2017 INSIGHTS
on External Development for the Video Game Industry
advancing external development for the games industry
2
TABLE OF CONTENTS
04
06
07
11
14
15
16
21
23
26
WHO PARTICIPATED IN THE SURVEY
QUICK STATS
2017 EXTERNAL DEVELOPMENT INDUSTRY OBSERVATIONS
FINDING AND SELECTING PARTNERS/CLIENTS
TOP ISSUES IN ENGAGEMENTS
EXTERNAL DEVELOPMENT TOOLS AND TECH RESOURCES
PROJECT DISCIPLINES AND PLATFORMS
SERVICE PROVIDER AVERAGE RATES BY COUNTRY
THE FUTURE OF EXTERNAL DEVELOPMENT
GLOSSARY OF TERMS
ABOUT
3
What’s Inside?
External development refers to the practice of video game developers and publishers
(buyers) leveraging service providers (sellers) in any aspect of development including but
not limited to art, animation, cinematics, audio, server-side/front-end engineering, porting,
game development, UX-UI, motion capture QA, localization, and VFX. This report is
intended to provide insights in to the changing trends in external development that have
occurred in recent years as it becomes an increasingly integral part of game development.
The statistics in this report were derived from over 150 service providers
worldwide, and over 55 industry professionals from leading game
developers and publishers. Data was anonymously contributed to
provide insights on engagements.
The research and data gathered to establish this report was collected by
the organizers of the External Development Summit, with contributions
from the XDS Advisory Committee. Permission must be requested if you
would like to use this information in articles or industry presentations.
Who We Are
External Development Summit (XDS) is the only annual, international games
industry event held in Canada, with a primary focus on external development for art,
animation, audio, engineering, QA and localization. Each year, a broad community of
game developers and publishers, service providers, and middleware providers meet
in Vancouver to contribute to the advancement of the video game industry through
collaboration, sharing of best practices, networking and the delivery of a high-caliber,
educational program. XDS 2017 will take place on September 6-8, 2017
in Vancouver, Canada.
Guest Authors
Jason Harris
Dilber Mann
Andrea Wood
Senior Director,
Worldwide External
Development, EA
Senior Producer,
The Coalition,
Microsoft
Telfer School of
Management Graduate
WHO PARTICIPATED
4
SERVICE PROVIDER OVERVIEW
Service Offerings
Service providers participating in the report represent a range of different disciplines
Art
32%
Animation
21%
Engineering
14%
Cinematics/VFX
9%
UX-UI
9%
QA
7%
Localization
4%
Audio
4%
Client Make-up
Multinational Games Developer / Publisher 34%
Mobile Game-Focused Developer 20%
Small Independent Console Game Developer 16%
MMO Game-Focused Developer 8%
TV/Media Company 7%
Motion Picture Company 6%
Online Casino / Gambling 5%
Online Social Game-Focused Developer 3%
MOBA2%
ESports0%
55%
50%
85%
of service providers
surveyed have LESS THAN
50 EMPLOYEES with only
14% having more than 250
of service providers that
participated have only
ONE LOCATION
of these service providers have
been in business for MORE
THAN 5 YEARS
6%
44% over 10 years
operate out of more than
5 LOCATIONS
EMPLOYEES
LOCATIONS
4%
less than 2 years
TIME IN BUSINESS
WHO PARTICIPATED
5
DEVELOPER / PUBLISHER OVERVIEW
Developer / Publishers Platform Focus
72%
Console games
47%
Mobile games
41%
Browser/PC games
14%
VR games
Facebook games
12%
Social Casino Games 4%
Frequency of Changing Partners Year Over Year
•
•
•
•
5
Average team size
managing service
providers
100% are the same
75% are the same
75%
50% are the same
< 50% are the same
14
Average number of
service providers a
developer / publisher
works with annually
of service providers are
the same year after year for
the majority of developers/
publishers
93%
93%
Foresee a growth in
demand for external
development services
Developer / publishers
expect to work with
the same service
providers again after
project completion
QUICK STATS
6
TOP 3
1
most important factors
when selecting a
service provider:
QUALITY
2
EXPERIENCE
ART
accounts
for 80% of
all external
development
projects.
GAME
INDUSTRY
EVENTS
are the #1 place
service providers
meet new clients
3
RATES
#1 Reason
Companies Engage
Service Providers:
to scale teams
to deliver more
content &
features
2017 EXTERNAL DEVELOPMENT INDUSTRY OBSERVATIONS
7
Mergers and Acquisitions Activity is Leading to Consolidation in the Industry
Mergers and Acquisitions activity has been increasing over the past year with visible consolidation in the industry. 30% of SERVICE
PROVIDERS reported that they are actively looking for acquisition targets and over half of respondents (55%) have been approached
for M&A conversations.
