it is just an opinion from that analyst. But it is also possible that analyst has some inside source in NTES, NCTY or Blizzard.

It is easy to see the pro and con of why Blizzard wants to switch partner. There are many pros, and only one con.

There is a big reason why Blizzard doesn't want to switch partner in June 2009. Wrath of the Lich King is not a new game, it is an expansion pact. Therefore, the new partner has to get all the WOW players statistics.

I am certain Blizzard thought about it the last time it extend the license to NCTY. I am certain there are clause in the contract that NCTY will have to provide the players statistics to Blizzard if the license is not renewed.

But how can Blizzard be certain that NCTY won't provide only partial or even incorrect data to Blizzard? Blizzard will be taking a big chance to switch partner in mid-stream.

But there are many good reasons why Blizzard would change partner from NCTY to NTES. I will list them as follows:

1. NCTY had become the partner for EA. Because EA and Blizzard are mortal enemies, Blizzard are literally sleeping with the enemy.

2. By signing up with NTES to operate Starcraft 2 and Warcraft 3, Blizzard and NTES had become partners.

3. Why prolong the agony by keeping on sleeping with the enemy?

4. Starcraft 2 and Warcraft 3 are single player PC games. It is impossible to make money from single player PC games in China. The idea is to make money through battle.net. Players will be paying access to battle.net (either through time based or item based) for battle matching Starcraft 2 and Warcraft 3 games. But do you get it started? The best way is to use a popular game to get people started on battle.net. What is more popular than WOW.

5. In essence, Blizzard can use WOW to push battle.net. From there, it can then monetize Startcraft 2 and Warcraft 3.

At this point, everything is still rumor. But if this rumor is true, it would be devastating to NCTY. Blizzard will be taking a big risk, but a risk with potential of high return.

But the big winner will be NTES, it will be laughing to bank with three great titles (Starcraft, Warcraft 3, WOW) in its name.

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