Since NetEase confirmed layoffs at the Seattle studio for the very successful live service title Marvel Rivals, fans have been speculating about what the company intends to do next. But this more than idle talk among fans.
GamesBeat reported on their sources claiming that the company intended to pull out more of their business outside China. In fact, it’s possible that they will leave behind all of their international investments, including the studios they own.
According to their sources, NetEase is losing interest in making games with overseas developers in general, not just Marvel Rivals. Some of those reasons are things fans have already guessed: hiring and paying US developers is expensive, and Chinese game developers have proven their mettle.
GamesBeat also quoted F4 Fund CEO David Kaye as saying:
“China is in retreat: geopolitical tensions, some big bets not paying off and the whims of certain CEOs mean that a massive pullback has begun. One MAJOR strategic who has made dozens of investments in the past several years is reportedly pulling the plug and divesting ALL investments outside of China. Some will likely find buyers, others will not be so lucky.”
GamesBeat’s sources told them Kaye was referring to NetEase. For their part, NetEase denied these claims in response to GamesBeat.
Niko Partners’ Director of Research and Insights Dan Ahmad, who wrote briefly about why NetEase did this on social media, shared a longer essay explaining the situation on Niko’s website. As Ahmad puts it, while it’s true that Chinese companies are concerned about US regulations, that wasn’t actually the main reason for NetEase’s new direction.
If you may remember, US video game companies overinvested during the lockdown and quarantine years, expecting unreasonably high growth in the months to come. The wave of layoffs and studio closures it experiences today is at least partly, if not mostly, because they had to pull out of those investments when that growth did not come.
Subsequently, Chinese game companies like NetEase also entered into huge investments in developers and studios during and after those lockdown years, from 2019 to 2023. In this case, they are seeing growth in their business, but they are also feeling the higher costs and lower returns that US game companies experienced.
So, even as it’s plainly clear that Marvel Rivals has been incredibly successful, NetEase fired the developers who made it a success anyway. And while those layoffs may not be substantial in terms of staff numbers, it indicates that NetEase is no different in character to all these other game companies that closed studios and laid off their workers.
Other game companies NetEase invested in based in the US include Quantic Dreams and The Blood of Dawnwalker studio Rebel Wolves. Those companies may have other business partners to help secure them if NetEase pulls out, but we shouldn’t regard these investments from Chinese companies the same way we did just a few years ago.