What services are companies
interested in acquiring?
30%
SERVICE
PROVIDERS
Looking for M&A Targets
17% 3D ART
15% ANIMATION
12% 2D Art
12% VFX
10% Cinematics
12% Engineering
8% Mobile Game
Development
7% Other 5% Console Game
Development
2% 72%
of service providers say
they are open to being acquired
Audio
2017 EXTERNAL DEVELOPMENT INDUSTRY TRENDS
Increasing Number of External Development Projects from Mobile Companies
Service providers are seeing an increase in the number of art and engineering projects from mobile companies who now represent
20% and 29% of their client portfolio, respectively.
TOP 3
areas of increase in
the past 12 months
1
Mobile Game Developer
2
Online Casino / Gambling Company
3
Multinational Games Developer / Publisher
Service providers cited Mobile Games Companies as the #1 growing
client segment over the past 12 months, followed by online casino
games companies.
The increase in projects from mobile companies is not surprising given the growth in
the market. According to SuperData’s report, “2016 Year in Review” the mobile market
is continuing to see growth with total mobile games revenue estimated at $40.6 billion
USD in 2016 and growing to a forecasted $50 billion in 2018.
Comparing to data collected from a similar report of 100 service providers in 2011
shows further evidence of this trend; increases in work from mobile developers, TV/
media companies, motion picture companies, and online casino/gambling companies.
www.superdataresearch.com/market-data/market-brief-year-in-review/
8
2017 EXTERNAL DEVELOPMENT INDUSTRY TRENDS
9
Service Provider Art Client Portfolio by Segment, 2013 vs. 2017
2017
31%
17%
21%
23%
36%
2013
0%
n
n
n
n
n
10%
20%
9%
30%
40%
Multinational Games Developer / publisher
Small Independent Console Game Developer
Mobile Game Developer
MMO Game Developer
Online Social Game Developer
n
n
n
n
10%
50%
60%
3%
6%
10%
70%
9%
7%
5%
1%
4% 3% 1% 4%
80%
90%
100%
Motion Picture Company
TV/Media Company
Online Casino/Gambling Company
Other
This is also true for engineering projects where SERVICE PROVIDERS cited that mobile
companies represented 7% of their client portfolio in 2013 compared to 29% in 2017.
Service Provider Engineering Client Portfolio by Segment, 2013 vs. 2017
26%
2017
14%
29%
38%
2013
0%
n
n
n
n
n
10%
20%
12%
30%
Multinational Games Developer / publisher
Small Independent Console Game Developer
Mobile Game Developer
MMO Game Developer
Online Social Game Developer
40%
6%
50%
n
n
n
n
6%
7%
60%
Motion Picture Company
TV/Media Company
Online Casino/Gambling Company
Other
10%
70%
3% 4%
1% 4%
9%
4%
80%
8%
1%
18%
90%
100%
2017 EXTERNAL DEVELOPMENT INDUSTRY TRENDS
VR/AR Not So Hot for External Development
Although service providers are optimistic about the impact of VR/AR, developers / publishers are less convinced this will drive demand
for external development.
37%
SERVICE PROVIDERS see VR/AR as
the #1 driver for increased demand
in external development
ONLY 14%
of DEVELOPERS / PUBLISHERS report
that they are currently experimenting
with VR/AR
ONLY 10%
of DEVELOPERS / PUBLISHERS
believe VR/AR will drive demand
10
FINDING AND SELECTING PARTNERS/CLIENTS
11
How do you meet the majority of your partners?
Networking tools such as LinkedIn are one of the most utilized tools by service providers to reach out to buyers, but only 4%
of developers / publishers find their external partners through this outreach. This declined compared to the 2016 report where
10% of respondents said they met services providers through “cold calls.”
Games
industry
events
Internal
company
resources
7%
31%
39%
27%
Online
research
Service
Providers
41%
Developers /
Publishers
13%
3%
Other
Referrals
Internal
referrals
& company
resources
18%
Buyer
Reaches
Out
Games
industry
events
12%
Industry Peer
Referrals
4% 4%
Other
Games events and referrals are the top ways that companies connect.
SERVICE PROVIDERS: Factors Considered When Accepting a New Client Project
1 Potential for future projects
2 Prestige of project/client
3 Rates the client can pay
TIP FOR SERVICE PROVIDER Prioritize attending industry events to meet
potential clients’ verses relying on outreach through networking sites.
