'World of Warcraft' battle heats up as NetEase rejects Blizzard offer

Copies of World of Warcraft: Mists of Pandaria video game published by Activision Blizzard, owned by Vivendi, are displayed in a shop in Rome

By Josh Ye

HONG KONG (Reuters) -Chinese games publisher NetEase Inc NTES.O said on Wednesday it has rejected a proposal from Activision Blizzard Inc to extend their long-time partnership for six months, as the U.S. game developer looks for a new partner.

NetEase said the proposal was "commercially illogical" and accused the U.S. firm of "seeking a divorce but still remaining attached," in a rare public display of acrimony between the two gaming giants.

Blizzard said in November it would end its 14-year partnership with NetEase - sending shockwaves across the industry as the partnership was widely seen as one of the most lucrative in video games.

The companies had been unable to agree on key terms of cooperation and hits such as 'World of Warcraft' will not be available in China, the world’s largest gaming market, from Jan. 23.

NetEase said Blizzard reached out last week with an offer to extend the partnership for six months but also made it clear that it would not stop negotiating with other potential partners.

"Considering the non-reciprocity, unfairness and other strict conditions attached to the cooperation, the parties could not reach an agreement in the end," China's second-largest gaming company said in a statement.

The exact sticking points that soured the deal, which started in 2008 and was renewed in 2019, remain unclear.

A person close to Blizzard said the dispute that scuttled the renewal revolved around commercial terms rather than data issues as some media had reported.

The person, who declined to be identified due to the sensitivity of the issue, said NetEase had proposed to make structural changes to the partnership that would affect Blizzard’s control over its intellectual property (IP).

In its statement late on Tuesday, NetEase said it had never requested control over IP from Blizzard or any other partners as a publishing company over the past 14 years.

“Any usage and licensing of Blizzard’s IP were done in accordance with contract terms and with Blizzard’s consent and approval,” it said.

Activision Blizzard did not immediately respond to a Reuters request for comment.

With the demise of their partnership, Blizzard is currently without a Chinese publisher. Unlike other countries, foreign gaming companies typically need a Chinese publisher before they can release games in China.

NetEase rose to become a gaming giant partly by publishing Blizzard's games in China. It has since accelerated its own game development capability, with in-house games now accounting for more than 60% of revenue.

(Reporting by Josh Ye; Editing by Anne Marie Roantree, Edwina Gibbs and Kim Coghill)