Is GAPP About To Drop The Hammer On Netease and World Of Warcraft?
If the latest reports in the Chinese press are accurate, China’s General Administration for Press and Publications (GAPP) has told Netease ($NTES) that it has until January 17th to stop charging for World of Warcraft, otherwise it will impose a massive fine and shut off its Internet access. This has not been confirmed, nor have any of the other recent rumors about Netease paying fines up to 500m RMB but being allowed to continue to operate WoW commercially. We should learn the regulators’ decision before the end of the month.
Netease is in a very difficult position. They were certainly caught in the middle of internecine bureaucratic warfare, but they may have made their hole much deeper. Until Q3 2009, GAPP was the primary regulator and the Ministry of Culture the secondary regulator of online gaming in China. In Q3 2009 the central government body responsible for allocating areas of regulatory control appeared to shift primary online game regulatory power to the Ministry of Culture. A couple of months before the shift in regulators had been made public, Netease had received approval from the MOC to relaunch WoW following the transition from The9, the previous WoW licensee. GAPP did not agree that it had lost its role as primary regulator and surprisingly waged a nasty public battle with the MOC over the interpretation of the apparent new regulatory structure.
Netease, clearly under financial stress from the delays in the commercial launch of WOW, decided in mid-September to ignore GAPP completely and launch the game commercially, arguing that the MOC had approved it. It was a remarkable move, as Netease effectively told a powerful regulator to pound sand, when it was not actually clear who was going to come out on top in the bureaucratic skirmish. But one key point that Netease may have forgotten is that even though the MOC was likely supporting them, the authorities most likely do not take kindly to private companies ignoring powerful, central government regulatory bodies; it sets a very bad precedent. So I always assumed it was a matter of time before GAPP took its wrath out on Netease.
If all these rumors turn out to be for naught and Netease is allowed to operate WoW with no or minimal penalties, then we know the MOC won the regulatory battle. If there are significant sanctions, the online game industry will continue to have to appease two regulatory masters, in addition to the security regulators every Internet industry must work with. This bureaucratic battle is not just about turf; there is a lot of money involved in the regulation of the game industry, from conference and exhibitions to all sorts of other “fees”.
I highly recommend Xie Wen’s column “Page not Found” from the newly launched Caixin English language website. Discussing online gaming, Xie writes “the sector’s enormous growth…triggered high-profile interference by rule makers, rule interpreters and various regulators. The powerful joined the gold rush, and the industry suffered.” Will the suffering soon be over for Netease, or is it just starting?
What do you think? Please let me know in the comments.
Related posts:
- Update On Netease and World of Warcraft in China
- Shanda Games Buys Mochi Media; Are US Game Companies Ready For The Chinese?
- Best Article So Far On Netease’s Problems Getting World of Warcraft Approved In China
- “网瘾战争 War of Internet Addiction” — Are World of Warcraft’s Travails In China Much More Interesting Than Google’s?
- New Report On China’s Online Game Industry-$3.6B in 2009 Revenue, $9.2B By 2014
