NetEase Shares Slide After Game Release Delay

The Chinese gaming giant was set to release its anticipated "Diablo Immortal" on Monday but pushed it back after the company was barred from posting on Weibo.
Jun. 20, 2022 22:37
NetEase Shares Slide After Game Release Delay

(CapitalWatch, June 20, Hong Kong) Chinese gaming giant NetEase lost some ground in Hong Kong on Monday after delaying the domestic release of its latest video game.

With just three days ahead of the scheduled launch, NetEase (Nasdaq: NTES; HKEX: 9999) announced that it would be pushing the release to July 8. The company said that it made the decision to make some adjustments and improvements to the game.

The delay comes shortly after the company's official Weibo account was barred from posting. NetEase didn't address the ban, but screenshots circulated of a May 22 post from the company's account that could be alluding to criticism of President Xi Jinping.

China's $46 billion video game market was one of the key industries hit by the country's regulatory crackdown. Although officials are showing signs of easing the scrutiny, video game companies are still hard-hit by what's already happened. 

After an eight-month freeze, China's National Press and Publication Administration restarted issuing game registrations in April. Both before and during the pause, regulators also placed new limits on minors' use of video games and in app spending capabilities. 

The delay caused smaller companies to shut down in droves, and thousands of workers lost their jobs as a result of the companies' cutbacks.

Both NetEase and Tencent (OTC: TCEHY; HKEX: 0700) were out of the new rounds of game licenses, pushing the internet and gaming titans to a nearly year-long content drought. 

After the announcement, NTES shares dropped around 6.6% in Hong Kong on Monday. U.S. markets were closed for Juneteenth on Monday.

Diablo Immortal is a massively multiplayer online role-playing game co-developed by NetEase alongside Activision Blizzard (Nasdaq: ATVI). 

The game was already released outside of China on June 2. As the fourth installation in the hit Diablo series, it's considered one of the most anticipated games of the year. Diablo Immortal was approved in February 2021 before the crackdown and freeze began. The Diablo series' demonic themes are especially in focus as regulators have been strongly opposed to games featuring violence or religious topics. 

Eyes are trained on the events of Diablo Immortal's China release to see just how much Beijing will soften its grip on the industry, if at all. Its delay is certainly not a good omen.