(Bloomberg) — NetEase Inc. reached a new agreement to distribute games in China for Microsoft Corp.’s Blizzard Entertainment, salvaging a 15-year relationship and reviving titles like World of Warcraft for the world’s biggest gaming market.
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With the deal, famed franchises like StarCraft, Diablo, Hearthstone and Overwatch will once again be live for players in China. The Hangzhou-based publishing giant and Microsoft’s Activision Blizzard subsidiary halted a longtime partnership in January of last year after failing to agree on an extension.
Separately, Microsoft’s gaming division and NetEase have agreed to explore bringing new NetEase titles to Xbox consoles and other platforms, the companies said in a statement.
NetEase shares gained as much as 2.4% in Hong Kong on Wednesday, after rising 4.1% a day earlier on speculation about the return of Blizzard’s games.
“We are thrilled to embark on the next chapter, built on trust and mutual respect, to serve our users in this unique community that we’ve built together,” NetEase Chief Executive Officer William Ding said in the statement. The expiration of the previous deal descended into acrimony when the two sides alleged bad-faith negotiations for a renewal of the terms.
Read more: NetEase Blasts Blizzard in Fiery Post as Warcraft Spat Escalates
Blizzard suspended most online game services and sales in mainland China when the prior pact expired more than a year ago, cutting off a lucrative collaboration for both parties. Its major release in June 2023 — Diablo IV, which got off to a hot start internationally — hasn’t been officially available in China. The companies now say Blizzard games “will return to the market sequentially” starting in the summer, with further details to be provided at a later date.
What Bloomberg Intelligence Says
The resumption of NetEase’s partnership with Microsoft-owned Blizzard could boost the Chinese company’s 2024 EPS growth by a few hundred basis points, based on our calculations. However, a renewed partnership would unlikely transform NetEase’s outlook, with the company set to enter a period of slower growth following an exceptionally strong 2023. We expect growth in China’s domestic video game market to slow to 6% in 2024, down from 13.9% in 2023.