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A Lesson from Blizzard: Treat Asian Market Differently

  • Date: 09-03-2010 Views:

    KeyWords: Blizzard,Asian Market,China,Korea,NetEase,World of Warcraft,StarCraft

  • Summary: Having gone through a series of sufferings, Blizzard has to carry out the initial plan of selling games and Battle.net services. In a word, Blizzard neither masters local market rules nor acquaints itself with local customs and culture. They cannot get rid of the original business model simply by working out business plans.

Since Blizzard Entertainment officially announced on April 16th, 2009 that its World of Warcraft would be licensed to NetEase in mainland China, Blizzard Entertainment seems to come into a new developing stage in China. Aside from that, NetEase has already signed deals with Blizzard Entertainment for Warcraft III, StarCraft II, and Battle.net so as to unify all of player communities in China.

Nevertheless, until now only World of Warcraft has generated revenue for NetEase and Blizzard Entertainment. When will StarCraft II become a moneymaker? Nobody knows.

Blizzard Entertainment doesn't be well repaid as expected for its years of painstaking efforts spent in mainland China. An industry insider commented, the switch of World of Warcraft Chinese publisher seemed a turning point for Blizzard to grasp the overall situation at that time, but actually it made Blizzard run into obstacles. The reason is that Blizzard is not familiar with mainland China. It trusts its partner too far and seeks unrealized short-term commercial profits.

A Lesson from Blizzard
NetEase's World of Warcraft

According to NetEase's 2008 Form 20-F (Annual and Transition Report of Foreign Private Issuers pursuant to the US Securities Exchange Act), NetEase has paid to Blizzard RMB27.5 million (US$4.0 million) for StarCraft II as an initial license fee as of December 31, 2008, with an additional RMB40.9 million (US$6.0 million) to be paid as an initial license fee upon the commencement of open beta testing and commercial release in the PRC of a localized version of Blizzard's Battle.net platform. In addition, Shanghai EaseNet has committed to pay royalties and consultancy fees to Blizzard and a minimum marketing expenditure and hardware support for the above-mentioned games in the aggregate of at least RMB592.8 million (US$86.9 million) over the three-year term of the license. Plus, NetEase has paid to Blizzard an aggregate of RMB232.0 million (US$34.0 million) as three-year term of license fees for World of Warcraft as of May 31, 2009. License Fees that NetEase has paid to Blizzard for Warcraft III, StarCraft II, World of Warcraft and Battle.net totaled RMB 2057.1 million (US$315 million) and the royalty rate of World of Warcraft increases to 55%. However, Blizzard only paid The9 Limited a small sum.

According to Mr. Li who was in charge of the cooperative project with Blizzard, the minimum sum NetEase paid to Blizzard for World of Warcraft was less than US$60 million what The9 Limited paid in 2008 and the royalty rate remained almost the same. Currently, Battle.net hasn't entered the open beta testing, let alone commercial release. Thus, Blizzard has only received US$4.0 million and US$34.0 million from NetEase as license fees for StarCraft II and three-year term of World of Warcraft as well as the royalties from greatly reduced users.