Networking
sites
FINDING AND SELECTING PARTNERS/CLIENTS
12
DEVELOPERS / PUBLISHERS: Factors Considered When Selecting an External Partner
Developers / publishers indicated that the most important factors in selecting an external partner are quality,
experience, and rates. Despite the huge impact that a company going out of business during an engagement
or an IP leak can have on a developer / publisher, financial stability and security controls ranked as the least
important factors. A report released by IBM (2016 Ponemon Cost of Data Breach Study) analyzing security
breaches at 383 organizations in 12 countries found that “the average consolidated total cost of a data breach
is $4 million USD” so leaks can be very costly.
1
2
3
4
5
6
7/8/9
7/8/9
7/8/9
10
11
12
http://www-03.ibm.com/security/data-breach/
QUALITY
EXPERIENCE
RATES
Credibility
Language/Communication Skills
Previous Clients & portfolio
Size of company
Studio leadership
Technology Experience
Security controls
Financial stability
Proximity
FINDING
AND
SELECTING
PARTNERS/CLIENTS
FINDING AND
SELECTING
PARTNERS/CLIENTS
TOP REASONS Developers / Publishers Engage Service Providers
31%
Scale teams to deliver more content and features
18%
Cost savings
16%
Flexible skill-set ramp-up/ramp-down
12%
Access hard to find skills
11%
Lack of available local resources
7%
Support content needs for live services
5%
Speed up development through follow-the-sun model
#1 Reason
Scale teams to deliver
more content & features
13
TOP ISSUES IN ENGAGEMENTS
14
TOP ISSUES Encountered with External Development in 2016
SERVICE PROVIDERS
DEVELOPERS / PUBLISHERS
1
Inadequate documentation and direction
1
Partners lack capacity
2
Differences between internal & client time estimates
2
Communication challenges
3
Communication challenges
3
Iteration issues (volume, speed)
4
Iteration issues (volume, speed)
4
Poor quality deliverables
5
Acquisition of client
5
Pipeline set-up
TIP FOR SERVICE PROVIDER
Ensure you invest in communication tools,
relevant language courses, and training for
project managers. Communication challenges
rank as the #2 issue for your clients.
TIP FOR DEVELOPERS / PUBLISHERS
Take time to create adequate documentation,
clearly communicate quality benchmarks, and
fully understand reasons for differences in
estimates. This can save you a significant
amount of time and money in the long-run.
It will reduce the number of iterations
and asset polish/ code clean-up needed
by your internal artists/engineers.
Developers / publishers cite that high demand for the top service providers is leading to capacity issues.
EXTERNAL DEVELOPMENTS TOOLS AND TECH RESOURCES
TOP TOOLS
Tools commonly used to support external development displayed in order of highest usage.
SERVICE PROVIDERS
DEVELOPERS / PUBLISHERS
Jira
Trello
Shotgun
Basecamp
MS Excel
Jira
Shotgun
Communication
Skype
Email
Slack
Email
Skype
File Transfer
FTP
Dropbox
Aspera Faspex
Aspera Faspex
Perforce
FTP
Art Review
Basecamp
Shotgun
Jira
Shotgun
Internal tool
Code Review
Github
Github
External Company
Database (CRM)
Pipedrive
Salesforce/Internal tool
Internal tool
Project Management
</>
Emerging
Tools
For the second year in a row, Substance
was named as the top emerging tool
adopted by service providers.
15
PROJECT DISCIPLINES AND PLATFORMS
16
The number of integrated art projects have decreased in 2017, dropping from 41% of all projects to 25% while the percentage of
conventional art projects with partial tool pipeline jumped from 19% to 36%. The number of co-development projects also dropped
from 16% to 8%. This could be a result of an increase in mobile projects where service providers do not integrate art assets directly
in engine or normally work in a co-development model.
TYPES OF ENGAGEMENT
Of all external projects, 84% are for
production (-6% YOY) with very few
projects for R&D, pre-production,
live services updates or DLC.
36%
25%
Conventional Art External Development with partial tool pipeline
Integrated Art Development full pipeline
Convectional Art External Development without partial tool pipeline
19%
8%
8%
2%
2%
PROJECTS BY PLATFORM
Full Development
Co-Development
Programming
Other (Programming and Full Development)
Console
58% (+3% YOY)
Mobile/Tablet
22% (-8% YOY)
Browser/PC
21% (+3% YOY)
VR/AR
2% (+2% YOY)
PROJECT DISCIPLINES AND PLATFORMS
17
External Development within Art Disciplines
Although photo-real projects represent a slightly smaller
percentage of overall projects by art style compared
to 2016, there has been a 20% YOY increase in these
types of projects.
