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Government Tug-of-War Stunts World of Warcraft’s Growth In China

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Growth of Activision’s money-making MMO World of Warcraft is being stalled in China, as Reuters reports that the game is now caught up in the government’s crack-down on foreign investment and operations in its online games industry. For context, Activision (NSDQ: ATVI) reported about $70 million worth of revenue from the Asia Pacific region in its Q209 earnings report — or roughly nine percent of its total revenue for the quarter; the WoW business in China has been a primary source of its revenue in the region.

Activision re-upped its WoW license with Chinese portal NetEase in April, but the game suffered nearly two months of downtime, as the company was forced to make changes to get it approved by the General Administration of Press and Publication (GAPP) and the Ministry of Culture — China’s game industry regulators (via Gamasutra). It lost money each day that Chinese gamers had no access, in the meantime.

Activision made tweaks to graphics and other game features, then got an initial approval from the Ministry of Culture. But the GAPP has since reneged on its own approval, telling NetEase to suspend current subscriptions and block new account registrations, citing “gross violations” of federal regulations. Industry sources tell Reuters that GAPP’s about-face is more about its current turf war with the Ministry of Culture than any of WoW‘s actual content; the two bodies are currently battling over who has the greater power over regulating online games.

Still, the fact that either of the two bodies can force a multimillion-dollar game to grind to a halt on a whim, is a major issue for U.S. gaming companies and potential investors thinking about launching new titles in China. Companies that have already made their entry into the market — like the recently IPOd Shanda (NSDQ: SNDA) Games — don’t have to worry though, as they’d previously gotten approvals from both GAPP and the Ministry of Culture in tandem.