(Reuters) - Activision Blizzard, the biggest U.S. video game publisher by market capitalization, plans to offer its popular 'Call of Duty' title as a free-to-play online game in China in a bid to expand its footprint in Asia.
The video game publisher announced a partnership on Tuesday with Tencent Holdings Limited, an Internet and wireless services provider that will have an exclusive license to operate the shooter game in China.
Shooter games have been hugely successful in China. Chinese gamers have popularized the trend of playing free online games and paying small amounts to purchase virtual goods like weapons and maps over game play on consoles. Tencent's users form the largest online community in China, according to a company statement.
"We're really enthusiastic about China as a market opportunity," Activision Blizzard CEO Bobby Kotick told Reuters.
"It's unique content developed for the Chinese audience, developed for the Chinese model and a brand new game."
Activision's announcement comes in the wake of the departure of Jean-Bernard Levy, CEO of media and telecommunications company Vivendi, which owns a 61 percent stake in Activision.
Levy's departure has revived speculation that Vivendi is looking to sell its stake in Activision Blizzard, valued at $8.1 billion.
Activision, based in Santa Monica, California, had hinted over the last year and in its earnings call in May that the multiplayer, free-to-play, microtransaction-based 'Call of Duty' game for China was in development.
The company has explored the Chinese market with its online subscription-based 'World of Warcraft' game and is experimenting with a free-to-play model of its 'Call of Duty' title for the first time.
Tencent operates a successful tactical shooter game called "CrossFire" that generates $1 billion a year in revenue in China, according to Wedbush Securities analyst Michael Pachter.
"If 'CrossFire' can do $1 billion a year, 'Call of Duty' with better graphics and better design is likely to approach that over time," Pachter said. "It's meaningful but it will take a while before that happens."
Kotick said the free-to-play game was developed over the last two years with a Shanghai-based development team. He said the game represented a "very expensive investment" for Activision, but declined to provide a figure.
Mike Hickey, analyst at National Alliance Capital Markets, estimates Activision's investment at between $20 million to $30 million, or about half of the amount to develop the console version of "Call of Duty."
"Call of Duty" represents Activision's largest franchise. The last edition, "Call of Duty: Modern Warfare 3," had record sales of over $400 million on its first day in stores last year. Heading into the holiday season, the company's 2012 pipeline includes "Call of Duty: Black Ops II," which is scheduled for a November 13 launch.
Shares of Activision were up 4 percent at $12.46 in Tuesday afternoon trade on Nasdaq.
Reporting By Malathi Nayak; Editing by Gerald E. McCormick, Sofina Mirza-Reid, Peter Lauria and Marguerita Choy