NetEase, the second-largest gaming company in China and the sixth-largest in the world, has opened its first US-based studio in Austin as China’s gaming industry slows.

The company’s archrival Tencent was a step ahead in expanding to North America. TiMi, Tencent’s cash cow studio known for the mobile blockbuster Honor of Kings, began hiring in Los Angeles back in 2020. Last year, it added a base in Montreal.

The Chinese gaming giants are venturing abroad at a time their home market comes under increasing regulatory scrutiny. Over the past few years, China has restricted playtime for minors, slowed down regulatory approvals for games, and imposed stricter rules on content.

Such requirements have inevitably put a squeeze on gaming companies’ bottom line. Many small studios, struggling to obtain regulatory licenses because they lack the financing or resources, have turned to foreign markets for growth.

In 2021, China’s gaming industry racked up nearly 300 billion yuan ($45 billion) in sales revenue, up 6.4% year-on-year, though the growth rate was down 15% compared to the year before.

Given the domestic challenges, it’s no surprise that the country’s giants are seeking new avenues for growth. NetEase’s new US-based studio, called Jackalope Games, is led by Jack Emmert, a veteran of massively multiplayer online role-playing games who worked on titles including City of Heroes, Neverwinter, Star Trek Online, and DC Universe Online.

The studio will operate independently and maintain creative autonomy in its game development and publishing, NetEase said. It will work on both PC and console games and be hiring globally, though it didn’t say how many people it will be recruiting.

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