On April 10, 2024, Blizzard Entertainment, Microsoft Games and NetEase jointly announced that Blizzard's games will return to the Chinese mainland market in the summer of 2024. From left: Ding Lei, CEO and Director of NetEase, Johanna Faries, President of Blizzard Entertainment, and Phil Spencer, CEO of Microsoft Games/Blizzard China
On April 10, Blizzard Entertainment, Microsoft Games and NetEase jointly announced that Blizzard Entertainment's game titles will return to the Chinese mainland market from the summer of 2024 according to the updated game publishing agreement.
As soon as the news came out, it immediately rushed to the top of the hot search list. As of noon on April 11 alone, 475,000 people have pre-registered for World of Warcraft in NetEase's game community. This also means that after more than 400 days of "service suspension", the national server players have finally found their "home".
On January 24, 2023, Blizzard authorized NetEase's "World of Warcraft", "Hearthstone", "Overwatch: Return", "Diablo 3", "StarCraft 2", "Warcraft 3: Remake", "Heroes of the Storm" and other seven games to close at the same time, which is also the largest service suspension in the history of the game. At that time, NetEase wrote in an open letter to players: "We always firmly believe that people who meet can always meet again. We sincerely look forward to the day when all Blizzard players return to the national server. ”
For players, more than 400 days is obviously a long time, and the joy on the screen of hot search topics is enough to prove the torment of the previous wait. It is also a very short period of time, because some players joked that they have not actually come out of this "breakup" turmoil more than a year ago, and they have actually "reunited".
The "breakup" more than a year ago was not pleasant, NetEase and Blizzard once "tore each other" apart, and today's reunion can better confirm the old saying: there are indeed no eternal enemies in the mall, only eternal interests.
This reunion is not simply "the two got back together", because there is also a "third party" - Microsoft Games. The industry believes that Blizzard games do not dominate in this compound, and it is more like a "dowry" for the combination of NetEase and Microsoft games.
From the honeymoon phase to the breakup
2010 to 2016 was the honeymoon period between NetEase and Blizzard. In 2012, NetEase successfully renewed its contract with Blizzard, and immediately won a number of games. After "Hearthstone", the Chinese market ranked first in the world in terms of the number of users and revenue, and in 2016, "Overwatch" set a sales record in the Chinese market, accounting for 1/4 of the total global sales.
It's a win-win partnership, with NetEase keeping Blizzard strong in the Chinese market, and Blizzard establishing NetEase a position in the Chinese gaming industry and improving the latter's R&D capabilities. As the industry says, Blizzard and NetEase are no longer developers and operators, but a strategic alliance.
But after 2016, NetEase and Blizzard, which have entered the stage of "old husband and wife", have a lackluster relationship. The philosophical differences between the two sides gradually emerged, and Blizzard gradually withdrew its rights in esports, separating the right to operate the event from the right to operate the game. Blizzard pays more attention to the experience of the game process, while NetEase hopes to stimulate the player's customs clearance experience, and the concept is also inconsistent. Behind this philosophical divergence is also the difference in operational and commercial directions.
In 2017, Blizzard's net revenue from licensing NetEase games was 3,467.7 million yuan, down 17.4% year-on-year, and the proportion of NetEase's net revenue from online game services dropped from 15% in 2016 to 9.6%. The share of agency game revenue in total revenue also fell off a cliff, from 12.5% in 2016 to 7.2% in 2017.
In January 2019, Blizzard and NetEase renewed their contracts again. However, in the following years, Blizzard's reputation declined, and the founding team left in large numbers to start businesses. In particular, 2020's Warcraft 3: Remastered can be called the biggest setback in Blizzard's history. From 2019 to 2021, NetEase's revenue from agency games accounted for 7.5%, 9.1% and 9.5% of total revenue, respectively, all of which were less than 10%. On the other hand, Blizzard's national service accounts for only about 3% of the annual net income of Activision Blizzard, the "big owner", which is also not as important as people think. Coupled with various changes in the industry, the two sides gradually diverged.
