China’s NetEase buys Halo co-developer SkyBox Labs in global expansion drive

By Josh Ye

HONG KONG, Jan 6 (Reuters) - NetEase Inc said on Friday it had acquired Canadian gaming studio SkyBox Labs, best known for co-developing hits including Halo Infinite and Minecraft, as China’s second largest video games firm steps up a global expansion effort.

The Hangzhou-based company did not disclose the size of the deal. Founded in 2011, SkyBox Labs has more than 250 employees in Canada. Besides Halo Infinite and Minecraft, the company is also known for being a co-developer behind Fallout 76 and Age of Empires: Definitive Edition.

The move comes after NetEase’ acquisition of Quantic Dream, a French gaming studio behind Detroit: Become Human, in August.

Like its main rival Tencent Holdings which now manages more than a dozen studios abroad, NetEase has been aggressively expanding its gaming business overseas after regulators tightened screws on China's gaming market, the world’s largest.

It also comes after US gaming titan Activision Blizzard abruptly ended its 14-years partnership with NetEase in November. NetEase rose to become a gaming giant partly by publishing Blizzard’s games in China in its early years, but the company has been rapidly scaling up its own in-house game development capability in recent years, with self-developed games now accounting for over 60% of the company's revenue.

NetEase’ global expansion drive kicked into high gear in 2022. In Japan, it launched the “Nagoshi Studio” in January under the leadership of Toshihiro Nagoshi, the veteran producer behind the Yakuza franchise. Later in October, it founded GPTrack50 helmed by industry veteran Hiroyuki Kobayashi.

It launched its first U.S. studio, Jackalope Games, in May and three months later opened its second, Jar of Sparks, led by Jerry Hook who was the head of design for Halo Infinite.

Skybox Labs helps develop many games owned by Microsoft . NetEase is Microsoft's partner in China as it publishes Minecraft for the U.S. giant.

NetEase said that SkyBox Labs will continue to operate independently within NetEase Games under the leadership of its three co-founders, and provide a full range of game development services to current and future partners. It added that Skybox Labs will continue to grow, retain staff and hire new employees in Canada.

The company's founder William Ding said in May last year that NetEase generated more than 10% of its quarterly gaming revenue overseas but that it aims to increase it to nearly 50%. (Reporting by Josh Ye; Editing by Raju Gopalakrishnan)