Credit: Steven Hook / via Shutterstock
Blizzard Entertainment titles including Overwatch, Starcraft, Hearthstone and World of Warcraft have officially gone offline in China after a tumultuous end to the developer’s distribution partnership with NetEase when the two gaming giants failed to negotiate an extension to their 14-year licensing relationship.
The servers officially went offline when the clock struck midnight in China on January 24, but the relationship ended back in November 2022 and has grown increasingly acrimonious ever since. At the time, NetEase President Simon Zhu made a public statement at Blizzard, calling an unspecified person at the company an “idiot.”
Then, on Jan. 17, Blizzard said on Chinese social media site Weibo that it had offered to extend the partnership by six months while it looked for another distribution partner. For its part, NetEase rejected the expansion, calling it “commercially illogical,” according to a Reuters translation. It had to turn down the extension because it had already laid off staff and closed its shared office, The Esports Advocate reported.
NetEase retaliated by smashing the massive Warcraft hammer statue at its headquarters – and livestreamed the act on social media.
Why is the toxic relationship important to sport? The termination of the deal appears to be a mutual blow for NetEase and Activision Blizzard, with the latter already under pressure from sexual harassment lawsuits and legal challenges to the upcoming Microsoft merger.
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NetEase had valuable Chinese government approval to distribute Blizzard’s titles. That means even if Activision Blizzard does find a new distributor, it could be months or years before the government issues a hard-to-get license to operate its games in the country.
“It’s hard to say who exactly is to blame,” said Daniel Ahmad, senior analyst at market research firm Niko Partners. “From Blizzard’s perspective, they would say that, by and large, China is only 3% of their sales across the entire company… So it could be that Blizzard thinks they can do a better deal.”
Still, China is the largest esports market in the world, which means the affected titles will see a sharp drop in casual players, pro players, and fans alike. China accounts for a significant portion of the player base on some Activision Blizzard titles — particularly Overwatch. No fewer than four Overwatch League franchises are based in China: Hangzhou Spark, Chengdu Hunters, Guangzhou Charge, and Shanghai Dragons — the latter of which is actually owned by NetEase, further complicating the relationship.
It’s not clear what will happen to these franchises – whether they’ll be forced to relocate, rebrand, or go overseas. Brad Crawford, senior director of global communications at Activision Blizzard Esports, told Esports Insider that there would still be quite a few teams for East and West (China competes in the league’s East Division), but confirmed that changes League 2023 is coming up for Overwatch.
“The league is definitely making changes for the 2023 season,” Crawford said. “We’ve been working hard behind the scenes to iron out details and plan to share more with the community over the next few weeks. We’re looking forward to OWL’s sixth season, where we’re expecting a whole host of teams from East and West.”
Crawford said there will be a community update video next week that will go through all the details and answer questions about the Blizzard community in China. On January 23, Chengdu Hunters Tweeted: “Bye and see you.”
By now, the Hearthstone effects may have kicked in. On Jan. 20, Blizzard significantly downsized Hearthstone’s esports scene for 2023, announcing that Chinese players can no longer keep up, a move likely due at least in part to the loss of the Chinese market.
But professional players aren’t the only consideration here. Live streaming of unlicensed games is also banned in China, meaning eSports broadcasts of Blizzard games are theoretically no longer allowed. In reality, however, it’s a bit more complicated.
“Technically, the game officially requires a license before it can be monetized, streamed or distributed,” explained Niko Partners’ Ahmad. “But practically it’s very different as people in China can still access games that may not have a license. You can still watch games that don’t have a license. The only time that [rule] really enforced when a game is banned for a specific reason.”
Ahmad said that while the games are unlikely to completely disappear from live streaming platforms, in the absence of official NetEase streams, broadcasts of these titles could be more streamer and influencer based.
Chinese streaming platform Bilibili received exclusive broadcast rights to the Overwatch League in China from Activision Blizzard in a multi-year deal in 2021. It is not clear what the impact on this partnership is.
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Finally, the shutdown of Blizzard’s titles in the country comes just a month after VALORANT received approval from gaming regulators in China, making Riot’s FPS legally playable. With Overwatch going offline while VALORANT goes online, gamers, esports fans, and professional gamers alike could flock to the new shooter – a popular genre in China – with important implications for esports market share.
“VALORANT has an opportunity there to reach players in the country,” added Ahmad. It’s very good timing, at least for Riot, since Overwatch has gone offline and there’s that gap for a hero-style shooter game.
However, the end of the deal will also be a major blow to NetEase, whose share price plummeted when news of the partnership’s dissolution was announced. NetEase will no longer host the on-site events that Blizzard’s titles used to have.
The tumultuous end to the 14-year relationship between name-slinging and statue-destroying appears to go beyond a purely business decision in many ways. In an impassioned LinkedIn post the day before Blizzard’s servers shut down, NetEase President Simon Zhu said a heartfelt goodbye, recalling a childhood spent alongside Blizzard’s era-defining games.
“Today is such a sad moment to witness the server shutdown and we don’t know how things will pan out in the future. The biggest casualties would be players in China who live and breathe in those worlds,” Zhou wrote.
“I also know how difficult it will feel for the Blizzard developers who have poured all their passion and talent into building these amazing worlds. I hope all these precious memories never fade.”
Jake is a features and trending news editor for Esports Insider. He has been part of the ESI team since early 2021 and is interested in politics, education and sustainability in sport.