Chinese tech giants are reconsidering their strategies towards Japanese studios. Tencent and NetEase have started making more cautious moves overseas amid a resurgence in the domestic games market.
Visions of Mana
Here are the key takeaways from the Bloomberg’s new report:
- NetEase laid off almost all of the staff at its subsidiary Ouka Studios, which just launched action RPG Visions of Mana;
- The company has been cutting jobs since this spring, currently considering closing the studio entirely (NetEase told Bloomberg that it had “nothing to announce” on this matter);
- Tencent has already scaled back investments in Japan, pulling out of several funding commitments for new games due to its frustration with the lack of ambition among local developers;
- Japanese studios prefer to make “smaller-scale, lower-risk projects,” while Tencent wants to invest in projects with global appeal and franchise potential;
- At the same time, both Tencent and NetEase plan to continue their partnerships with major Japanese companies like Capcom and Bandai Namco.
Chinese companies have been expanding into Japan for several years due to regulatory scrutiny from the government. As industry analyst and Kantan Games CEO Serkan Toto pointed out last year, Tencent and NetEase “both feel pressure to make headway in Japan, especially since game regulations in their home market are becoming increasingly restrictive.”
However, their strategy shifts come at a time of thaw in the Chinese market, and especially in the wake of the worldwide success of Black Myth: Wukong (Tencent also has a 5% stake in developer Game Science).
“Globally, the video gaming industry has retrenched post-Covid, and many large publishers have reduced headcount or scaled back investments,” Bernstein analyst Robin Zhu told Bloomberg. “Anecdotally, the Japanese developers’ desire to tightly control what can be done with their IP has sometimes been a source of friction.”
China’s two biggest game companies will continue to expand their game portfolios, while also relying on hits produced by in-house teams. In 2024, Tencent launched Dungeon & Fighter Mobile, which generated $270 million in player spending on iOS in China in its first month, and NetEase successfully launched the mobile version of Naraka: Bladepoint.
In terms of global expansion, the two rivals try to invest in big-budget free-to-play titles with global appeal. Earlier this year, NetEase launched Once Human, which reached 10 million players in its first month. Tencent, on the other hand, is gearing up to release of Delta Force: Hawk Ops, a multiplayer shooter with a premium single-player campaign developed by Call of Duty: Mobile maker TiMi Studio Group.