When NetEase chief executive William Ding decided to pull the plug on international game studios, it became one of the starkest examples yet of how quickly tech company bets can unwind.NetEase will cut off funding to the studio led by Yakuza franchise creator Toshihiro Nagoshi, the latest to be affected by the Chinese company's broader strategy to shrink game development activities.
Employees of Nagoshi Studio were told of the decision on Friday, with NetEase confirming it will stop financing the studio from May. For Nagoshi and his team of 80 developers, it is a stunning reversal from December, when they unveiled Gang of Dragon at The Game Awards to considerable fanfare. But the reality underneath was far grimmer:NetEase discovered additional funding of at least ¥7 billion ($44.4 million) would be needed for the project to be completed.
Think about this from a business perspective. NetEase spent years and significant capital courting veteran game creators internationally. Now, facing pressure to show profitability, the company is essentially exiting the business of funding big-budget creative projects outside China.NetEase's founder is now only interested in investing in games that are likely to generate hundreds of millions of dollars annually, a task Nagoshi's planned game is apparently unlikely to meet.
Nagoshi is trying to find new sponsors without success so far. Meanwhile,the studio has been informed that while it is free to continue on its own, it must bear the corresponding costs if it wants to keep the assets or brand, with NetEase only open to negotiations if the studio can pay its way out. It is a punitive position that essentially locks creative talent in place while the company exits.
The Nagoshi situation is just one piece of a larger pattern.NetEase has conducted a number of layoffs and studio closures in the last year, including February 2025 layoffs for the Seattle-based team working on multiplayer shooter Marvel Rivals, shutdowns for subsidiaries T-Minus Zero Entertainment, Fantastic Pixel Castle, and Bad Brain Game Studios, and January 2026 layoffs at NetEase's Montréal studio.NetEase plans to cut its non-Chinese studios, with these now actively being "shopped around" to new buyers, and one source told Game File that NetEase plans to fully divest itself from its overseas teams.
For investors and developers who believed NetEase was genuinely committed to building a global game development empire, this is a costly education in corporate strategy.NetEase founder William Ding is eyeing major budget cuts across the several development studios working under the publishing company. The message from headquarters has been clear: no additional funding, no marketing support, and no extension of deadlines.NetEase isn't planning to spend on marketing or promotion for the games greenlit in Japan, a price tag that can often equate for 30-50 percent or more of a game's entire production budget.
Now, before we dismiss this purely as NetEase's poor judgment, there is a genuine business case beneath the chaos. The games industry has been in turmoil;NetEase reported a 6.9% increase in overall revenue to RMB 112.6 billion ($16.1 billion) for 2025. Yet that headline number masks a painful reality: most of the company's portfolio expansion in the West has not generated the returns executives promised investors. When your core gaming business is under pressure, international studio acquisitions become a luxury you can no longer afford.
The fallout for creative professionals, though, is real.A studio of about 80 people were reportedly working on Nagoshi's project, and he had been trying to decide which content to cut to keep the project on-track. Now those 80 people face redundancy or relocation as the studio searches desperately for alternative funding. For Nagoshi himself, who departed SEGA after 32 years as a celebrated producer, it is a humbling reminder that creator prestige does not guarantee financial backing when corporate priorities shift.
There are legitimate questions about NetEase's execution here. Committing billions to international studios and then withdrawing support mid-project suggests poor planning and weak project governance. Yet there is also a broader lesson: when a company is running a consolidated business that depends on recurring revenue, the appetite for high-risk, long-tail entertainment projects evaporates quickly. This is not unique to NetEase. The entire games industry is learning this painful lesson.
For developers and investors watching this unfold, the takeaway is uncomfortable but clear. Large publisher backing, even from tech giants with deep pockets, is no guarantee of stability. Studios betting their future on a single investor face existential risk when that investor's priorities change. Nagoshi had an opportunity to explore creatively after decades at one company. Instead, he has become a cautionary tale about the gap between corporate ambition and corporate commitment.