Showdown Between Regulatory Agencies Could Shutter World of Warcraft in China For Good

This is my most recent post on Digital East Asia.

We reported last month on the return to China of Activision Blizzard Inc.’s (NASDAQ: ATVIWorld of Warcraft, and how administrative rights over who regulates what regarding online games have beensorted out. Well, it appears that the General Administration of Press and Publication (GAPP) is having its own interpretation of the government guidelines, as they have undertaken a crackdown covering more than 200 games that has led to the shutdown of 45 online games so far. They also came out with a circularwhich bans foreign investors from operating online games “in any form” in the country.

Interestingly, a Ministry of Culture (MoC) official“expressed his shock” (link in Chinese) at GAPP’s latest announcements, saying it clearly violates the State Council’s earlier guidelines. It’s quite rare to see different branches of the government argue in public, but the MoC will probably take some further actions to protect their turf.

While this power grab is interesting to watch, it certainly isn’t fun for the businesses affected.CCW.com.cn reports (link in Chinese) that Mainfirst Securities (based in Hong Kong) has come out with a new report claiming that WoW is in danger of shutting down. Mainfirst’s point of view is that the MoC has lost the power grab to GAPP, and therefore WoW cannot avoid a shut-down since it has not received approval from GAPP. Mainfirst also believes that the best that NetEase.com, Inc.((ADR) NASDAQ: NTES) can do at this point is to apologize, pay a fine, and try to minimize the down-time while getting through the approval.

Mainfirst maintains its “sell” rating on Netease with a target price of $35. The stock’s ADR price fell 2.8% on Friday to close at $40.51.

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