Shulou(Shulou.com)11/24 Report--

Blizzard and Netease as long as 14 years of cooperation announced the end.

Beijing time on November 17, Blizzard Entertainment issued a statement saying that due to the expiration of the existing license agreement with Netease on January 23,2023, most Blizzard game services in the mainland of China will be suspended.

These include Warcraft series, StarCraft, Diablo 3, Hearthstone and many other Blizzard games. Diablo: Immortal, a mobile game jointly developed and distributed by the two companies, has a separate agreement, which is outside the scope of this time.

In a statement, Blizzard said the two parties did not reach an agreement to renew the contract that is consistent with Blizzard's operating principles and commitments to players and employees. Mike Ybarra, president of Blizzard Entertainment, said: "The company is looking for alternatives to bring Blizzard games back to players in the future. "

In response, Netease said it had been doing its best to negotiate with Activision Blizzard and hoped to push forward the renewal. After lengthy negotiations, Netease was still unable to reach agreement with Activision Blizzard on some key terms of cooperation,"We regret that Activision Blizzard announced the cessation of cooperation today, and we will have to accept this decision." Netease will continue to fulfill its duties and serve our players until the last moment. "

According to the paper news, an insider revealed that the main reason for the termination of cooperation between the two sides is that the price failed to negotiate, Blizzard party for renewal put forward high conditions, Netease can not accept.

At present, a number of game companies have been rumored as potential parties to negotiate with Blizzard, including Tencent, Perfect World, Station B, etc.

Among them, Tencent responded that there was no relevant information internally for the time being,"Blizzard copyright issues are suggested to Blizzard official reply."

Related topics immediately reached the top of Weibo hot search. Today (November 17) intraday, Netease shares once fell 14%; by the close of Hong Kong shares, closed at HK $103.5/share, down 9.49%.

1. Where does the break come from? In fact, the end of cooperation between the two sides has long been foreshadowed.

On November 8, Activision Blizzard announced its Q3 2022 earnings report. In its earnings report, it has been pointed out that the agency agreement signed by the company in China will expire in January 2023, and the company is discussing the renewal of the agreement, but may not reach a satisfactory result for both parties in the end.

According to the earnings report, the current agreement to be renewed covers a number of games released in Blizzard China, which account for about 3% of Activision Blizzard's consolidated net revenue in 2021.

Earlier in August, there was also news that Blizzard and Netease cooperation "World of Warcraft" IP mobile game project has been cancelled, the relevant development team has also been dissolved. It is reported that the project has been co-developed for 3 years, and the number of development teams has reached more than 100 people.

The reason for the cancellation was that Blizzard and Netease had differences on the terms of cooperation, which eventually caused both sides to stop developing progress.

According to Tiger Sniff, the reason for the collapse of Blizzard's cooperation with Netease may be that Blizzard's new renewal conditions make Netease unacceptable. The conditions are as follows:

Blizzard's share of revenue and net profit is further increased by more than 50% compared with the contract period of 2019-2022, and Blizzard game pricing is synchronized globally (before the national service pricing is generally about 20% lower than other regions);

Netease according to "Diablo: Immortal" mode, research and development Blizzard other IP mobile games global distribution, but only enjoy China market revenue share; and Netease needs to pay huge margin or prepaid fees as guarantee, otherwise will be "punished."

Activision Blizzard has proposed binding terms that cannot be committed to the domestic game version number issue.

Source: If the network accepts such conditions, it means that the revenue generated by the games owned by Netease Blizzard will be further reduced in the future; on the jointly developed mobile games, Netease will also bear more capital risks and market pressures.

The new treaty is not a cost-effective cooperation for Netease. In fact, it will not be a cost-effective deal for game manufacturers who have the ability to represent Blizzard games in China. This may also mean that under the same conditions, Blizzard is difficult to find new partners in the Chinese market.

Blizzard may have something to do with its eagerness to find new growth.

Blizzard's revenue and net profit have been declining since fiscal year 2022 until the third quarter, but they are still much worse than the same period last year. In Q3 this year, Activision Blizzard's net revenue was $1.782 billion, down 14% year-on-year; Net profit was $435 million, down 32% year-on-year, and monthly active users were 368 million, down 5.6% year-on-year.

From the performance in recent years, Activision Blizzard's revenue is also in a continuous decline in the predicament. Not only that, Activision Blizzard faces a bigger dilemma in the new tour cut-off file.

In the past, there was a saying in the game circle that "Blizzard produces, it must be a boutique," which is an affirmation of Blizzard's succession of Star Series, Warcraft Series and Diablo Series games.

