Chinese agencies battle over 'World of Warcraft'

BEIJING — It could almost be a "World of Warcraft" game session: Two competing titans, plotting against each other, swapping blows, embarked on a quest for a single prize that only the stronger will claim.

But this is not virtual reality. The titans are two agencies of the Chinese government. And their quest, during which they have traded a few blows in the past week, is for a potentially rich prize: the power to regulate the real "World of Warcraft," among the most popular online games in China.

The background: On Monday, the Chinese General Administration of Press and Publication ordered the Shanghai-based operator of "World of Warcraft," NetEase, to shut down its servers for "World of Warcraft." The agency said it had rejected the company's application to become the new host of the game's 4 million Chinese players.

The Ministry of Culture struck back Wednesday.

"In regards to the 'World of Warcraft' incident, the General Administration of Press and Publication has clearly overstepped its authority," a ministry official, Li Xiong, was quoted as saying in the Economic Information Daily, a newspaper in Beijing. "They do not have the authority to penalize online gaming."

The ministry said it had that authority, and it said NetEase was free to offer the game on computers in China. The matter appears destined for settlement by the State Council, the Chinese government's Cabinet.

The defining aspect of the dispute involves money.

The online-gaming industry in China is huge, and growing fast. About 50 million people crowd the Internet cafes of China on a regular basis to play. Revenues in 2008 rose about 50 percent to at least $2.9 billion, according to Alicia Yap, a Hong Kong analyst for Citi Investment Research and Analysis. That is 10 times the revenue of five years ago. IDC, a research company, has predicted annual revenue will reach $6 billion by 2013.

In that context, the question of who decides what games go online looms large. It is especially important for game makers outside China, who have had trouble cracking the Chinese market.

Of the 10 most popular games in China ranked by MMLC Group, a Beijing intellectual-property consulting firm, only "World of Warcraft," by Blizzard Entertainment, is U.S.-made; two are South Korean, and the rest were developed in China.

The press and publication administration has taken a hard line against outside involvement in the industry, stating last month that foreign investment in Chinese online-gaming operations is forbidden.

Historically, the publication administration has had the power to censor and ban virtually anything published, whether a book, a DVD or an online game. The Ministry of Culture has policed film and other performing arts, including literary and audiovisual works.

The State Council sought to redefine this overlap in 2008, essentially giving the publication agency the power to approve online games before they are made public, and assigning the Ministry of Culture to police them once they appear on the Internet.

"World of Warcraft" fell between the cracks. Long popular among Chinese gamers, the role-playing game hit a snag in June, when Blizzard dropped the previous operator of the game's Chinese franchise in favor of NetEase. NetEase shut the game down while it reapplied for permission from the Ministry of Culture and the publication agency.

The ministry swiftly approved the game, while the publications agency lagged. In September, NetEase restarted "World of Warcraft."

Li Bibo and Xiyun Yang contributed research.