Seattle is a long way from Hangzhou, but for the developers working at NetEase’s U.S. studios, the distance no longer matters. Their jobs are gone.
Only weeks after Marvel Rivals — a game they helped build — became a runaway success, their contracts were terminated. The game pulled in $136 million in its first month, proving NetEase could launch a blockbuster in the West.
Yet, instead of expanding its international operations, China’s second-largest gaming company is cutting back on its global footprint.
Layoffs are nothing new in the gaming industry, which has seen more than 34,000 jobs lost in the past two and a half years, but NetEase’s recent moves suggest something bigger.
Insiders say the company is actively withdrawing from its overseas investments, selling stakes in gaming firms, and shutting down some of its Western development teams.
The timing is curious. It coincides with escalating U.S.-China tensions, a renewed trade war, and a broader shift in China’s gaming industry. For years, NetEase pursued an aggressive international expansion strategy, investing in Bungie, Quantic Dream, and Behaviour Interactive while opening studios in North America, Europe, and Japan.
Now, reports suggest that CEO William Ding has lost confidence in expensive overseas teams.
At the same time, China’s domestic developers are proving they can build world-class AAA games at a lower cost. The recent success of Black Myth: Wukong, a Chinese-developed action RPG that has already sold tens of millions of copies, validates a shift in strategy.
With high production quality and global appeal, Chinese studios are becoming self-sufficient — and some executives may be asking whether they even need Western teams anymore.
NetEase officially denies that it is retreating from the global market.
In response to questions from GamesBeat, the company said it remains committed to overseas operations and that its recent studio closures were “purely business decisions.”
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But investors and analysts aren’t convinced.
The question is, why would a company that spent years building a global presence suddenly change course?
Is this a matter of rising costs and strategic adjustments, or is NetEase responding to geopolitical realities? And if the company is truly scaling back, what does that mean for the global gaming industry?
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The Rise of NetEase: How a Chinese Giant Went Global
For years, NetEase was one of China’s most ambitious gaming companies, determined to expand beyond its home market.
Unlike Tencent, which largely grew through acquisitions and investments, NetEase took a dual approach: it developed blockbuster titles at home while building a network of international studios.
This strategy made sense. China’s gaming industry, despite its vast size, was highly regulated. The government imposed strict playtime limits on minors, slowed down game approval licenses, and regularly tightened content restrictions.
By looking outward, NetEase could diversify its revenue streams, gain access to global talent, and secure intellectual property that appealed to Western audiences.
Strategic Acquisitions and Investments
To make its mark, NetEase poured billions into overseas deals.
- In 2018, it invested $100 million in Bungie, the developer of Destiny.
- In 2022, it fully acquired Quantic Dream, the French studio behind Detroit: Become Human.
- It also bought Grasshopper Manufacture, the Japanese studio known for No More Heroes.
- Through its investment arm, it took stakes in Devolver Digital, Behaviour Interactive, and Makers Fund, a venture capital firm managing nearly $1 billion in gaming investments.
The company also set up first-party studios in North America, Europe, and Japan, hiring veteran developers from Blizzard, Rockstar, and Ubisoft to create new IPs aimed at Western players.
At its peak, NetEase was on track to double its international gaming revenue.
In 2022, CEO William Ding publicly stated that he wanted 50% of NetEase’s gaming income to come from overseas markets. This was an ambitious goal, considering 90% of its gaming revenue still came from China at the time.
But then, something changed.
The Shift: From Expansion to Retrenchment
Despite years of investment, NetEase’s Western studios struggled to produce major hits.
The high cost of running teams in the U.S. and Europe became a growing concern. Meanwhile, China’s domestic gaming industry was catching up fast.
The turning point came in 2024 with the success of Black Myth: Wukong. Developed by Game Science, a Chinese studio with no Western footprint, the game quickly became a global phenomenon.
It proved that China could create high-quality, AAA games at a fraction of the cost of Western studios.
