The recent announcement that NetEase was laying off some of its US-based Marvel Rivals developers, including one of the game’s directors, prompted concern and questions given that the hero shooter is performing well in the market with 40 million players. Now, a clearer picture of what’s going on and the context behind the shocking decision is coming into focus.
Niko Partners analyst Daniel Ahmad published a report in which he offered his take. Ahmad said there is “some truth” to how various Chinese game companies are downsizing their US operations due in part to “geopolitical risks” under the new Trump administration. However, there may be more to the story. Ahmad said the “full picture is more nuanced” and might also reflect NetEase performing a “recalibration of its global strategy.”
In addition to the layoffs at the Marvel Rivals team at NetEase is Seattle–under a dozen people were reportedly affected–NetEase made a number of other significant drawbacks to its global games business. Ahmad pointed out how NetEase either closed or scaled down funding for Ouka Studio in Japan, Worlds Untold in Canada, and Jar of Sparks in the US. More recently, Just Cause creator Christopher Sundberg’s new studio Liquid Swords announced cuts, as did Halo Infinite co-developer SkyBox Labs in Canada. Both teams were funded in part by NetEase.
“NetEase aggressively expanded its overseas footprint between 2019 and 2023, opening and investing in numerous studios outside China with the aim to develop high-end PC and console games,” Ahmad said. “NetEase’s recent decisions regarding its overseas investments and studio operations reflect a broader recalibration of its global strategy, driven by multiple factors. This change in strategy has impacted both US based studios and non-US based studios.”
Ahmad went on to note that the “core” development team for Marvel Rivals is based in Guangzhou, China. This includes a second game director, Guangyun Chen, alongside the US-based director, Thaddeus Sasser, who was let go this week.
Also in his note, Ahmad said NetEase and other Chinese giants like Tencent and miHoYo invested significantly in overseas games and teams to try to reach players globally. However, Ahmad said a “turning point” for Chinese companies came in 2024 when Black Myth: Wukong, developed by a relatively small Chinese team at Game Science, broke out and became a giant success.
“The success of Black Myth: Wukong challenged the industry’s assumption that only Western or Japanese AAA studios could produce globally competitive PC and console titles,” Ahmad said.
So why did NetEase cut its US-based Marvel Rivals development team? We may never know the real answer, but Ahmad said it has more to do with “high costs and lower returns” over the past few years following a pullback after the boom of the pandemic. “Therefore, streamlining operations helps reduce costs and shorten development cycles, and NetEase is now following a new strategy both for these reasons and to mitigate risk from US-China policy changes,” he said.
It’s not just NetEase that’s scaling back operations in the US, as the US video game industry has undergone turbulent times of late, with thousands of layoffs rocking the business in the past few years. These cuts come as some US-based video game companies, including Electronic Arts, continue to see huge profits.
