World of Warcraft has finally returned to China, but not before costing Chinese operator NetEase a truckload of money maintaining the game during its downtime.
Activision dropped The9, the original Chinese operator of World of Warcraft, in favor of NetEase in June, in what Gamasutra says was an effort to bring in a higher royalty rate on the game. Unfortunately, the changeover also brought some rather serious side effects: Heightened scrutiny from the Chinese government, which demanded changes to the game’s content, followed by an extended closed beta test that ran from July 30 to September 14.
That’s been an expensive proposition for NetEase, which was reportedly forced to spend more than $146,000 per day to maintain the servers during the testing period. For those of you without calculators, that translates into well over $6.7 million down the crapper. Making things worse, NetEase forked over an estimated $25 million payment to Activision Blizzard for the rights to the game and also agreed to the company’s demand for higher royalty payments than The9 was paying.
It may still prove to be a profitable maneuver, however; a Morgan Stanley report issued last months predicted a 30 percent growth in game sales volume at NetEase and a four percent growth in its market share by 2010. However, according to “industry insider” Wang Menglong, content in the Chinese version of the game lags behind the Taiwanese and U.S. editions, which could ultimately drive users away, a situation the extended downtime certainly isn’t going to help.
As for Activision, it’s not expected to suffer unduly from all this nonsense: Analyst Colin Sebastian of Lazard Capital Markets estimated in late July that despite providing nearly half of the World of Warcraft user base, China accounts for only six percent of the total revenues generated by the game.