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Why did Blizzard switch to NetEase in China? For $90 million a year, says Pachter

Thursday, 16th April 2009 14:25 GMT By Patrick Garratt

wowchina

Blizzard didn’t specifically say this morning why it’s dropped The9 in favour of NetEase to run its Chinese WoW operation, but Wedbush Morgan analyst Michael Pachter’s claimed the answer’s simple: it’s going to make a mother-trucking boatload more money from the new deal.

“The company had previously contracted with The9, but the current arrangement will expire in June 2009,” said Pachter in a note this afternoon.

“Under the terms of its contract with The9, Activision Blizzard received a royalty of 22% on revenues generated in China. We estimate that the current arrangement generated revenues of around $50 – 55 million annually (using most recent subscriber figures), at close to 100% margin. Although the terms of the new arrangement were not disclosed, we estimate that the royalty rate will increase to at least 55%, and that the new arrangement will generate revenues of over $140 million annually.”

$90 million is probably a good reason to kick a partner into touch. But don’t shit the bed just yet, share-buyers: Pachter said he believed the upside – approximately $0.04 per share – has already been factored into forecasts.

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2 Comments

  1. TheTwelve

    Money is the reason why anybody does anything.

    12

    #1 6 years ago
  2. Michael O'Connor

    It’s a little more complicated than that.

    The9 have been trying for almost a year to get the game released in China, but the censor boards have been very iffy about letting it go through; something vague about the representation of bones and gore.

    When you have an expansion almost entirely centred around zombies and skeletons and all that jazz, things get complicated.

    It makes perfect sense that they would give the title to a company that’s actually going to get it released.

    #2 6 years ago

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