In August 2022, Bloomberg reported that Blizzard and NetEase were about to part ways due to the cancellation of the development of the Warcraft mobile game that the two sides had spent three years working together. The report also said, "Blizzard will take 90% of the revenue and will not bear any development costs." ”
However, even with such and such differences, the complete rupture of this long-term relationship still seems a bit unexpected. The original licensing agreement between the two parties expired on January 23, 2023, and in November 2022, NetEase and Blizzard successively issued statements announcing the end of the partnership. NetEase believes that in the new renewal plan, the key core clauses, including long-term operation and player rights, are proposed by Blizzard, and these terms are unacceptable to NetEase. Blizzard claims that NetEase intends to fundamentally change the form and structure of the cooperation between the two sides, which will make Blizzard lose control of the game IP.
In the end, the national server Blizzard game was officially suspended on January 24, 2023.
There have been different opinions about the reasons for the breakup between the two sides. It is reported that when the previous cooperation between the two parties is about to expire, NetEase hopes that Blizzard can directly authorize it, rather than licensing it through a joint venture third party as in the past, which is also somewhat in line with the requirements of relevant new regulations. Blizzard reluctantly accepted the request, but at the same time demanded a one-time upfront payment of $500 million from NetEase (a prepayment that Blizzard wanted to add some leverage to the Microsoft acquisition), and the talks collapsed.
In addition, it is also reported that Blizzard's proposed share ratio is higher than that of the previous contract period, and requires NetEase's other Blizzard IP mobile games developed by NetEase to be published globally, but only enjoy the revenue share of the Chinese market. But these claims have never been truly confirmed. Later, Blizzard proposed to give NetEase a six-month extension, but this behavior of "riding a donkey to find a horse" was not accepted by NetEase. Having said that, Blizzard did have a need to raise the bar in the Chinese market, when World of Warcraft's monthly card prices were much lower than in other markets around the world.
In terms of business, there is nothing wrong with Blizzard and NetEase, but there are differences in cooperation models.
On July 31, 2020, in Shanghai, ChinaJoy China International Digital Interactive Entertainment Exhibition, players gathered in front of the Blizzard Games booth Photo/Visual China
Value beyond the commercial level
Negotiations between Blizzard and Nine Cities broke down in 2008, largely because of the sharing issue. At that time, Blizzard could only get a 22% share of the revenue from World of Warcraft's Chinese mainland operations, and Nine Cities refused to increase it.
The reason why NetEase was able to replace Nine Cities was not only because of Blizzard's dissatisfaction with Nine Cities, but also because NetEase provided more favorable conditions, and it is said that it promised to give Blizzard's "World of Warcraft" cooperation up to 55%.
The reason why NetEase provides such conditions is because of Blizzard's product quality and appeal on the one hand, and on the other hand, it is the adjustment of its own market strategy. Prior to that, in 2007, NetEase's annual revenue was 2.31 billion yuan, of which game revenue reached 1.93 billion, accounting for more than 80%. The stability of independent research and development is of course commendable, but the product agent can achieve "two-legged walking", which is also more conducive to NetEase to enter the international market. In this case, Blizzard is certainly the best option.
However, in 2022, Blizzard doesn't seem to be so "fragrant". Compared with the endless new products on the market, Blizzard has not seen new IPs appear for several consecutive years, exposing a trace of fatigue, and revenue and profits are declining. In terms of operation, Blizzard is also a bit old-fashioned, for example, it does not allow agents to change the main operating rules, and "World of Warcraft" has always used the point card recharge model, compared with the in-app purchase system in the mobile game era, this outdated monetization method is seriously lacking in competitiveness.
One of the most interesting data is that after the loss of Blizzard, NetEase's gross profit margin and net profit margin have greatly increased. Its gross profit margin in 2023 is as high as 60.95%, up from 54.68% in 2022 and 53.62% in 2021, and its net profit margin is 28.37%, up from 20.56% in 2022 and 19.38% in 2021.
Therefore, some people believe that NetEase still needs Blizzard, but it is not impossible to lose. Blizzard certainly has other options, but the losses may be greater. After all, in 2023, the actual sales revenue of the domestic game market will be 302.964 billion yuan, and the total global revenue will be about 1.3 trillion yuan, accounting for 24% of the Chinese market. However, in the cooperation between the two sides, the specific value measurement is not only revenue and profit, but also communication and learning, after all, NetEase's game production and brand operation over the years, there are always traces of learning from Blizzard, this kind of "teacher and friend" relationship is a value outside of business.
