NetEase Explores Global Game Market by Setting up Studios and Investing
In 2022, only 468 new games obtained approval from Chinese authorities, far less than the 679 approved in 2021. The tightening domestic game market forced NetEase to develop operations in overseas markets. The following content has been compiled according to a report by Chinese media outlet Zhixiang Chuhai on December 29.
NetEase has invested in at least 21 game teams and set up six studios in overseas markets in recent years, hoping to further strengthen its R&D and distribution capabilities for games.
But in the short term, these moves have not contributed much to revenue. According to data.ai, NetEase ranked seventh in a list of Chinese game manufacturers’ overseas income in November 2022, surpassed by miHoYo, 37 Interactive Entertainment and Lilith. In data.ai’s similar lists for the first 11 months of this year, NetEase only reached fifth place in April, and often ranked after 10th.
In 2017, Wang Yi, the vice president of NetEase, once said that the company is recruiting globally, exploring the acquisition or investment of game studios in other countries, and hopes that 30% of the company’s revenue will come from overseas markets by 2020. However, NetEase CEO Ding Lei mentioned in a financial report for the first quarter of 2022 that the revenue of NetEase games from the overseas market accounted for more than 10%, which obviously did not reach the target in 2017.
NetEase‘s global market exploration can be roughly divided into three stages. The first stage was before 2016, when NetEase independently distributed casual games, but turnover was mediocre. The second stage was from 2016 to 2018, which witnessed the a blooming in the Japanese market. “Onmyoji” once became the 16th best-selling game in Japan. “Knives Out” was the only battle royale video game in the Japanese market at that time. The third stage is from 2019 to now, when NetEase has begun to accelerate its investment in overseas game teams and has built several game studios.
Since investing in Reforged Studios in Finland in 2015, NetEase Games has invested in at least 21 companies related to the game business in overseas markets. Its investment in the field reached four times in 2019 and 2021, and eight times in 2022, mostly in North America and Europe.
NetEase established a studio in Montreal, Canada in July 2019, and up to now, six studios have been established. Different from the investment trend, NetEase has three self-built studios in Japan alone.
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Except Thatgamecompany, an American independent video game development company founded by USC students Jenova Chen and Kellee Santiago, and Second Dinner founded by the former “Hearthstone” core team, NetEase‘s investments were mainly in console games and PC games. Although some of the game R&D teams are quite young, they have work experience at Blizzard, Riot Games and other gaming giants.
In addition to traditional games, NetEase has invested in cutting-edge game derivatives, accounting for a small part of total investment. For example, in 2022, it invested in Haegin, a South Korean metaverse game developer, and PlayPulse, a Norwegian game exercise bike startup.