NetEase ends funding for Toshihiro Nagoshi’s studio

NetEase will stop financing Nagoshi Studio from May, a NetEase spokesperson told Bloomberg, in the latest move to shrink the company’s game development activities.

Founded in 2021 by Yakuza creator Toshihiro Nagoshi, Nagoshi Studio went independent after he left Sega Sammy Holdings.

One of the people said NetEase decided to end funding after concluding the studio’s first game would need at least ¥7 billion (US$44.35 million) more to complete.

The studio is seeking new sponsors for Gang of Dragon while negotiating asset rights with NetEase, which said the studio must fund itself to retain the assets and brand.

NetEase has been cutting game investments under William Ding, founder and CEO, a strategy that has included job cuts and the late-2024 closure of Japan’s Ouka Studio.

A NetEase spokesperson did not give details on the exit terms, Bloomberg reported.

🔗 Source: Bloomberg

🧠 Food for thought

Implications, context, and why it matters.

NetEase’s retreat from global studios runs deeper than one funding cut

The step back from Nagoshi Studio fits a broader retreat, with reports saying NetEase plans to sell off most overseas teams 1.
The shift has also hit other big bets, including hiring freezes at studios led by veterans known for work on the Halo and Mass Effect franchises 1.
The move contrasts with late 2022, when NetEase was still buying Western studios to build a strong lineup of global teams 2.
On a recent earnings call, executives tied studio closures to how well products fit the market plus quality concerns 3.

The pullback puts more weight on in-house games and a rethink of overseas spending

NetEase is leaning into its home strengths, with growth coming more from established domestic titles and new in-house games built for a global audience 3.
Its internally developed party game, Eggy Party, reached over 30 million daily active users, which supports the idea that scale can come without buying outside studios 2.
That trend makes the expensive, risk-heavy approach of backing veteran Western and Japanese teams less appealing than scalable live-service games (games that are continually updated and monetized over time).
The extra ¥7 billion, about $44.4 million, reportedly needed to finish Gang of Dragon lays out the budget risk of external projects, even for a company with large cash reserves 4 5.