The stock price of The9 Limited (NASDAQ:NCTY) decreased by 20% while the price of NetEase.com (NASDAQ:NTES) increase by 2% on 16th April 2009. Below links displayed the stock price of two companies: http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chdet=1242417600000&chddm=24633&q=NASDAQ:NCTY&ntsp=0
http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chdet=1242417600000&chddm=24633&q=NASDAQ:NTES&ntsp=0
Which event caused this change? It was the transfer of right of operating the online game, World of Warcraft(WOW), in China. Blizzard Entertainment, one of the best PC game developers which developed Starcraft, Diablo and WOW, announced it would stop the cooperation with The9, which has operated WOW for about 4 years in China, and give the right of operating the new version of WOW to NetEase for next three years on 16th April.
The revenue of The9 is 1,708 million CNY, of which revenue from operating WOW in China contributed 90%, in 2008. The9 earned about 1.3 thousand million US$ by running WOW in China for four years and ranked as the No.4 biggest online game company in China. Losing the right of operating WOW in China was an extreme hit to The9. Although Zhu Jun, the CEO of The9, expressed his idea that losing WOW was not a big deal to The9 and it would cooperate with Electronic Arts (EA) to run several new online games, the price of The9 stock reduced by 33% in two days when the news about contract of WOW was stopped was open.
NetEase, which once was one of three biggest news websites in China, has transformed its core business to online game. In 2008, its total revenue was 3 billion CNY while revenue from online game was 2.5 billion CNY. NetEase paid more to Blizzard than The9 to get the right of running WOW in China and it will form a joint venture company with Blizzard in China to do further cooperation in Chinese market.
The Chinese online game market grew very quickly and its total revenue got 1.8 billion CNY in 2008, which increased by 76.6% compared to 2007. But online game companies in China faced a similar issue that they lacked of research and development capabilities. The popular online games in China were almost developed by foreign companies from Korean, USA and Europe. In order to get the right of running hot online games owned by foreign companies, Chinese local companies had to pay hugely to them and the competitions was unavoidable, such as the war between The9 and NetEase. Currently, the Chinese government regulates foreign company can not run online game directly in Chinese market, which made the cooperation between Chinese and foreign online game companies had to be kept. But if the regulation was cancelled, how Chinese online game companies could survive without core developing capabilities?
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