At the same time, global gaming investment slowed down. The post-pandemic gaming boom had ended, and M&A activity in the industry dropped sharply.
NetEase, like many other firms, had to reevaluate its priorities.
By late 2024, signs of NetEase’s retreat were becoming clear:
- Reports surfaced that NetEase was shutting down its overseas investment division.
- Layoffs hit multiple studios, including its Seattle team that worked on Marvel Rivals.
- Analysts at the Dice Summit in Las Vegas openly discussed China’s gaming industry pulling back from international markets.
For investors, the shift was jarring. Just two years ago, NetEase was expanding aggressively.
Now, sources suggest it is looking to sell some of its overseas assets, potentially unwinding years of investments.
But is this really just about cost-cutting, or is something bigger happening behind the scenes?
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Is NetEase’s Retreat a Response to Geopolitics?
NetEase’s global pullback is happening at a time of growing tensions between the U.S. and China.
Trade disputes, economic policies, and national security concerns have increasingly put pressure on Chinese companies operating abroad — especially those in technology and entertainment.
The timing raises a key question:
Is NetEase’s decision to scale back its overseas investments purely about costs, or is it also responding to the shifting geopolitical climate?
The U.S.-China Trade War: A Growing Concern for Gaming Companies
The U.S. and China have been locked in a trade war for several years, but in 2024, new tariff measures and restrictions raised the stakes for Chinese firms.
- The Biden administration classified Tencent as a “Chinese military organization” in its final days, raising concerns about how deeply Chinese tech companies are tied to Beijing.
- The U.S. has previously investigated Tencent’s ownership of Epic Games and Riot Games for potential security risks. While those concerns were largely dismissed, gaming companies remain under scrutiny.
- Donald Trump, currently leading in polls for the next U.S. election, has indicated that tariffs on Chinese technology could increase further, potentially including games and gaming hardware.
While NetEase denies that the trade war has affected its business strategy, industry analysts aren’t so sure.
If the U.S. were to target gaming companies for national security reviews, NetEase’s overseas investments could become more difficult to manage or even politically risky.
China’s Shifting Policies on Gaming Expansion
For years, the Chinese government encouraged its game companies to expand internationally.
In 2021, the China Audiovisual and Digital Publishing Association openly promoted gaming as part of China’s Belt and Road Initiative, framing it as a key part of China’s global soft power strategy.
But by 2023 and 2024, the mood shifted:
- China imposed stricter gaming regulations at home, limiting the number of new gaming licenses issued.
- Major gaming companies, including Tencent and NetEase, faced increased oversight on their foreign investments.
- The Chinese government signaled a preference for investment in domestic studios rather than Western expansion.
With AAA-quality Chinese games like Black Myth: Wukong proving successful, it became less necessary to rely on expensive Western development teams.
NetEase could focus on strengthening its domestic studios, rather than taking on the risks of running costly international operations.
The Blizzard Fallout: A Sign of Changing Priorities?
Another factor that highlighted NetEase’s shifting global stance was its high-profile breakup with Blizzard Entertainment in early 2023.
For 14 years, NetEase had been Blizzard’s publishing partner in China, handling World of Warcraft, Overwatch, and Hearthstone.
But when contract renewal negotiations collapsed, Blizzard pulled its games from the Chinese market, leaving millions of Chinese players without access.
At the time, NetEase’s public response was unusually aggressive:
- The company publicly criticized Blizzard, accusing it of being unreasonable and arrogant.
- It even live-streamed the demolition of a Blizzard-themed statue outside its headquarters, in a move seen as nationalistic defiance.
In 2024, Blizzard returned to China under a new deal with Microsoft, not NetEase.
That meant NetEase had lost one of its biggest international publishing partnerships, reinforcing the idea that it was shifting away from global partnerships and focusing inward.
What Does This Mean for the Global Gaming Industry?
If NetEase continues scaling back its Western operations, the impact could be significant.
- Studios that relied on NetEase funding — such as Quantic Dream and Devolver Digital — may need new investors or face restructuring.
