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Morgan Stanley Views Blizzard's Potential Return to China as a Minor Positive for NetEase

In a recent research report, Morgan Stanley stated that the potential return of Blizzard Entertainment, a leading video game developer and publisher, to the Chinese market could have a minor positive impact on NetEase, Inc. (NTES.US), a prominent Chinese online game company.

Blizzard’s potential return to China, which has been speculated about for some time, could open up new revenue opportunities for NetEase, as the company has historically served as Blizzard’s partner in China. However, Morgan Stanley analysts believe that the overall impact on NetEase’s revenue would be modest, as the company’s self-developed games already account for a significant portion of its total revenue.

“The potential return of Blizzard to China could imply an annual revenue of over RMB3 billion or about 4% of NetEase’s total game revenue,” stated Morgan Stanley analysts. “NetEase’s self-development business has accounted for 95% of its total game revenue.”

The analysts also noted that the potential return of Blizzard could be realized on more favorable financial terms for NetEase, which could open ways for additional game licensing in the future. However, they also highlighted that many Blizzard gamers in China have moved on to other games over the past year, resulting in a user churn.

“The potential return could be realized on more favorable financial terms for NetEase, and better financial terms may open ways for additional game licensing in the future,” the analysts added. “However, we also note that many Blizzard gamers in China have moved on to other games over the past year, resulting in a user churn.”

Morgan Stanley’s view on the potential impact of Blizzard’s return to China on NetEase is measured. While the analysts acknowledge that there could be some positive revenue opportunities, they also recognize that the overall impact would be modest and that there are potential challenges to consider.

The analysts’ views align with the uncertainty surrounding Blizzard’s potential return to China. While there have been positive signs, such as the restoration of Blizzard’s China server access, regulatory hurdles still need to be cleared.

Overall, Morgan Stanley’s assessment provides a balanced perspective on the potential impact of Blizzard’s return to China on NetEase. While there could be some benefits, the overall impact is likely modest, and there are potential challenges to consider.

Morgan Stanley’s research report highlights the potential implications of Blizzard’s return to China for NetEase. While the analysts believe the impact would be minor, they acknowledge the potential for new revenue opportunities and favorable financial terms for NetEase. The overall impact will depend on various factors, including regulatory approvals and the gaming landscape in China.

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