Business, Internet, Law & Policy

Chinese Govt: NetEase.com Has No Approval To Operate Internet Game

Proving that Internet business models in China can come and go at the whim of a Chinese government agency, a new government edict states NetEase.com has no authority to operate the World of Warcraft and the company should immediately stop charging users to play the game.

Posted on the website of the General Administration of Press and Publication, the agency responsible for licensing and administering online games in China, is an official statement that asks Shanghai EaseNet Network Technology Limited, NetEase.com's affiliate, to stop charging fees to World of Warcraft game players. The game is allegedly not being operated with proper approval, and GAPP is evaluating whether to impose administrative penalties on Shanghai EaseNet.

Furthermore, GAPP is returning Shanghai EaseNet's application for approval and Shanghai EaseNet should not allow new account registrations by Internet-based players. World of Warcraft was licensed by NetEase.com from U.S.-based Blizzard Entertainment.

In a company statement, NetEase.com professes that neither it nor Shanghai EaseNet has been officially notified of GAPP's determination of any penalties. The company states it believes it and EaseNet are in full compliance with Chinese laws and they are currently seeking clarification from Chinese authorities regarding this statement by GAPP.

The massively multiplayer online role-playing game World of Warcraft is something of a cursed object in China. NetEase actually managed to grab the WoW game away from its previous Chinese operator, The9, earlier this year, in a move that sunk The9's earnings.

Not operating the World of Warcraft MMORPG online game in China hit The9 with a CNY79.2 million net loss in the second quarter ended June 30, 2009. Zhu Jun, chairman and CEO of The9 stated at the end of August 2009, "After the cease of the WoW operation upon expiration of the license, our revenue has been significantly reduced. However, we believe we will soon recover from the challenging time and continue to leverage the tremendous growth of China's online game market."

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