NetEase launches first US studio in Texas as China’s second-largest video games player seeks growth outside hostile home market

  • Jackalope Games will be led by veteran American game designer Jack Emmert, who worked for Daybreak Games
  • Opening of US studio reinforces trend of Chinese video gaming companies doubling down on overseas markets for earnings growth

NetEase, China’s second-largest video gaming company, has launched its first US studio in Austin, Texas, marking another move overseas by a Chinese games developer as the domestic market turns increasingly hostile.

NetEase Games, the online games division of Nasdaq-listed NetEase, said in a release on Thursday that the US studio, Jackalope Games, will be led by veteran American game designer Jack Emmert, who has worked on City of Heroes, Neverwinter, Star Trek Online, and DC Universe Online.

Emmert, who was head of the Daybreak Games studio responsible for massively multiplayer online role-playing games (MMORPG), said in a statement that NetEase Games “is the best possible place for me and my team to thrive”.

NetEase did not disclose the financial terms of setting up the studio. It said the studio will operate independently when it comes to game development, and the first title produced by Jackalope Games will be fully funded by NetEase.

The opening of the studio reinforces a trend of Chinese video gaming companies doubling down on overseas markets for earnings growth, which has stalled at home amid regulatory pressure and a months-long freeze on new gaming licences that only ended recently.

William Ding, founder and chief executive of NetEase, said in a February earnings call that the company is “calling on global gaming talent and will accelerate overseas expansion”.

None of the newly-licensed games in April came from Tencent Holdings or NetEase, the country’s two biggest gaming companies, and the approval number of 45 was around half the 87 titles approved last July, before the ban began.

Meanwhile, Beijing has maintained its tight grip on gaming content and the gaming time of young people. Authorities have limited gamers aged under 18 to playing between 8pm and 9pm only on Fridays, Saturdays, Sundays and statutory holidays, and asked studios to promote positive social values in the games themselves.

The overseas expansion by NetEase comes at a time when the US is increasing its audit scrutiny of US-listed foreign firms.

NetEase has been added to the compliance watch list of the Securities and Exchange Commission, along with another 87 Chinese companies, including gaming and video-streaming site Bilibili.

The Holding Foreign Companies Accountable Act (HFCAA), which came into effect in late 2020, requires US-listed foreign firms to comply with audit inspection rules under the Public Company Accounting Oversight Board (PCAOB), or face the risk of being delisted from US stock exchanges after three consecutive years of non-compliance.

Jackalope Games said it believed that collaboration and diversity are necessary ingredients for studio success and that it “embraces a virtual office”, hiring talent from all over the world.

NetEase Games has absorbed a number of studios over the past year, many led by industry veterans.

Author: Ann Cao, SCMP

You might also like