World of Warcraft shutting down in China?

Citing "gross violations," regulator revokes NetEase's permit to operate game in authoritarian nation; internal government power struggle blamed.

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After spending much of 2009 offline, the Chinese version of World of Warcraft has found itself in limbo once again. According to Reuters, the authoritarian nation's General Administration of Press and Publication (GAPP) has revoked the permit needed to operate the game from Blizzard Entertainment's localization partner, NetEase.

"I'm sorry sir, but that sword just isn't regulation size."

Regulators reportedly claimed that NetEase, which landed the localization contract for the massively multiplayer role-playing game in April, had committed "gross violations" of Chinese law. As a result, GAPP officials ordered NetEase to stop charging players of the game in China and cease accepting any new registrations. It also reportedly rejected the company's application to localize the first WOW expansion, The Burning Crusade.

As a result of the GAPP's move, NetEase saw its shares fall 2.4 percent on the NASDAQ stock exchange to close the day at $37.69. (Shares were down an additional 1.38 percent in after-hours trading.) Reps for the company told Reuters they believe they are in full compliance with the GAPP regulations and were seeking "clarification" as to what exact violations were committed.

Roth Capital Partners analyst Adam Krejcik blamed the sudden revocation on behind-the-scenes jockeying for power by the GAPP and China's powerful Ministry of Culture, which has been leading a crackdown on online gaming all year. "These guys are essentially stuck in the middle of this power struggle," Krejcik said of NetEase.

If World of Warcraft is shut down in China permanently, it will have an adverse effect on the earnings of Blizzard's parent company, Activision Blizzard. Janco Partners analyst Mike Hickey told Reuters that $0.05 could be lopped off the megapublisher's per share earnings, which are expected to be $0.65 for the 2009 fiscal year.

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