HONG KONG -- American game developer Blizzard Entertainment said Thursday it will suspend most of its game services in mainland China after current licensing agreements with Chinese game company NetEase end, sending NetEase's shares tumbling.
Blizzard, which partnered with NetEase in 2008 to offer popular games such as World of Warcraft, Overwatch and Diablo in mainland China, said in a statement the two companies did not reach a deal to renew the agreements "that is consistent with Blizzard's operating principles and commitments to players and employees."
The partnership is set to expire next January. Blizzard said new sales will be "suspended in the coming days."
NetEase shares plunged as much as 15% in Hong Kong following the news.
NetEase said the expiration of its licenses with Blizzard would have "no material impact" on the company's financial results.
The company said revenues and income from the licensed Blizzard games represented "low single digits" as a percentage of NetEase's total revenues and income last year, and in the first three quarters of 2022.
"We have put in a great deal of effort and tried with our utmost sincerity to negotiate with Activision Blizzard so that we could continue our collaboration and serve the many dedicated players in China," William Ding, CEO of NetEase, said in a statement. "However, there were material differences on key terms and we could not reach an agreement."
Blizzard Entertainment CEO Mike Ybarra said the company is looking for alternatives to bring the games back to Chinese players in the future.
"We're immensely grateful for the passion our Chinese community has shown throughout the nearly 20 years we've been bringing our games to China through NetEase and other partners," Ybarra said.
The games affected by the suspension are World of Warcraft, the StarCraft series, Hearthstone, Heroes of the Storm, Overwatch and Diablo III.
China's game industry came under scrutiny in August last year, with authorities limiting gaming time for minors to just three hours a week after state media decried online games as "spiritual opium." For the next nine months, no new video games licenses were approved by regulators.
Game companies like NetEase and Tencent have seen their stock prices tumble amid the scrutiny and economic uncertainty as China continues its COVID-19 measures, including snap lockdowns, mass testing and strict entry restrictions.
But there are signs that China is easing restrictions on the technology and game industries. On Thursday, NetEase received its second game license since the crackdown for a game titled "Journey to the West: Return." It received its first license in September for a mobile game, "All-Star Street Ball Party."
NetEase rival and the world's largest game company by revenue, Tencent, also received a license for its "Metal Slug: Awakening" action game, its first commercial game license since the crackdown began. In September, Tencent was granted a license for a non-monetizable educational game.
A total of 70 games were approved in a list published Thursday by the National Press and Publication Administration.
