NetEase rumored to re-structure gaming departments

New NetEase flagship game Nishuihan (逆水寒) developed by R&D and gaming department Leihuo. Image Credit: NetEase Gaming (screen shot)

Pangu Game (盘古游戏), a game development studio under NetEase, is said to be merged into tech R&D and gaming department Leihuo (雷火), according to an anonymous staff member at NetEase who leaked the information in a WeChat conversation (in Chinese).

Pangu is going to be a sub-department at Leihuo, but it’s unconfirmed whether there will be any personnel layoffs, a person close to the matter says, according to local media (in Chinese).

Leihuo is the development force behind some of NetEase’s most influential self-owned games, which include online game Qiannv Youhun (倩女幽魂),  based on an ancient love tale of a fairy ghost. The game invited celebrity Liu Yifei as a brand representative, but is widely criticized by players for being extremely money consuming.

“I haven’t seen any confirmed information on this. When I was there a few years ago, I heard that Pangu was originally part of Leihuo,” a former employee at NetEase Games told TechNode. “But [current NetEase Games staff] I’ve talked to know that Pangu is not doing very well,” they added. There is no public information of either Pangu or Leihuo’s performance.

The merger rumor was a surprise to many in the industry. On October 29, Pangu just co-established a center for game development with the animation faculty of China’s Central Academy of Fine Arts. Pangu and Leihuo also co-organized a game show for fresh developers at the same event. It is unclear whether it was a sign of an already on-going merger. However, considering tightening state regulation on the general content industry, NetEase’s decision (if true) is a necessary step to restructure the business and optimize input-output balance.

The company is now hoping to count on gaming, e-commerce, and advertising services to drive future growth. William Ding, Chief Executive Officer and Director of NetEase, commented in August that the company’s “PC-client and mobile games continue to serve as dual growth engines”.

According to the second quarter’s fiscal report of NetEase, online game services’ net revenues were RMB 10.1 billion (US$1.5 billion), up 6.7% compared with the second quarter of 2017. NetEase is going to release the 2018 third quarter financial results on November 14.