In a striking legal battle within the gaming industry, co-creators of State of Decay, Jeff and Annie Strain, have filed a lawsuit against NetEase Games seeking $900 million for alleged defamation and unfair trade practices. The lawsuit, filed in January 2025, claims that NetEase's actions severely damaged the Strains' company, Prytania Media, leading to its eventual shutdown.
According to the lawsuit, the conflict has roots that trace back to 2024, involving journalist Ethan Gach from Kotaku. During a conversation regarding the closure of Prytania Media's subsidiary, Crop Circle Games, Gach allegedly mentioned non-public details about Project Vonnegut, a game in development at another Prytania subsidiary, Possibility Space. The Strains contend that these leaks led to a drop in investor confidence, preventing Crop Circle Games from securing additional funding and ultimately leading to its closure.
NetEase Games, which holds a 25% stake in Prytania Media and was an investor in Crop Circle Games, is accused of spreading damaging rumors about the Strains and their companies. The Strains claim that these actions eroded trust among potential investors. The lawsuit states, "Shortly after NetEase spread the above referenced rumors, all of the potential investors into Crop Circle Games pulled out of the ongoing discussions regarding possibly investing in the Company." The Strains allege that their relationship with NetEase soured when they sought assurances that the company complied with U.S. foreign investment laws.
The lawsuit alleges that NetEase's resistance to this request stemmed from a desire to keep ties between its executives and the Chinese Communist Party (CCP) under wraps. The legal filing characterizes the situation as a catastrophic blow to the Strains' careers, with the introductory statement declaring, "This case is about the destruction of the careers of two gaming industry veterans and their company (Prytania Media) by a Chinese entity (NetEase Games) seeking to avoid compliance with United States law." Initially, Prytania Media sought $300 million in damages but later sought an increased amount of $900 million following the success of Marvel Rivals, a game also published by NetEase, which reportedly earned over $135 million in its first month.
In response to the allegations, NetEase has firmly denied all claims, asserting their intention to defend themselves vigorously. In an official communication, the company stated, "The allegations by Prytania Media and its founders Annie and Jeff Strain are wholly without merit, and we emphatically deny and will vigorously defend ourselves against them. Our record as a global gaming company speaks for itself, and we remain committed to conducting business with integrity. We are confident that the legal process will vindicate our position and shed light on the real reasons behind the demise of the Strains’ studios."
This case has implications beyond just a legal dispute. NetEase recently laid off a significant number of developers, including those working on Marvel Rivals, as part of a cost-cutting strategy driven by financial struggles. The turmoil surrounding NetEase's operational decisions has raised questions about its future in the competitive gaming market.
Moreover, other studios within the NetEase portfolio have reported budget reductions, operational halts, and layoffs, with the company reportedly exploring options to sell off several of its studios in a bid to regain financial footing. Such developments further complicate matters for NetEase as it faces this high-stakes lawsuit.
Despite the ongoing legal challenges, the production of Marvel Rivals remains unaffected. Game director Guangyun Chen has confirmed that Season 2 is ready for release, and designs for Seasons 3 and 4 have also been finalized, promising players continued support for well over a decade.
As this legal battle unfolds, the industry will be watching closely to see how it impacts both NetEase and the Strains. The lawsuit reflects larger tensions in the gaming landscape as companies navigate business practices and compliance with laws across international borders. Only time will reveal how this case will reshape relationships within the industry, but one thing is clear: the stakes are high for everyone involved.