Even from a purely commercial point of view, it's hard to say who has lost more. Although there was an initial decline in revenue, after the release of Diablo 4, more than 10 million players purchased and experienced it that month, with a total of more than 700 million hours, and Blizzard's revenue also increased significantly.
For Blizzard, if it wants to return to the Chinese market, it is too difficult to "change partners". Because the agent switch is quite complicated, even if you find the next home, it is impossible to take over and open it immediately. In particular, in the face of domestic game review, in accordance with relevant regulations, if the operating unit of an online game that has been pre-approved or imported approved by the General Administration of Press and Publication is changed, it must go through the pre-approval or import approval procedures again.
Moreover, there are practically no suitable potential collaborators in the country. For example, Tencent acted as an agent for Blizzard's "Call of Duty OL", but it was criticized by many players because of the proliferation of plug-ins and prop charges. Moreover, Tencent, as the world's game giant, has a huge game revenue base, which has already exceeded 100 billion yuan, compared to Blizzard's revenue, which is too small. As for the small and medium-sized companies that need Blizzard, it's hard to look at.
From this point of view, the reunion of Blizzard and NetEase seems to be the only option. In the more than 400 days since the suspension of service, the rumors of Blizzard's return have never subsided, and some people even jokingly called "135 Blizzard returns, 246 refutes rumors and clarifies", although it is a rumor and a joke, but it also shows that the relationship between the two is "inseparable".
Is Microsoft the main character?
In October 2023, Microsoft spent $68.7 billion to acquire Activision Blizzard as a wholly-owned subsidiary, making Microsoft the world's third-largest gaming giant, behind Tencent and Sony. At that time, some industry insiders believed that after Microsoft became the owner, the opportunity for NetEase and Blizzard to reunite greatly increased.
Many details are signs, such as the departure of CEO Bobby Caldecott, who was previously harsh on NetEase, at the end of 2023. The trial of Shanghai NetEase (a subsidiary of NetEase), which was originally scheduled to be heard on January 18, 2024, against Blizzard over a dispute over a computer software copyright license contract was also cancelled due to the withdrawal of the lawsuit.
On June 28, 2023, in San Francisco, Activision Blizzard CEO Bobby Caldecott (right) and Lulu Cheng Meservey, executive vice president of corporate affairs, leave the courthouse Photo/Visual China
Microsoft, which is in business, is also reluctant to change agents for Blizzard, after all, the cost of re-reviewing and applying for a version number is too high, while NetEase has existing servers, teams that can be recalled, and a relatively quick version restart for approval. In addition, NetEase and Microsoft have long cooperated, and the national server of "Minecraft" has received a good response, and the cooperation has lasted for many years, and the contract has been renewed until 2026. This time, Microsoft also announced that it has reached an agreement with NetEase to bring NetEase's new games to Xbox and other platforms.
Microsoft's acquisition of Blizzard, of course, the most exploitable is those IPs with global influence, and there will be huge profit margins if they are changed to mobile games. However, Microsoft's previous mobile game products did not perform well, and Blizzard's mobile game products could only barely support it, and both sides lacked the ability to port games such as "World of Warcraft" to mobile phones and make them popular.
In contrast, NetEase's revenue in the game field in 2023 will reach 81.6 billion yuan, second only to Tencent in China, and the main revenue comes from mobile games. Its collaboration with Blizzard on Diablo Immortal has already demonstrated its strong strength in the field of mobile game development. NetEase's ambition is also undoubted, and since 2022, it has established a number of studios overseas, which can be said to be fearless of the global economic downturn, and has always insisted on increasing its weight. What's more, it also has game versions of various Blizzard series. Therefore, NetEase is a more practical and urgent partner for Microsoft.
It is precisely because of this that many people think that this time is not a reunion of NetEase and Blizzard, but a marriage between NetEase and Microsoft. Microsoft is supported by the second largest game manufacturer in China, NetEase can go to the world through Microsoft, and Blizzard has become a dowry.
