Report: StarCraft II In China Approval Pipeline, As NetEase Profits Rise

Online game operator NetEase, which runs Blizzard's World of Warcraft in China, is seeing gaming revenues surge, with its third quarter profits up 49 percent to 585.3 million yuan ($88 million) thanks to strong performances for its titles and better ad dollars. Sales rose 59 percent to 1.4 billion yuan ($210.86 million), although the company ultimately saw an offset on the profits on those sales thanks to the impact of WoW licensing fees the company owed Activision. Activision Blizzard transitioned operation of WoW to NetEase last year from rival The9, in part because of the opportunity to get higher licensing fees from NetEase. The U.S. firm viewed that transition as worth the possible lost revenue and subscriptions from the long interruption in WoW operations in China as the game underwent government reviews -- and ended up snagged in the crossfire between two different regulatory groups. Now it seems Activision and NetEase will face Chinese regulators again for StarCraft II, which an analyst reports has been submitted to the authorities for evaluation and approval. Cowen Group analyst Doug Creutz, who claims the submission recently occurred, says this is a good sign. NetEase's overall sales and marketing spend is too high, he warns, the company's profits came in below expectations, and it is in need of a strong catalyst in its near future. So StarCraft II in the approval pipeline makes a China launch "sometime in 2011" for the game look likely, the analyst suggests. Nonetheless, during NetEase's third quarter, it was its own largest product, Fantasy Westward Journey, that drove the largest share of its revenue, ahead of WoW and the long-awaited Chinese launch of the Wrath of the Lich King expansion in August. StarCraft II could reach Chinese audiences in 2011 provided no unforeseen snags occur: contention continues between whether China's General Administration of Press and Publication or its Ministry of Culture has primary responsibility for online content regulation, and in June, the ministry asserted itself with the introduction of some tighter restrictions. It will prohibit the sale of "unwholesome" content to minors, but hasn't offered specifics on what qualifies "unwholesome", having thus far only expressed that games containing pornography, violence, gambling, cults, superstition and any other content defined as "cruel" or "horrifying" will be ruled illegal for consumers under 18, for example. In WoW's case, blood from beasts was required to be replaced with black mists, and images suggesting the undead, like bones or skulls, had to be removed or replaced. It's possible one or both regulatory bodies will ask for some changes to be made to StarCraft II.