Blizzard Activision is caught between two Chinese ministries regarding its operation of World of Warcraft in China.
Activision Blizzard's (Nasdaq: ATVI) great adventure in Chinese bureaucracy appeared to have drawn to a peaceful close in late September with the commercial relaunch of World of Warcraft. On November 2, 2009, however, China's General Administration of Press and Publication (GAPP) declared that the relaunch was illegal and demanded a halt to the commercial operation of the game.
Activision Blizzard's journey began last April when it announced a switch in local operators for World of Warcraft from The9 (Nasdaq: NCTY) to NetEase (Nasdaq: NTES). The Ministry of Culture and GAPP, China's two rival video game regulators, quickly declared that World of Warcraft needed to go through a new content review and approval procedure in order to make the switch. NetEase complied, and in late July the Ministry of Culture issued its approval. By early September, however, with nearly one hundred zero revenue days and counting, GAPP still hadn't reapproved the game. World of Warcraft languished in bureaucratic limbo.
Then the referee showed up.
On September 7, 2009, the State Commision Office for Public Sector Reform (SCOPSR) issued an explanation of the relevant provisions from last year's Three Determination Regulation, which the General Office of the State Council released to redefine the size, authority and internal structure of China's many central ministries and agencies. SCOPSR stated that the primary regulator for the online game industry is now the Ministry of Culture and that GAPP's role would be limited to approving games prior to publication. In addition, if anyone publishes a game without GAPP's approval, the Ministry of Culture rather than GAPP will lead the enforcement efforts.
The following week, the Ministry of Culture (MOC) called together representatives from China's game companies and explained that they're now fully in charge. GAPP's approval authority, the MOC said, is limited to those elements of online games that are published in a tangible medium - things like player guidebooks and compact discs with the client side software. For downloads and online content, approval from the Ministry of Culture is sufficient. In addition, once a game is available online the Ministry of Culture assumes full regulatory authority.
NetEase listened carefully, and the next day World of Warcraft relaunched.
On September 28, 2009, GAPP issued its own interpretation of the referee's new rules. The release explained that GAPP has sole approval authority over online game publishing, which includes follow on approvals whenever a game is changed - new version, expansion pack, new operator, whatever - time to once again talk to the GAPP. In addition, publishing approval covers the whole game - offline and online, physical medium or digital data stream, the GAPP minds it all. In direct contradiction to SCOPSR, GAPP also claimed it has the enforcement power to stop the online operation of games that it has not approved.