From NetEase's point of view, Blizzard's market value is indeed not indispensable. Morgan Stanley estimates that Blizzard's return to China will bring NetEase an annual revenue of 3 billion yuan, but it accounts for less than 3% of NetEase's total revenue.
But Microsoft is desperately needed by NetEase, so in the composite statement, the cooperation with Microsoft on Xbox is the top priority. And beyond the statement, NetEase has something more wanted.
Microsoft's products and services are spread all over the world, with a large user base and an extremely solid technology platform. In the AI boom, Microsoft's technology, computing power, and infrastructure have huge advantages, which can not only bring about great changes in the field of games, but also have room for cooperation in other fields. NetEase, which has 16.5 billion yuan in spending in the field of AI in 2023, obviously wants to cooperate with Microsoft in this regard.
As an industry insider said: "The biggest variable brought about by this 'remarriage' may be technology sharing and market sharing." NetEase will work with Microsoft to develop both domestic and overseas markets through the possible research and development of Blizzard IP mobile games, and may establish a strategic alliance with Microsoft on multi-terminal interoperability (console, PC and mobile games) to jointly achieve technical research. ”
In the era dominated by the post-00s, Blizzard only has feelings left
Previously, Blizzard was suspended in China, and some people would not be able to understand the sadness of players. If you don't know anything about the game field, you will also be criticized as "plaything". But for many players, gaming isn't just a game, it's a social tool, full of emotion. "Stopping taking it is like withdrawing the memory of youth from the body" is a common feeling of many people.
Because of this, many players choose to "wander" on other platforms such as the United States and Asia after the service is suspended, although they are facing the same game, they still lose the motivation to continue playing.
But it is undeniable that this part of the players who are "inseparable" with Blizzard have entered middle age, and the time and energy to play games will decline, and they are no longer the dominant force in the game market. Globally, Blizzard's active users are also on a downward trend.
At present, the dominant force in the game market is the post-00s. In 2023, the actual sales revenue of the domestic game market will exceed the 300 billion yuan mark for the first time, a year-on-year increase of 13.95%, and the number of game users will reach 668 million, a record high.
Compared with giants such as Tencent and NetEase, new forces in the domestic game industry have performed well in recent years, such as miHoYo and Lilith are typical examples. They focus on market segments and are also accustomed to "exporting to domestic". For example, miHoYo's overseas revenue accounts for 50% of the total revenue, and the second largest market for Genshin Impact is Japan, accounting for about 23% of the revenue. Despite their small size, these companies are extremely attractive to younger players. The attraction of games such as "Genshin Impact" to post-00s players has actually indicated that the pattern of the domestic game market will change.
Even Blizzard's veteran players have inevitably lost some of their services over the past year or so. For example, NetEase, which was previously responsible for Blizzard's game copyright, joined Giant Network after the suspension of service, and the core members of "Hearthstone" also joined the "Full Moon Night" project team under Giant Network. This also made "Full Moon Night", which was originally a single-player card battle game, immediately unlock the multiplayer online PVP mode, taking away some old Blizzard players. In addition, miHoYo's "Call of the Seven Saints" inherited most of Hearthstone's previous media and anchor resources in China. Although both have their limitations, the diversion effect is still quite obvious. At the same time, "Hearthstone" has launched four expansion packs in more than a year, and has also updated a large number of cards, heroes and gameplay, which domestic players have missed, even if the national server is compensated after the restart, there will be problems with experience and coherence.
The day after Blizzard officially announced its return to the national server, the number of players who successfully logged in and completed the reservation reached 2 million Figure/World of Warcraft
Psychological factors cannot be ignored, and in Blizzard's previous service suspensions, players were the most neglected and hurt group. One player described the server change as "like losing the key to your home and having to open a hotel outside".
The game industry has developed to this day, and it is actually an extremely complex economic activity, which is the sum total of the labor and value of countless players. The suspension of the game company's service is equivalent to blocking the player's labor results and economic output, which is extremely harmful. In this case, there is still a lot of work to be done after Blizzard's return, and the most urgent thing is to restore the confidence of players.
To do this, it is obviously not enough to rely on the feelings of veteran players. What's more, any game company has the need to expand new users.
Southern People Weekly Contributing Writer Ye Kefei
Editor-in-charge: Chen Yafeng