SwagVault MMO Blog

The9 Ltd Down 22% On Reports It Lost World Of Warcraft License

The9 Ltd. (NCTY) American depositary shares dropped 22% in recent trading as unconfirmed reports said the company’s chief executive has told employees the company is losing its license on the blockbuster videogame World of Warcraft.

Chinese media source JLM Pacific Epoch cited Sina reports that the Shanghai-based online gaming company has lost the contract to operate the multi-player online version of the game from Activision Blizzard Inc. (ATVI), the game’s maker, to competitor Netease.com Inc. (NTES).

The ADRs fell 22% to $10.28 on the reports, which Dow Jones Newswires has been unable to independently confirm.

Standard & Poor’s equity analyst Scott Kessler said in a note to clients that it wouldn’t be surprising if The9 lost its license, given its failure to launch another version of the game, The Wrath of Lich King, earlier this year in China and the decision by Activision to give another contract to Netease last year.

Kessler told Dow Jones Newswires, he estimates the game represents easily three-quarters of the The9’s revenue and profits, though the company doesn’t break out the figure.

“In the history of gaming, World of Warcraft has to be considered one of the preeminent properties and successes,” he said, adding losing China means losing the world’s most populous online-gaming community. “It would be the equivalent of going from feast to famine.”

Kessler did say that The9 has increased spending on research and development and bought shares in game developers, but remains an unproven entity without World of Warcraft.

For Netease, the news could be “immense” said a Pali Research blog post, predicting an agreement could be the first of many between the online gaming company and the California-based game-making giant.

“[Netease] could become a permanent partner for Blizzard in China, not only for one or two games but across all of Blizzard’s other games as well,” the blog said.

ADRs of Netease were up 9 cents to $29.30 recently.

None of the three companies had representatives immediately available to comment, and the analysts said they had yet to confirm the reports either.

From: http://online.wsj.com/article/BT-CO-20090415-711893.html