Chinese government cracks down on World of Warcraft

Activision Blizzard and top Chinese online gaming company NetEase continue to have problems in China as government regulators put the squeeze on the duo related to World of Warcraft. NetEase announced this week that the General Administration of Press and Publication (GAPP) has returned its application to operate the latest version of Activision World of Warcraft in the region due to “gross violations” of regulations.

The Chinese government run agency emphasized the point by posting a statement on its Web site demanding that NetEase suspend charging users to play the game, and started rejecting new account registrations. This news certainly puts into question World of Warcraft’s future in the lucrative region and also didn’t help both companies’ stock prices, which took slight hits.

Analysts familiar with the region believe that this is tantamount to a turf war, after Blizzard walked away from a contract with another Chinese online games provider The9, which the Chinse government apparently favors. While that is certainly a factor, the Chinese government has been cracking down on game content that it sees as undesirable. It especially enjoys cracking down on companies that have foreign investment; in Oct. the government banned many forms of foreign investment into the country’s online games industry.

And the news certainly isn’t hurting NetEase’s competitors; Shanda Games saw a bump of 3.1 percent, while The9 closed at 4.3 percent yesterday on the news. But it does hurt Western companies like Activision and EA, who want to crack the market and take some of the profits being generated there; the Chinese gaming market is projected to grow by 30 - 50 percent this year to $4 billion.