Photo Real
63%
PROJECT TYPES BY
ART
STYLE
4%
Cartoon
33%
Stylized
By Project Duration
Compared to 2016, for projects overall there has been an increase (from 35% of projects to 49%) in the number of projects under
three months in duration and a drop in projects lasting more than 12 months (from 33% to 25%). This could also be a result of the
increase in mobile projects which are often shorter in duration than console projects. The below graphic provides a break-down for
art and engineering (does not include other categories such as UX-UI, VFX, QA, etc).
art
engineering
60%
% of project
engagements
51%
30%
20%
12%
11% 10%
6%
months
<3
3<>6
6<>9
9 < > 12
>12
PROJECT DISCIPLINES AND PLATFORMS
18
Maturity of ART/ANIMATION External Development Disciplines
Most companies started their art engagements by sending 3D props out-of-house. A third of respondents began this over 10 years with
all respondents now citing that no prop work is done internally. This is expected as props are one of the easiest types of assets to send
externally with an abundance of service providers being able to take on this work. Very few respondents (less than 10%) started sending
3D art work out-of-house less than a year ago with approximately 70% starting over 5 years ago. Hand-in-hand with this, only 8% of
companies have kept 3D animation internal. Most companies started sending 3D animation out-of-house around 2 to 4 years ago.
n
Less than 5% of developers / publishers have kept 3D art
(characters, environments, weapons, and props) internally.
n
Developers / publishers appear cautious to send 2D work
out-of-house with 15 to 20% of respondents keeping this
internal. Most started sending 2D assets out-of-house about
2 to 4 years ago. This also ties in to the growth of mobile
games within the past few years.
n
Very few companies create cinematics internally (less than
3%). Over 50% of respondents started sending this out of
house over 5 years ago.
n
U
X-UI is one of the newest areas that companies have
started sending out-of-house. Almost 40% of respondents
only began engaging with service providers in this area less
than 1 year ago and 32% starting 2 to 4 years ago. Only 22%
of UX-UI work now remains internal.
n
VFX is the area most companies keep internal (45% of
respondents) with some companies experimenting with this
over the past couple of years.
ART TIMELINE: When developers / publishers started sending art disciplines out-of-house
Remains
Internal
< 1 year
2 - 4 years
2D Environments
2D Characters
2D Vehicles
2D Props
Concept Art
3D Animation
2D Animation
Cinematics
VFX
> 10 years
3D Props
3D Environments
VFX45%
UX-UI23%
UX-UI
5 - 9 years
3D Characters
3D Weapons
2D Weapons
2D Animation
22%
2D Vehicles
20%
2D Weapons
20%
2D Props
16%
2D Environments
14%
2D Characters
14%
Concept Art
10%
3D Animation
8%
3D Environments
5%
3D Weapons
3%
Cinematics3%
3D Characters
2%
3D Props
0%
PROJECT DISCIPLINES AND PLATFORMS
19
Maturity of ENGINEERING External Development Disciplines
n
Compared to art, a higher percentage of engineering projects
remain internal with 83% of rapid prototyping remaining
internal, 75% of front-end development, 70% of engine
development, and 60% of telemetry work.
n
Although a high percentage of rapid prototyping projects
remain internal, 11% of respondents experimented with
engaging external partners in this area over the past year.
n
Web development is the most common candidate for external
development with only about a quarter of these projects
remaining internal, 28% starting to send these out of house
2 to 4 years ago, and almost 40% started 5 to 9 years ago.
n
Only one-third of respondents have kept full SKU mobile
development projects in-house.
n
About 50% of companies send console game modes, tools
development, level design, and server-side development outof-house.
ENGINEERING TIMELINE: When developers / publishers started sending engineering disciplines out-of-house
Remains
Internal
< 1 year
2 - 4 years
Console game modes
Tools development
Engine development
Telemetry
Server-Side development
Level Design/Building
</>
Rapid prototyping
Rapid prototyping
83%
Front-end development
75%
Engine development
70%
Telemetry60%
5 - 9 years
Web development
Full SKU mobile development
Full SKU console development
Front-end development
Server-Side development
58%
Level Design/Building
52%
Tools development
50%
Console game modes
41%
Full SKU console development
41%
Full SKU mobile development
34%
Web development
26%
PROJECT DISCIPLINES AND PLATFORMS
20
TOP COUNTRIES for Different Types of Work
3D ART
FULL DEVELOPMENT
ENGINEERING
1
China
1
Ukraine
1
USA
2
India
2
India
2
United Kingdom
3
Vietnam
3
Russia
3
Russia
4
Spain
4
Argentina
4
Canada
CONCEPT ART
UX-UI
1
United Kingdom
1
United Kingdom
2
Mexico
3
India
4
Canada
*Backed up by the data on where game engineering work is being sent
TOP
TOP
EMERGING
EMERGING
markets for game
markets for game
development**
development
India and Ukraine
India and Ukraine
SERVICE PROVIDER AVERAGE RATES BY COUNTRY
21
Average rates were collected from over 150 service providers worldwide covering art, animation, and
engineering. Information is shown on the next two pages for countries and disciplines that received a
critical mass in responses.
