ByteDance are in the process of “aggressively downsizing its video gaming unit, affecting hundreds of employees”, reports the South China Morning Post.

The Chinese company has reportedly laid off or transferred the staff at its Shanghai-based Wushuang Studio, said sources close to the matter, who asked to remain anonymous. Likewise, the company’s Hangzhou-based Jiangnan Studio is also seeing layoffs. This follows the closure of 101 Studios in June.

People familiar with the situation are calling this “a fresh sign that the smart money in China is continuing to exit the heavily regulated industry”. Although some of the largest gaming companies in the world, such as Tencent and NetEase, are Chinese, the Asian country has recently grown increasingly strict in terms of censorship, with every detail from storylines to costumes being under scrutiny.

This brings the gaming industry in the country in line with film and television, which likewise faces such impositions. In 2011, for example, the country famously banned time travel as a plot device, due to concerns about how it could impact perception of Chinese history.

Adding muscle, reducing fat

China imposed a lengthy hiatus on the issuing of new game licenses in July 2021, and although the country began providing licences again in April. Although ByteDance has received licenses since the freeze was lifted, it appears that it hampered the company’s original ambitions to compete with industry giants such as Tencent.
Although ByteDance has curtailed the development of new games, it will continue to maintain certain operations in Shanghai to support projects which have already been released.

CEO Liang Rubo has implemented a policy of “adding muscle and reducing fat,” cutting back operations with weak profitability while doubling down on successful ones. This recent downsizing could be seen as a part of this strategy, refocusing on the popular social media platform TikTok while putting plans to emerge into the games space on hold.

Last month, we listed ByteDance as one of the top 50 game makers of 2022.