NetEase Allegedly Will Pull Back From “Majority Of Its Overseas Teams”

It turns out that the recent layoffs in the Marvel Rivals developer’s US office could be the beginning of NetEase’s upcoming actions to cut more overseas studios. 

The Chinese gaming giant has been aggressive in the past few years in funding and opening global studios, many of which were led by industry veterans. Simply alone in 2023, we’ve seen it set up quite a few gaming studios that are led by industry veterans, such as Bad Brain Game Studios in Canada, Tokyo-based PinCool that was under the leadership of a key Dragon Quest producer, Ryutaro Ichimura, AnchorPoint Studios led by Control Lead Designer Paul Ehreth, Worlds Untold along with Mac Walters, the Lead Writer on Mass Effect 2 and 3, and many more. However, this fast expansion seems to have come to an end, followed by the possible shutdown of some of the newly founded studios. 

According to Game File’s sources, who are familiar with the company’s operations, “NetEase plans to divest itself of the majority of its overseas teams, leading to the potential closure of more than a dozen game studios if they can’t secure new post-NetEase funding.” 

Letting go of part of Marvel Rivals’ Seattle team was sensational news that was announced at bad timing — it followed the developer’s announcement of the hero shooter’s huge success. Before that, a few more other studios were affected by NetEase’s adjustment since last November, including Worlds Untold and Jar of Sparks, which had to pause operations and look for new funding partners. 

Many people still question why the developer made such a poor decision. Well, despite Marvel Rivals reportedly generating significant revenue and contributing to a 1.5% YoY increase in NetEase's gaming department, the company’s overall net revenues decreased by 1.4%. As stated by its financial report, NetEase has taken approaches to cut costs, decreasing total operating expenses by 15.1% compared with the same time span of 2023, which is “mainly due to decreased marketing expenditures related to games and related value-added services.” 

Besides lowering costs, the company is said to have lost the will to develop games with overseas employees. Sources of Games Beat mentioned that “part of that reason is the high cost of U.S. developers in particular. Another reason is that China’s game developers have also matured enough to make triple-A games,” proved by the success of Black Myth: Wukong. 

A representative from NetEase refused to comment on the cuts and scales mentioned by Game File and said, “All studios and projects are in constant review and evaluation, and NetEase will determine changes needed to be made throughout that process.” 

It is still unknown whether NetEase will stick with its promise of “engaging an ever-growing global audience” and remaining “dedicated to fostering creativity and collaborating with top talent and strategic partners” while facing the challenges of dropping revenue. If Game File’s information proves to be true, a large-scale “industry earthquake” caused by the company’s strategy change might occur.