World of Warcraft wends its way to China

Blizzard Entertainment today hit a milestone on the road to launching its upcoming MMORPG World of Warcraft in the Chinese marketplace. The company said it would collaborate with fast-growing Internet service provider and online game publisher China The 9 Interactive (aka The9.com) to localize and distribute World of Warcraft in the Asian nation.

Paul Sams, senior vice president of business operations, said Blizzard will rely on The9.com for "all aspects of community management and customer and technical support" for the title. The agreement also calls on The9.com to localize the text and voice elements of the game in simplified Chinese. Blizzard also intends to customize gameplay elements of the title for China. Sams told GameSpot, "We intend to create customized content and periodically have world events that are culturally tailored to appeal to Chinese gamers."

For the past few months, the deal has been discussed widely among game industry insiders and is considered a feather in the cap of The9.com. Informed sources have speculated that the China-based suitors to Blizzard's title could push the amount paid to license the game well above the $10 million mark. Many considered other more deep-pocketed companies such as NetEase or The Shanda Network as more likely winners of the license--NetEase is listed on the NASDAQ exchange, and both are considered to have greater resources available to them than The9.com.

While Blizzard declined to comment on the financial arrangements behind the deal, certainly they were substantial. The Chinese market is now considered key to North American MMORPG developers and publishers. It has been estimated that one-fifth of China's 79.5 million Web-connected citizens play online games--that's almost 14 million gamers. Research firm IDC Corp. estimated that the Chinese market generated nearly $193 million in 2003--a 300 percent increase from 2001. Additionally, IDC predicts the market will generate $1.76 billion by 2006. (See previous GameSpot coverage of the Chinese online game marketplace).

At The9.com's offices in Shanghai, the announcement was greeted with celebration. One executive who spoke with GameSpot mentioned that the news would be released on April Fools' Day in China. "April first will be the day for Blizzard and The9.com to release news of our cooperation. It's a special day, but it is not a joke."

GameSpot spoke with Sams to get additional background on today's news.

GameSpot: Paul, can you characterize the level of interest the licensing opportunity for World of Warcraft generated among the service providers in China?

Paul Sams:The licensing of World of Warcraft in China generated a great deal of interest throughout the industry, and, as a result, many companies contacted us with proposals. Because of World of Warcraft's complexity, we did extensive due diligence--far beyond anything we've done in the past--to ensure we ended up with a licensing agreement that provided for excellent localization, technical support, and in and out of game customer service for the game in China.

GS: Before the announcement of this deal, did Blizzard have any business partners in China?

PS: Prior to this agreement, our partner in China was our PC distributor AEC, who distributed the Starcraft, Diablo, and Warcraft games there. Warcraft III: Reign of Chaos and Warcraft III: The Frozen Throne were launched as localized products in China.

GS: Why go with The9.com? What was it about their operation that made them more attractive than others?

PS: In our assessment and selection process, we found China The 9 Interactive by the company's business-management team, who are very experienced in operating a large-scale MMORPG in China. Also, China The 9 Interactive is financially strong, with an excellent reputation with local companies, agencies, and government officials, as well as with the gaming community. We consider China The 9 Interactive to be one of the very best, most experienced companies in the Chinese game market, and we are confident that they will be highly committed to World of Warcraft's success in China.

GS: In what ways will The9.com have to staff up to support the title? Will Blizzard be providing any training in the area of customer service?

PS: China The 9 Interactive will hire locally as needed to support World of Warcraft and provide the level of service that the game requires. Because of this, and because of the added impact of having what we hope will be a large number of subscribers accessing the game through local service providers, we believe that World of Warcraft will also create additional industry support jobs and will have a positive effect on the Chinese economy. In regard to training, Blizzard will visit China The 9 Interactive to help train in-house World of Warcraft specialists there, and members of China The 9 Interactive will visit Blizzard to train under our GM staff here in California. Our intent is for gamers in China to receive a level of service that is consistent with what we will have available in the US and other regions around the world.

GS: Given the popularity of MMORPGs in China, what targets are you working with in terms of subscriber numbers?

PS: Our goal is to launch one of the most popluar MMORPGs in China. To do this, we plan to deliver a massively multiplayer experience of unparalleled quality and provide players with an exceptional level of support.

GS: How will the game be sold? Shrink-wrap? Full client download?

PS: To be successful in a particular region, it is important to follow the business model for that region. As such, we intend to follow a similar business model to that of other successful MMORPGs in China.

