Why Wasn't NetEase Good Enough for Activision?

Chinese gamers will soon have a new shooting game to fire up.

Activision Blizzard (Nasdaq: ATVI  ) -- the world's largest third-party video game publisher -- is rolling out a modified version of Call of Duty Online in China.

This isn't the same video game that has served the gaming giant well stateside with its November installments in recent years. This is an online version of the game, similar to the company's iconic World of Warcraft and Starcraft franchises.

Players don't have to shell out $60 to buy the game the way that stateside gamers do with the console-based titles. It's a free-to-play model, which means that Activision Blizzard will be making money through the virtual items that players can purchase throughout the game to enhance the experience.

The strategy isn't a surprise. It's what China's online gaming giants have relied on over the years to deliver heady growth and meaty margins. The real surprise here is that the multi-year agreement for exclusive licensing rights to run the game in the world's most populous nation is Tencent.

Tencent isn't a bad choice. It's an online gaming behemoth that's probably best known for its popular QQ messaging platform in China. However, this has to leave NetEase (Nasdaq: NTES  ) scratching its head. It is NetEase, after all, that has seemingly served Activision Blizzard well with the exclusive license for World of Warcraft and Starcraft in China.

Should NetEase be worried that Activision Blizzard went with another gaming titan?

Not necessarily. In a Forbes interview discussing the move, Activision Blizzard CEO Bobby Kotick points out that Tencent was a logical partner because it already has a very successful military combat game that is somewhat similar to the Chinese version of Call of Duty Online.

It's also simply a matter of smart business. Activision Blizzard doesn't want to put all of its eggs in one basket, and divvying up its business in China will make it more competitive when time for these individual agreements come up for renewal.

Activision Blizzard knows how to play this game.

Drink up
NetEase is one of the many dynamic recommendations made to Rule Breakers subscribers over the years, but this is now a great time to discover the next rule-breaking multibagger that the newsletter has unearthed. It's a free report. Want it? Get it.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of NetEase and Activision Blizzard. Motley Fool newsletter services have recommended creating a synthetic long position in Activision Blizzard. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1933669, ~/Articles/ArticleHandler.aspx, 12/20/2014 8:16:57 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement