Netease rakes in record revenue thanks to self-developed games, overcomes drop in World of Warcraft players

Chinese online gaming and web giant Netease (NASDAQ:NTES) posted record numbers in Q3 2013 despite a fall in the number of World of Warcraft subscribers, which Netease operates in China. Here’s a quick summary (all growth stats are year-on-year):

• Netease made RMB 2.5 billion ($411 million) in revenue, up 23 percent. That’s a new record for the company.
• Net profit came out to RMB 1 billion ($171 million), up 29 percent from last year.
• Online game revenue grew 21 percent to RMB 2.1 billion ($344 million).
• Advertising revenue grew 23 percent to RMB 299 million ($49 million).

In the quarterly earnings call, Netease said strong showings from its self-developed games offset a decrease in World of Warcraft subscriptions. MMORPG Fantasy Westward Journey 2 and its associated ‘pocket’ mobile versions performed particularly well, as did other Asia-themed MMOs Heroes of Tang Dynasty, Fantasy Westward Journey II, New Westward Journey Online II, and Kung Fu Master.

The end of the World … of Warcraft

In the same quarter, World of Warcraft lost 100,000 users globally. The world’s most popular MMORPG now stands at 7.6 million users. Activision in May said it lost 1.3 million users in the first quarter of 2013, largely in Asia. At its peak in October 2010, it had 12 million players.

Despite the decline, Activision says the game will not resort to a free-to-play model.

Netease cited government action and decline in popularity among Chinese users as possible future risks for WoW:

[…] the risk that Shanghai EaseNet will not be able to continue operating World of Warcraft, StarCraft II or other games licensed by it for a period of time or permanently due to possible governmental actions or the risk that such games will not be popular with game players in China.

Netease says it will continue to add even more games in the future, and plans to generate more interest in its newer offerings.

On a side note, the company’s WeChat competitor app YiChat, backed by China Telecom, now has 30 million registered users. Active user stats were not disclosed.

(Editing by Steven Millward)