NetEase shares plunge after surprise delay of Diablo Immortal launch
Winnie the Pooh post on Chinese gaming giant's social media site viewed as disparaging to President Xi could have fuelled the drop
Chinese gaming giant NetEase plunged the most in nine months on Monday after delaying the launch of Diablo Immortal in the world’s biggest mobile app market, putting its sales recovery in question.
Shares slumped almost 11% in Hong Kong, leading declines on the benchmark Hang Seng Tech Index, which dropped as much as 2.5%. Tencent’s closest rival in China said on Sunday that it will postpone the original June 23 China launch of Diablo Immortal, the mobile game it co-developed with Activision Blizzard.
Reports said compounding the problem was a post on a social media site of the Chinese gaming group disparaging “the bear” — a reference to cartoon character Winnie the Pooh who President Xi Jinping is seen by some critics to resemble.
The surprise postponement comes at a delicate time for China’s games industry, which is only just emerging from a months-long freeze on game permits during a wide-ranging crackdown on tech firms. The official Diablo Immortal account on Weibo was blocked from posting for “violating relevant laws and regulations” last week, according to a banner notice affixed to the feed. It was unclear what content might have been in violation.
Diablo is one of Blizzard’s most popular franchises and the debut of its mobile iteration has been a hotly anticipated event. Immortal garnered 10-million downloads in the first week after its international launch outside China on June 2, but the game’s devotees criticised its pay-to-win elements and in-app purchases, leading to a 0.4 out of 10 user score on rating site Metacritic.
NetEase and Blizzard said on the game’s official website they needed additional time for content enhancement in pushing back the game’s availability in China. Blizzard also delayed its release in other Asia-Pacific markets such as Indonesia, Malaysia, Hong Kong and Taiwan, to July 8.
They did not specify a new release date for mainland China. Some analysts don’t see the postponement as indicative of a renewed move by Beijing to tighten conditions for games publishers.
“This is more specific to NetEase,” said Vey-Sern Ling, a senior analyst with Union Bancaire Privée, after the shares fell. “Maybe the market is worried that this is a larger issue with the regulators. Some Diablo contributions should already be pencilled into 2H for consensus.”
In the worst case scenario, Diablo Immortal could run into a so-called black swan event similar to what happened with Tencent’s Dungeon & Fighter mobile offering, Morgan Stanley analysts wrote. Originally slated for an August 2020 release, that game has never rolled out in China, after Tencent initially said that it needed to upgrade its anti-addiction system.
China is expected to become Immortal’s largest market, where players are more accustomed to a freemium business model instead of buying copies outright. Immortal, which obtained its Chinese commercial licence before the most recent gaming halt, is one of the few blockbuster launches expected in the country this year. With Staff Writer
Bloomberg News. More stories like this are available on bloomberg.com
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