Logos of NetEase and Blizzard Photo: VCG

Some requests of Blizzard Entertainment in renewing its license contract are "unacceptable," as it involves critical cooperation agreement concerning sustainable operation and the core interests of Chinese players and market, Netease CEO William Ding Lei said, in response to the ending of the two gaming giants' 14-year licensing agreement.

"Netease has put a great deal of effort into the negotiation with Blizzard, but the difficulty in negotiation has far exceeded expectations," Ding said during a conference call to release the company's third-quarter financial statement, noting that Netease is "very sorry" about Blizzard's announcement relating to suspending cooperation and had to follow the company's decision, news website thepaper.cn reported on Saturday.

Netease will continue to serve the Chinese players until the last minute, and ensure information security and the interests of players, Ding said. 

Blizzard Entertainment, the developer of a range of hit games including the World of Warcraft, Hearthstone, Warcraft III: Reforged, Overwatch, and the StarCraft series, announced on Thursday that it would be suspending most Blizzard game services in Chinese mainland as of January 23, 2023 due to the expiration of the current licensing agreements with NetEase. The two companies' partnership was first stuck back in August 2008. 

The two companies have yet to disclose details over the specifics of negotiation, but speculation and media reports have been circulating in recent days offering clues on disagreements between the two sides. 

A Bloomberg report quoted sources as saying that the key sticking points were ownership of intellectual property and control of data for millions of players across China. Chinese news portal thepaper.cn also quoted a source as saying that the key reason for the failed negotiation was that "Blizzard charged too higher price." But some investors and business insiders contended that allowing license to expire is just a normal business decision. 

In a fresh statement posted on Discord chat group on Sunday by Mike Morhaime, co-founder of Blizzard Entertainment, said that partnerships are a "two-way street," and the US-based company is focusing on "doing everything we can to ensure players in China can play our games."

A spokesperson from Netease refused to comment on the matter when approached by the Global Times. 

The two companies' "break-up" has spooked millions of Chinese players, who are now growing increasingly concerned on whether their gaming data will be stored properly during the transition period and when would the games provided by Blizzard resume operating in the Chinese mainland market.

A veteran player of Overwatch surnamed Tao, who has been playing the game for over six years, told the Global Times on Monday that he is pessimistic that the games developed by Blizzard would be available in the Chinese market in the near future. 

"In the worse case, the re-launch may not arrive until the end of next year, and many players might switch to other online games, gradually giving up Blizzard's as a result," Tao said, while also stressing that licensed Blizzard games will "make a comeback anyway" as the Chinese market is too big to ignore. 

Regulations issued by China's State Council stated that operation licenses for imported internet videogames should be re-acquired after the operator has switched, and that operation would be suspended until the new license is issued. 

That means even if Blizzard has inked a licensing deal with another Chinese game distributor, the latter still need to submit documents for new license approval, according to industry insiders. 

NetEase said that net revenues and income contribution from licensed Blizzard games represented low single digit as a percentage of NetEase's total net revenue and income in 2021 and in the first nine months of 2022.

Liu Dingding, a Beijing-based veteran market analyst, told the Global Times on Monday that end of partnership with Blizzard represents a big blow to the business of Hangzhou-based Netease, but it won't be "a matter of life and death."

"Netease has benefited a lot from the cooperation, which not only elevated its revenue but also expanded global influence. But luckily, the Chinese gaming firm, in addition of licensing business, has developed a range of homegrown popular games such as Onmyoji," Liu said. He stressed that the news also underscores the importance of developing high-quality homegrown games, a direction which Chinese gaming companies shall head toward in a full-throated mode.