Blizzard has disclosed to investors that their deal with their licensee in China is ending soon.
This was part of the language in their latest investor report. Blizzard’s statement to investors is reproduced below.
“Currently, we have licensing agreements with a third party covering the publication of several Blizzard titles in China. These agreements which contributed approximately three percent of Activision Blizzard’s consolidated net revenues in 2021 expire in January, 2023.
We are in discussions regarding the renewal of these agreements, but a mutually satisfactory deal may not be reached. We continue to see substantial long term growth opportunities for our business in the country.”
It isn’t clear why Blizzard did not name said partner when they made these disclosures in prior reports, and of course, that partner have some shares in the company themselves. Of course, that would be Tencent, arguably the biggest video game company in the world if non video game capitalization was taken into account. If we only talk video game investments, Tencent is still one of the biggest investors in video games. They even have deals with all three of the console manufacturers for China, Sony, Microsoft, and Nintendo.
In fact, around the time when Vivendi first went shopping for a buyer for Activision Blizzard, Tencent themselves were one of the names dropped. While we don’t know the full details of the process that led to Microsoft pursuing that acquisition themselves, Tencent’s other investments with other companies seem to indicate they aren’t so invested in managing companies themselves, as much as they just want to have their share of the market when these big games and platforms are brought to China.
Without getting into the details of how China does business with foreign vs local companies, it is a general rule of thumb that video games made outside China don’t fully realize their potential in Chinese markets if they don’t have a Chinese business partner. It isn’t just that their Chinese partners will understand the market better. They also get better arrangements with the Chinese government, that open up more opportunities to enter the market. Nintendo can attest to this themselves, if you compare how their business in the region was doing before and after they partnered with Tencent.
Since we brought it up, Activision Blizzard will have to deal with an awkward in between period between January 2023 and whenever the deal for Microsoft’s acquisition is finalized. Microsoft, of course, has their own deal with Tencent, and having to honor a separately negotiated contract for a Chinese partner, possibly a different partner like Netease or IQIYI, will complicate business for everyone. If Blizzard does end up working with Tencent, their investor could just redraw contracts when the time comes, so this is probably what they’ll want to do.
Source: TheGamer