GS: What will the World of Warcraft pricing structure be in China? And how is the billing affected? Tales of deceit and foul play in the context of developers not getting their fair share of revenues circulate widely. What can you tell me about the model in place for World of Warcraft?

PS: We are still investigating our pricing structure and have not yet announced what the subscription fee will be. In regard to us collecting our portion of revenues, we are aware of some of the challenges that other companies have faced in this area. To avoid these challenges, our agreement allows for a day-to-day Blizzard presence in the offices of China The 9 Interactive with extensive administrative access and audit rights to ensure that we and our parent company's shareholders are aware of the financial status of World of Warcraft in China at all times. We have extensive contractual protections in place to ensure that payment to Blizzard for World of Warcraft revenues in China and to meet its operational needs are being met at all times as well.

GS: Do you have a launch date set for China?

PS: Having just established our partnership for China, it will understandably take us some time to prepare World of Warcraft for beta and launch there. Also, Chinese is a complex language to deal with in terms of localization, and we have to account for this in determining our launch date. Nevertheless, we do have internal schedules in place for China that are contingent on our prior-market release dates. Ideally, our initial launches will go smoothly, and the schedules for China will remain intact. Ultimately, for China as for our other markets, we will take the time necessary to ensure that World of Warcraft will meet the high standards that our developers and customers have come to expect from Blizzard games.

GS: Paul, how many meetings took place to get to today's announcement?

PS: We visited China several times during the period in which we were evaluating our distribution options there. We conducted meetings at the 2003 E3, and China The 9 Interactive also visited our offices in California several times over a period of many months. Additionally, there are some employees from our parent company permanently based in Shanghai who worked on the partner-selection process daily during the evaluation period.

GS: Can you elaborate on how World of Warcraft content will be fine-tuned for the Chinese market?

PS: Based on the success of our previous PC titles in China, we have developed a good understanding of what gamers there like to see in a game. This experience and knowledge will be applied when we localize World of Warcraft for China. We have also received a steady stream of feedback from the Chinese gaming community on World of Warcraft, and we will take this feedback into consideration when localizing the game. Additionally, our partner in China will remain closely involved with the development team to help us customize the game to meet the needs of Chinese players.

GS: What special testing is needed to prepare World of Warcraft for the Asian market?

PS: As we are currently doing in North America and Korea, we will be beta-testing a localized version of World of Warcraft in China prior to releasing the game there. Conducting multiple beta tests in this manner will provide us with ample opportunity to fine-tune the game before its commercial release in China. Furthermore, with China The 9 Interactive we will test the simplified Chinese version of World of Warcraft on local, in-house test servers to ensure the localization quality meets our and their requirements prior to starting the beta-testing process for China.

GS: How have the decisions that you've made going into China been informed by Blizzard's past experience in Korea?

PS: From our past experience in Korea, we've learned that the continued success of a game relies on continued support from the company providing the game. We will bring this same dedication to players in China by making sure that we offer stable local servers and native-speaking customer support available from the first day that the Chinese version of World of Warcraft will be available. As for Korea, we have previously announced that a Blizzard-managed local World of Warcraft team will provide the game directly to players there.

GS: What are the biggest challenges you expect to encounter in the China market?

PS: The biggest challenge we could hope to encounter in China is having record-breaking numbers of players logging onto the servers to play. Should this turn out to be the case, we will be prepared in advance with a significant local server infrastructure and a well-trained local customer-support team already in place for the game at launch.

GS: What is unique about the Chinese technology infrastructure that you need to take into consideration for the game's proper functioning?

PS: Although penetration of broadband is growing quickly there, China is primarily a dial-up country. Therefore, we will do the necessary due diligence to ensure that the game accommodates narrowband users, and we will work with China The 9 Interactive and a Chinese ISP that has extensive peering and network-operations experience to ensure good local connectivity for gamers in China.

GS: Asian markets have been getting a lot of press for piracy. What steps are being taken to address piracy where World of Warcraft is concerned?

PS: In theory, piracy in MMORPGS should be greatly reduced due to server authentication with players. However, to further ensure the safety of the game, antipiracy efforts are being considered in our development process, as well as in the selection of our local operating partner. We plan to work closely with China The 9 Interactive to take an aggressive stance against hackers and cheaters. Additionally, we will remain diligent in our efforts to work closely with local antipiracy associations and government bodies to support the local antipiracy measures.

GS: Thanks, Paul.