- The industry-wide layoffs, already at 34,000+ job losses, could grow even worse if more studios shut down.
- South Korean and Middle Eastern companies (such as Saudi Arabia’s Savvy Games Group) may step in to fill the investment gap left by NetEase.
At the same time, Chinese gaming is still expanding — just with a stronger domestic focus. With successes like Black Myth: Wukong, China is proving it can compete on the global stage without relying on Western teams.
For NetEase, this is a major strategic shift. For the global gaming industry, it could signal the end of an era where Chinese gaming giants aggressively pursued Western expansion.
The Real-World Impact of NetEase’s Global Shift
NetEase’s international retreat is more than just a business decision — it’s a reflection of major shifts in the gaming industry, the global economy, and geopolitical power dynamics.
For nearly a decade, NetEase was one of China’s most outward-looking gaming companies, making strategic acquisitions, funding Western developers, and expanding its presence beyond China.
Now, it appears to be changing course, pulling back from overseas investments, laying off international teams, and reinforcing its domestic operations.
This shift raises three key takeaways that will shape the gaming industry going forward:
1. The End of China’s Global Gaming Expansion?
For years, Chinese gaming companies — led by Tencent and NetEase — were among the most aggressive buyers and investors in global gaming.
They funded studios, bought stakes in Western developers, and created new global publishing networks.
But with NetEase scaling down, and Tencent facing increased scrutiny from U.S. regulators, the era of Chinese companies freely acquiring and investing in Western gaming firms may be coming to an end.
This leaves a gap in the market. Who will step in?
- South Korean gaming giants like Nexon and NCSoft are already expanding their reach.
- Saudi Arabia’s Savvy Games Group, backed by billions in government funding, has been actively acquiring studios and could become the new major investor in Western gaming.
- Western publishers may need to seek alternative sources of capital — or consolidate further to survive.
The global gaming industry has long been fueled by Chinese investments. That could be changing.
2. A More Self-Sufficient Chinese Gaming Industry
The success of Black Myth: Wukong signals a major turning point: China no longer needs to rely on Western studios to produce world-class games.
For years, Chinese developers were primarily focused on mobile and free-to-play markets, while AAA development was still seen as dominated by the U.S., Japan, and Europe.
But with NetEase and other Chinese studios proving they can produce high-quality, globally successful games in-house, there’s less incentive to keep Western teams running.
This doesn’t mean China is turning away from global markets entirely — but it does suggest that Chinese gaming companies will be more selective about where and how they expand.
Instead of running costly studios in the U.S. or Europe, NetEase may now focus on developing AAA games in China and exporting them worldwide.
3. More Market Volatility for Western Game Studios
For Western game developers, NetEase’s retreat couldn’t come at a worse time.
- The gaming industry is already struggling with mass layoffs — more than 34,000 jobs lost in the past 2.5 years.
- Gaming M&A has slowed dramatically, making it harder for struggling studios to find buyers.
- Some NetEase-backed studios, like Quantic Dream and Devolver Digital, may now need to seek new investors or risk financial instability.
This is part of a larger problem: the post-pandemic gaming boom has collapsed, and many studios are facing cash flow issues, underperforming games, and shifting investor priorities.
NetEase’s exit from Western investments only adds to the uncertainty.
What Happens Next?
Despite NetEase’s denials, the evidence points to a company fundamentally rethinking its approach to international gaming. The coming months will be crucial in determining:
- Will NetEase fully divest from its international holdings?
- Will it sell off its stakes in companies like Devolver Digital and Behaviour Interactive?
- How will its competitors — Tencent, Nexon, or Saudi-backed firms — respond to this shift?
One thing is clear: the global gaming industry is entering a new phase, and NetEase’s retreat is a sign that the balance of power is shifting.
The gaming world once saw China as a dominant buyer, investor, and partner.
Now, it may be looking inward — leaving a gap that someone else will have to fill.
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