But in the absence of "elaborate" heavy investment, Blizzard also failed to produce a game comparable to "World of Warcraft." Whether it is "hearthstone legend" or "watch pioneer," are not "baton receiver," although they once popular online game market, but whether it is player reputation, or game score, there is an obvious downward trend.

What disappointed players even more was that Blizzard hadn't launched a new online game for six years after Overwatch Pioneer. The only big move was to keep updating World of Warcraft's expansion pack and remaking its own classic IP. Six years was too long for the fast-changing gaming industry.

In January, Microsoft announced that it would buy Activision Blizzard for $68.7 billion in cash, claiming that Activision Blizzard would remain independent after the acquisition.

However, some industry insiders analyzed that Bobby Kotick, who has been the head of Activision Blizzard since 1991, may be trying to seek a higher position in Microsoft's gaming system, which requires Blizzard to produce more results in the short term.

The "unequal" treaty with Netease may also indicate that Blizzard is urgent in increasing revenue.

The 14-year cooperation between Netease and Blizzard at the end of the honeymoon period has also been regarded as the most successful cooperation in China's game industry.

In 2008, Blizzard agreed to exclusively license StarCraft 2, Warcraft 3: Frozen Throne and Warcraft 3: Chaos Reign to Netease; in April of the following year, Blizzard further transferred the agency operation rights of World of Warcraft in the national service from the ninth city to Netease.

For the above two cooperation, Netease paid no less than 301.5 million US dollars in licensing, royalties, consulting and other fees. However, thanks to Blizzard's agency rights for many games, Netease's game business rose rapidly.

In Q4 of 2009 and Q1 of 2010, Netease's game business increased by approximately 60% and 50% respectively year-on-year, mainly due to the operation of World of Warcraft.

Blizzard has really opened up the Chinese market, with Chinese players pouring into the game, and Edward Hunter's survey shows that World of Warcraft online players reached 13.1 million in August 2009, a record high.

This win-win collaboration continued for many years to come. Since then, Netease has successively won Blizzard's "Diablo 3,""Hearthstone Legend,""Storm Hero,""Watch Pioneer" and other new products. After Diablo 3 was released, it quickly sold 2 million copies.

In the mobile game era, the cooperation between the two sides is no longer limited to agency and authorization, but also extended to joint development.

In mobile games, Blizzard, like many international game makers, lost to "arrogance."

In 2010, when the original iPad came out, Blizzard CEO Bobby Kotick bluntly said that he was not interested in mobile games,"We don't think the App Store can provide much space for core games... At present, we don't see the opportunity to participate in this market." "

After that, the layout of his opponent's game also focused on King's business. In 2015, Blizzard acquired King, the developer of the mobile game Candy Legend, to gain a foothold in the mobile game circle at a cost of $5.9 billion.

To date, King has been one of Activision Blizzard's three major business components, and its growth performance is also better than Activision and Blizzard Entertainment. In the third quarter of this year, King had the highest revenue of $692 million, up 6% year-over-year, while paying users achieved double-digit percentage growth year-over-year.

However, in the development of original IP mobile games, Blizzard has stagnated.

In May of this year, Blizzard held a brief online launch event to announce Warcraft IP's first native mobile game, Warcraft Arc Battle.

In terms of gameplay, this game is similar to Clash Royale and Fire Siege, with cartoon style, but the characters in Warcraft are designed as chess pieces in the game.

"Warcraft Arc Battle" game screenshot picture from: Network but this mobile game score is not high, directed at Warcraft IP to try out the game players found that its play method and no new breakthrough. In addition to the design of the chess pieces, the game has nothing to do with Warcraft, and the picture quality has been criticized as "this looks like a false advertisement for some infringing Warcraft mobile games."

Players 'expectation for Blizzard to do mobile games is to see a "more Blizzard" mobile game. And to this expectation, Blizzard and Netease cooperation, to a certain extent to meet the market.

In July this year, Netease, Blizzard in the development of each accounted for 50% of the proportion of "Diablo: Immortal"(Diablo mobile game) online. Thanks to the popularity and theme play of Diablo series IP, as well as Netease's experience in mobile games and localization, the download volume of Diablo mobile games overseas in the first month exceeded 10 million.

"Diablo: Immortal" propaganda picture from: Network early November, Appmagic report shows, Diablo mobile game five months of cumulative revenue has exceeded 300 million US dollars (about 2.174 billion yuan, has been removed from the platform share), of which the evening line nearly two months of the domestic market contributed 144.7 million US dollars, nearly half.

