Tencent and NetEase rethink Japanese strategy with studio closure imminent

• Both Chinese giants have major big-name Japanese investment in place but it’s their home market that showing the most promise
• NetEase recently backed out of a long-term deal to finance games with Bandai Namco

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NetEase Games plans to close Visions of Mana studio Ouka Studios just one day after the games release on August 29th. The move follows a dramatic rethink in how it intends to address ongoing difficulties when trading in the Japanese market.

And the gaming giant isn’t alone as rivals Tencent have their own moves afoot, set on righting the ship by abandoning high-cost projects in a Japanese development scene that’s proving increasingly difficult to navigate.

The Japanese exit strategy

That’s the news according to Bloomberg who’ve reported that both companies are now scaling back their Japanese studio investments citing years of spending which have produced few hit games. Meanwhile the once stifled Chinese market has started a slow comeback making high-profile overseas spends look like folly.

The rumours are made real through the imminent closure of Ouka Studio, a studio founded in 2020 with star talent from Bandai Namco and Capcom. A skeleton crew of final staff will look after the completion of current Visions of Mana commitments before closing completely.

Notably NetEase also owns Nagoshi Studio the studio of former Sega star Toshihiro Nagoshi, Grasshopper Manufacture the studio of Goichi “Suda 51” Suda, and GPTRACK50, the studio of Resident Evil and Capcom legend Hiroyuki Kobayashi.

Tencent in trouble too?

And NetEase is not alone. Rivals Tencent are also reconsidering or scaling back many of their investments in Japanese studios, after years of spending yielded few hit games. Meanwhile the Chinese market once plagued with uncertainty (and which prompted investment elsewhere) has been staging something of a comeback.

While NetEase reverses out of Ouka, Tencent are already doing similar, canceling funding agreements and commitments for new games, the main victim being Bandai’s Blue Protocol which was set to receive Tencent investment in order to turn the game into a series. That long-term funding will now no longer be happening with the two company’s deal ceasing in 2025.

“We may be approaching a point where Tencent and NetEase begin to scrutinize their returns more closely,” Bernstein analyst Robin Zhu told Bloomberg. “Globally, the video gaming industry has retrenched post-Covid, and many large publishers have reduced headcount or scaled back investments. Anecdotally, the Japanese developers’ desire to tightly control what can be done with their IP has sometimes been a source of friction.”

“Nothing to announce”

At the time of writing, outside of the Bloomberg report Tencent have produced an email statement reiterating it’s partner studios in Japan while Netease had “nothing to announce” when directly grilled concerning the closure of Ouka Studios.

“In supporting studios outside China, we craft our strategy based on our goal of providing better gaming experiences to local and global players,” a NetEase spokesperson told Bloomberg. The company is “thus always making necessary adjustments to reflect market conditions.”