NetEase Pulls the Plug on Nagoshi Studio Funding Just Months After Gang of Dragon Reveal
- Sagar Mankar
- 4 days ago
- 2 min read
NetEase, the Chinese gaming giant, has informed Nagoshi Studio that it will stop financing the developer from May 2026.
The move puts the studio's debut title, Gang of Dragon, in serious jeopardy, coming just months after its big reveal at The Game Awards 2025.
It marked the first project from Nagoshi Studio, founded by Toshihiro Nagoshi, the legendary creator behind the Yakuza franchise. Nagoshi left Sega back in 2021 and set up his new studio under NetEase shortly after. The game drew immediate comparisons to Yakuza, which was hardly surprising given the pedigree behind it.
According to a report by Bloomberg, NetEase made the decision after learning that Gang of Dragon would require at least an additional ¥7 billion, roughly $44.4 million, to reach completion.
Despite the setback, sources familiar with the situation claim the studio is not giving up yet and is seeking funding elsewhere.
NetEase has apparently allowed the studio to continue development if it can secure alternative funding. However, the company will negotiate the removal of its licensing rights only if the studio can essentially “pay its way out.” In other words, Nagoshi Studio would need to buy back control of the project before moving forward independently.
Major Withdrawal of NetEase
This situation also reflects a larger change happening within NetEase’s global strategy. Over the past year, the company has been reducing its overseas game investments and focusing more heavily on domestic development in China.
As per reports by Game File earlier in 2025, NetEase planned to divest from many of its international studios. That strategy could potentially affect more than a dozen teams if they cannot find new sources of funding.
Signs of this shift began appearing as early as August 2024, when reports surfaced that NetEase was planning to close Ouka Studios. The Japanese developer behind Visions of Mana included veteran talent from companies like Capcom and Bandai Namco.
In November 2024, Canadian developer Worlds Untold announced a suspension of operations and job cuts. The studio had been revealed by NetEase only a year earlier, making the decision particularly surprising.
The trend continued into 2025. Seattle-based Jar of Sparks, a studio NetEase had proudly introduced in 2022, also experienced a production freeze and spending cuts in January 2025. The developer was forced to look for additional funding to continue its projects.
Around the same time, Swedish studio Liquid Swords confirmed layoffs due to what it described as "shifting market conditions." NetEase had invested in the studio in 2022.
Fantastic Pixel Castle, led by former World of Warcraft developer Gregg “Ghostcrawler” Street, shut down in November 2025 after failing to secure a new publisher for its MMORPG codenamed Ghost. In the same month, Canada-based Bad Brain Game Studios also closed after struggling to complete its project, Midnight Riders. Both studios were formed by Netease in 2023.
Texas-based T-Minus Zero faced a similar fate but managed to survive after being acquired by its own founders in November 2025, which stands as a rare positive outcome in an otherwise bleak stretch.
Now, Nagoshi Studio may find itself facing a similar challenge. The team must either secure new investment or risk seeing its first game disappear before release.
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