According to its earnings report, Q3 Blizzard Entertainment revenue reached $543 million, up 10% year-on-year. A number of factors have driven Blizzard Entertainment revenue growth, the most important of which is the official launch of Diablo: Immortal in the Chinese market.

In this game try, relying on Netease "krypton gold" play method, Blizzard tasted the sweetness of the mobile game market. On the other hand, questions about the game's "Krypton 700,000" and "User Rating 0.7" have also been raised.

Many players said that the playability of the game is not bad, but the built-in krypton gold content is more, at least 22 kinds of payment currency or props have been designed, has reached the point where it is difficult to play without krypton gold.

Bellular News estimates that players need to invest about $110,000, or about 700,000 yuan, to maximize a character's performance. If it doesn't cost money, it takes 10 years.

The extremely high water flow and extremely low game score make this mobile game mixed.

However, Blizzard and Netease ended cooperation, probably not because Netease's "krypton gold" play method and its concept of the game conflict.

In fact, in Netease, Blizzard this end of cooperation projects, does not include dark hand games. In the future, dark mobile games will also continue to use Netease's "krypton gold" play method.

3. Netease, which has no winners and shines brilliantly in the mobile game era, has stabilized itself as the second largest game manufacturer in China. From the recent performance, the revenue generated by the Blizzard series of games has also become less important in Netease's overall performance.

In the Q3 earnings report just released, Netease said that the percentage of net revenue and net profit contribution to Netease in 2021 and the first nine months of 2022 by acting as a self-blizzard game was in low single digits. The expiry of the mandate will not have a material impact on Netease's financial results.

According to the financial report data, in 2020, Netease agent games generated net revenue accounted for only 9.1% of 2020, that is, Blizzard and Microsoft together contributed 9.1% of Netease revenue.

Although from the perspective of proportion, the end of Blizzard and Netease cooperation has little impact on Netease's overall business. However, the impact of losing Blizzard game IP authorization is difficult to measure for Netease.

In game development, Netease is good at gamification adaptation of IP familiar to the public.

For example, its old games "Dream Talk Westward Journey" and "Journey to the West" still maintain strong gold absorption ability for more than ten years. In the international IP, Netease won Yin Yang Shi, Harry Potter and other IP, launched a popular mobile game.

However, it should be noted that in recent years Netease launched what can be called "explosive" games are authorized IP, such as Harry Potter, Diablo, and its own original IP games but not too many sparks.

This may be affected by the version number. Since April 2022, Netease has lost the version number four times in a row.

In the old game, Netease's many games also declined seriously. According to Sensor Tower data,"Yin Yang Shi" in the first half of 2022 year-on-year flow situation fell 50%,"Harry Potter: Magic Awakening" flow fell month by month, often fell out of the best-selling list 50 or even 100.

This year, Diablo: Immortal appeared as a relatively successful IP game. However, the end of cooperation with Blizzard also means that Netease lost Blizzard's Warcraft, Starcraft and many other large IP.

Blizzard didn't win the breakup either.

In fact, Blizzard's influence in the Chinese market is not as great as before. Blizzard has been absent from explosive games for many years. The myth that "Blizzard produces, must belong to fine products" has not been able to retain enough Chinese players.

After this "breakup" storm, the suspension of services for a number of games will also lengthen the distance between Chinese players and Blizzard. If you can't find the "next home" quickly, it will also be a huge loss for Blizzard.

It is not easy to find agents of the same level as Netease in the Chinese market.

Although there are rumors that Tencent, Perfect World, B Station and other domestic game manufacturers are approaching Blizzard. None of them have been officially recognized.

Among them, the industry believes that Tencent is unlikely to cooperate with Blizzard. On the one hand, Tencent also has version number difficulties. The relevant laws and regulations stipulate: "When the online game that has been reviewed changes its operating unit, it must go through the examination and approval procedures again. Before obtaining approval again, the online game should stop all operating services. Violators shall be treated as illegal network publications." "

On the other hand, Tencent games since last year, will be a lot of business focus adjusted to the game out of the sea. Whether Tencent Games will adjust its energy to acting Blizzard games depends largely on how Blizzard's games will benefit Tencent. However, if the "unequal" treaty still exists, Tencent may find it difficult to accept it.

And the B station, which mainly plays the second dimension, is obviously incompatible with Blizzard's game style.

As for Perfect World, its role as an agent of DOTA2 has not been well received. Whether it can "hold" Blizzard's multiple super IPs may need to be questioned.

This "breakup" without winners, whether Netease, or Blizzard, will leave bloody scars.

This article comes from Weixin Official Accounts: All-weather Technology (ID: iawtmt), Author: Hu Description Editor: Luo Lijuan

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