NetEase closes external studios to fund a centralized development bet nearly seven years in the making
Summary
NetEase is cutting funding to external studios like Nagoshi Studio while pouring resources into Sea of Remnants.
Joker Studio has developed the title in-house since October 2019 on NetEase's 10,000-employee Hangzhou campus.
The contrast reveals capital reallocation toward a vertically integrated model competitors cannot replicate.
"Game development is highly complex, it has lots of pipelines, it has lots of professional procedures, so personally we don't see any pipeline or procedure being replaced by AI yet."
- Alfie, Creative Director, Sea of Remnants / Joker Studio
01
Nearly seven years of in-house development reveals NetEase's structural advantage
Joker Studio sits on one of two Hangzhou campuses, each housing close to 10,000 fully in-office employees.
The campus spans gaming, e-commerce, food, cloud music, and AI under one corporate roof.
Cross-divisional resource sharing is unavailable to independent or externally funded studios.
Sea of Remnants entered development in October 2019 and is only now approaching beta.
That runway would be unsustainable without a conglomerate absorbing overhead internally.
02
External studio cuts consolidate risk inside NetEase's own ecosystem
Pulling funding from Nagoshi Studio follows a pattern of retreating from ventures NetEase cannot control operationally.
External partners carry high burn rates but cannot monetize beyond the game itself.
Internal studios access NetEase's food, e-commerce, and merchandise businesses directly.
The asymmetry is structural: internal teams share conglomerate upside, external teams absorb all downside.
03
Monetization extends beyond in-game spend into physical retail and brand collaborations
China's blind box market hit 10.1 billion yuan ($1.4 billion) in 2020.
It was projected to reach 150 billion yuan ($20.7 billion) by 2025.
Joker Studio already tested this channel: Identity V partnered with a bottled tea brand sold nationwide.
Alfie confirmed merchandising and live events are "certainly under consideration for potential future expansion."
This multi-revenue model reduces reliance on gacha conversion during long live-service cycles.
04
Global audience is a design input, not a post-launch localization effort
Chinese-developed games now generate an estimated $20 billion in revenue outside China.
Sea of Remnants draws on Pirates of the Caribbean, One Piece, and 16th-17th century European aesthetics.
International artists Takayuki Takeya, Ryu Oyama, and Ashley Wood shaped the visual direction.
Lead artist Kairos described the brief as wanting pirates with "a trendy element."
This cross-cultural design strategy echoes the approach behind Genshin Impact's global breakthrough.
05
AI infrastructure exists centrally but stays out of flagship production pipelines
NetEase Game Labs is credited in Sea of Remnants' opening credits.
Joker Studio states no AI is currently used in game design or production.
Alfie: "They have their own independent department dedicated to AI development, but they're very independent of us."
NetEase's Eggy Party already integrates generative AI into user-generated content.
The separation signals deliberate sequencing: AI tools develop centrally before reaching highest-stakes titles.
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