World of Warcraft decline partially offsets NetEase Q1 profits

In-house developed games are driving Chinese MMO operator NetEase's increased revenues and profits, although this success is being offset slightly by a decline in revenue from Blizzard Entertainment's World of Warcraft. As part of the company's 2012 first quarter financials report, it said that the growing popularity of its self-developed games is driving overall revenues, with titles such as Ghost, Tianxia III and Fantasy Westward Journey all providing dynamic growth. The company noted that expansion packs for its long-running titles, including Westward Journey Online II, have helped these titles to provide increased ongoing revenue contributions, while revenue from newer titles is also growing. In particular, Tianxia III saw record high revenue compared to any other NetEase game during this first quarter. NetEase admitted that this growth was partially offset by a decline in revenue from World of Warcraft, which the company operates in China, although it said it was pleased to have recently renewed the contract for the game with Blizzard. Player subscription numbers for World of Warcraft have been steadily declining over the last year. For the first quarter ended March 31, 2012, NetEase's online game services totalled revenues of RMB 1.8 billion ($289.2 million), up compared to RMB 1.4 billion ($221.3 million) year-over-year, and gross profits of RMB 1.3 billion ($208.4 million) compared to RMB 952 million ($150.5 million) year-over-year. Overall, the company posted revenues of RMB 2.0 billion ($318.2 million), up compared to RMB 1.5 billion ($237.1 million) year-over-year, and profits of RMB 941.7 million ($149.5 million), up compared to RMB 737.4 million ($116.9 million) year-over-year. Looking to the rest of the fiscal year, William Ding, CEO of NetEase, explained that the company will continue to push diversification in its self-published games, with several more games due for release in the second and third quarters.