There has been a lot of understandable hand-wringing in relation to NetEase’s firing of American developers who helped support its mega-hit hero shooter Marvel Rivals and what it might signal for investment from China in gamedev, particularly in light of a tariff-happy US president. The maneuvering by NetEase has sent analysis into overdrive, and as people ask the question of “why,” the answer appears to be an unsurprisingly complicated one.
According to insiders reporting to VentureBeat, NetEase is “losing its will to make games using overseas staff” in light of the high cost of US labor and new confidence that Chinese developers can make AAA-quality titles – Marvel Rivals and the successful single-player RPG Black Myth: Wukong are floated as examples of the country’s ability to break new ground. David Kaye, the founder of venture capital firm F4 Fund, has also weighed in, claiming, “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.”
Charles Yu, a partner at game-focused Pillar Legal in Shanghai, concurs, believing that the over-expansion during COVID, worries about “high costs and management inefficiencies,” and recent Chinese-made hits are causing the country to reassess plans.
NetEase is one of the biggest investors in gaming overseas and especially here in the US, financially backing a ton of games and studios we’re watching here in the MMO space, including BulletFarm, Second Dinner, Craig Morrison’s cozy crime MMO, Greg Street’s Ghost, Rich Vogel’s T-Minus Zero, and Jack Emmert’s Warhammer MMO, along with major investment in Epic Games and Riot Games. And that’s just the MMOs and MMO-related projects. To say its retraction from the US market would make an impact is a huge understatement, and indeed, you could say it’s already begun; NetEase has already closed down multiple teams and studios and games in recent months, including Jar of Sparks, Worlds Untold, and Harry Potter Magic Awakened.
Furthermore, Rivals was called out in the company’s 2024 year-end fiscal report, which confirms that the hero shooter has surpassed 40M players worldwide, while its games division made $2.9B in the fourth quarter and $11.5B for FY2024, with online game operations accounting for approximately 96.2% of net revenue for the year.
“Our new hit titles not only redefined gameplay but also set new industry benchmarks, while our legacy franchises gained fresh momentum through striking enhancements in design, storytelling and immersive content,” NetEase CEO William Ding claimed in the report.
This news makes the firing of Rivals’ Seattle team particularly baffling, which incidentally saw game director Thaddeus Sasser ensure he was included among those who were laid off. “I don’t want to lay off a team I directly led and not include myself,” Thasser wrote on LinkedIn. “That would be some poor leadership in my mind. I like to lead the way when things are difficult.”
Yet even with all of this concern surrounding NetEase in specific and Chinese games investment overall as the impact of tariffs loom, some analysts argue that the current geopolitical landscape might not harm gaming too hard – albeit with a bit of presumption.
“I do not see how a divestiture, if proposed or enforced, would be related to tariffs directly. I just don’t see it that way,” remarked Lisa Cosmas Hanson, president of market analyst firm Niko Partners. “My feeling is that even if it were a blanket tariff on all products manufactured in China, there would be a carve out for many items, including consoles. This happened in the past.”
Additionally, NetEase itself issued a statement to VentureBeat, saying that its recent moves are part of a wider business strategy and not related to threats from the current US presidential administration:
“Regarding the tariff trade war, yes of course we are mindful of any developments in international trade. However, our decisions have been based solely on business evaluations and not influenced by other factors. We highly respect our gaming community in the US and their love and enthusiasm for our games is valued and appreciated.
“As part of our investment strategy, we started scaling down two of our studios at the end of 2024. This decision was based purely on business evaluations and was not influenced by other factors. And this represents only a small portion of our overseas studio portfolio. Our studios in North America, UK, Spain, and Japan all continue to refine and develop their ongoing game projects.”
Experts believe that overseas investments will slow but not entirely dry up, point out that other major Chinese corps like Tencent are still putting backing into western studios, and that investment in US studios from other regions like South Korea might open up as China scales back. Ultimately the regular rank-and-file within the games industry will have to wait and watch as the whims of executives, US leaders, and Chinese megacorps ponder their next moves.
