In a recent development, Li Kaiming, the producer of NetEase’s strategic game *Invasion of the Land* and head of the company’s 10th Interactive Entertainment Division, has resigned. This marks the third high-profile departure of a division-level executive within a year. Prior to Li, Jin Tao, president of the Zen Division, and Shao Yun, president of the Tianxia Division, also left the company.

All three executives belonged to different divisions but were part of the so-called "Guangzhou faction." According to former NetEase insiders, there has been internal competition between game studios in Guangzhou and Hangzhou, with the Guangzhou faction now losing influence to the Hangzhou faction. Additionally, insiders criticize the company’s "formalism," stating that excessive time is spent on internal reporting and procedural compliance rather than developing hit games.

Over the past two years, NetEase has reportedly adjusted or shut down at least seven game studios, with multiple games being discontinued.

**"Formalism" Over Substance** In September, NetEase’s *The Legend of the Condor Heroes*, an MMORPG developed by the Zhanhun Studio, announced its shutdown, citing the expiration of its IP licensing agreement with Minghe She and operational strategy adjustments. The game, which launched in March 2024, will cease operations on November 24, 2025.

Players expressed disappointment, as the game had been marketed as a high-budget, open-world martial arts title with cross-platform compatibility, boasting a 10 billion RMB investment and a six-year development cycle. However, poor performance is believed to be the real reason behind its closure. Data from Qimai shows that while *The Legend of the Condor Heroes* initially ranked 15th on the iOS revenue chart, it quickly dropped out of the top 100 within a month.

NetEase CEO Ding Lei openly expressed dissatisfaction with the game’s performance during the Q1 2024 earnings call, confirming leadership changes and plans to revive it through updates. However, insiders reveal that excessive bureaucracy and internal reporting requirements hindered the project’s success.

**Overhaul of Studios and Leadership** The source also criticized NetEase’s "producer-centric" model, where producers hold excessive control over game development and operations. This approach, once a strength, now clashes with industry trends favoring standardized and scalable production.

Meanwhile, NetEase’s Hangzhou-based Lei Huo Group has thrived, with hits like *Justice Mobile*, *Naraka: Bladepoint*, and *Eggy Party* contributing nearly half of the company’s gaming revenue. The promotion of Lei Huo’s head, Hu Zhipeng, to executive vice president in March 2025 further signals the company’s strategic shift toward Hangzhou.

In contrast, NetEase has aggressively downsized non-core and underperforming studios globally. The departures of veteran executives have often been followed by division restructurings, reflecting deeper strategic realignments.

**Intensifying Competition** While NetEase undergoes internal restructuring, competitors like Tencent and miHoYo continue to dominate. Tencent’s *Honor of Kings* and *Peacekeeper Elite* remain cash cows, while new titles like *Delta Force* have gained traction. Meanwhile, miHoYo’s *Genshin Impact* and *Honkai: Star Rail* have set new benchmarks for quality, raising player expectations industry-wide.

Financially, NetEase’s Q2 2025 results fell short of expectations, with gaming revenue reaching 22.8 billion RMB (up 13.7% YoY but down 5% QoQ). The company’s shift toward fewer, higher-budget titles has yet to yield success, with only four major mobile game releases in the first three quarters of 2025—far fewer than in previous years.

Insiders warn that NetEase’s internal turmoil may persist into next year, delaying the emergence of new hits and further demoralizing employees.