New details have emerged regarding the breakdown of the long-standing partnership between NetEase and Blizzard.

Previously the two companies had a long-term agreement through which NetEase published Blizzard’s titles - including the likes of World of Warcraft and Overwatch - in mainland China. However, this deal expired earlier this year, with the companies failing to reach an agreement as to the terms for renewal.

Sources close to the matter told The New York TImes that there were numerous factors in the failure to renew the deal, much of which centred on NetEase’s concerns regarding the Chinese government’s tightening hold on the games industry. The company reportedly attempted to change the contract to ensure compliance, while asking Activision to disclose details such as annual revenue to Chinese regulators.

Activision also objected to NetEase’s proposal that it should control licensing rights in China entirely, as opposed to their previous joint-handling of these responsibilities. Although NetEase claimed that this increased level of control would ensure compliance with regulations, Activision Blizzard believed that NetEase was acting in bad faith, taking advantage of the looming regulations to gain a favourable outcome for itself.

The elephant in the boardroom

Sources also claim that NetEase CEO William Ding attempted to leverage his own political influence to sway the Chinese government’s decision regarding Microsoft’s acquisition of Activision Blizzard. The deal, which would be the largest gaming acquisition in history, has been the subject of intense scrutiny, with some of the world’s key gaming markets launching investigations into how it could affect competitors.

However, sources close to NetEase disputed this claim, stating that the company was pointing out that, if Activision Blizzard did not accept a new deal, Microsoft would face the same hurdles as Blizzard in its attempts to conduct business in China.

Activision attempted to renew the deal at the eleventh hour for a period of six months, on the condition that it could continue its search for a new partner, thus avoiding an interruption of services for Chinese consumers - and the resulting hit to its revenue. However, Gamesindustry.biz reports that it offered to accept NetEase’s proposed licensing agreement on the condition that the Chinese giant paid a $500 million fee up front. This decision was rejected by NetEase, who called the company’s terms “commercially illogical”.

We listed NetEase and Activision in first and second place in the top 50 mobile game makers of 2022.