CANADA
)
3D Animation
Concept Art
Console Dev
Mobile Dev
$12,540
$14,200
$9,975
$11,702
USA
3D Animation
Concept Art
Console Dev
Mobile Dev
VR Dev
$10,313
$9,790
$13,734
$13,659
$13,200
UNITED KINGDOM
Concept Art
Console Dev
VR Dev
Mobile Dev
$11,200
$11,327
$8,580
$10,171
UKRAINE
3D Art
2D Art
Mobile Dev
VR Dev
$4,464
$4,162
$4,400
$5,368
SPAIN 3D Art
2D Art
Mobile Dev
All rates are staff month rates in USD and calculated at 22 days per month.
$6,490
$5,280
$6,600
SERVICE PROVIDER AVERAGE RATES BY COUNTRY
22
RUSSIA
3D Art
3D Animation
Console Dev
Concept Art
$5,075
$4,928
$6,774
$4,928
CHINA
3D Art
3D Animation
2D Art
Concept Art
$4,082
$5,435
$3,874
$4,449
INDIA
3D Art
3D Animation
$4,253
$3,300
VIETNAM
2D Art
3D Art
Mobile Dev
$4,400
$4,635
$4,500
PHILIPPINES
3D Art $3,483
MALAYSIA
3D Art
3D Animation
Concept Art
All rates are staff month rates in USD and calculated at 22 days per month.
$4,880
$4,840
$5,030
THE FUTURE
OF EXTERNAL
DEVELOPMENT
THE
FUTURE
OF EXTERNAL
DEVELOPMENT
23
Q1 What are the main drivers for an increased demand in external development services over the next 3 to 5 years?
SERVICE PROVIDERS
DEVELOPERS / PUBLISHERS
1
Virtual Reality
1
Demand for more content
2
Players demand for more content
2
Richer/deeper games
3
Augmented Reality
3
Need to decrease development costs
4
Need for developers to decrease development costs
4
Virtual Reality/Augmented Reality
Service providers are significantly more optimistic about
VR/AR as they forecast this to be the biggest area of
demand in the next 3 to 5 years. This ranked 4th for
developers / publishers.
Q2
85%
of developer / publishers responded that the
need for more content is driving demand.
F or what disciplines are service providers optimistic
about growth in demand for services over the next 12 to 18 months?
Most Optimistic (10 is highest)
Engineering
Art
Animation
Audio
QA
UX-U
Cinematic/VFX
Localization 93% growth
As games get bigger/deeper and with the proliferation of
platforms, 93% of developers / publishers are seeing a
growth in demand for service providers at their company.
1
10
UX-UI and concept art are two new areas seeing significant growth.
THE FUTURE
OF EXTERNAL
DEVELOPMENT
THE
FUTURE
OF EXTERNAL
DEVELOPMENT
Q3
24
In what areas have developers / publishers seen a growing demand for external services in the past 12 months?
3D CHARACTERS
81%
3D PROPS
75%
ALL OTHER 3D ART 70%
UX-UI69%
CONCEPT ART
Q4
58%
In what areas do developers / publishers expect to see growth/demand in the next 18 months?
DEVELOPERS / PUBLISHERS
1
3D Props
2
3D Characters
3
VFX
4
UX-UI
5
Concept Art
areas of less growth
The bottom 3 areas where developers / publishers
did not expect to see much growth were:
2D casual art, 2D animation, and web development.
only 17%
of developers / publishers expect to see a demand in
VR/AR development in the next 18 months
THE FUTURE
OF EXTERNAL
DEVELOPMENT
THE
FUTURE
OF EXTERNAL
DEVELOPMENT
25
Main concerns about the future of external development
SERVICE PROVIDERS
DEVELOPERS / PUBLISHERS
Demand for lower rates, but higher quality
Increased need for investments and training on new
technology, software, and platforms.
onsolidation is pushing out high-quality, niche service
C
providers.
evelopers / publishers often want hard to find niche
D
skills but do not always want to pay the higher rates.
Consolidation among service providers could potentially
cause a number of issues:
• reduce competition among the top companies.
• lead to rate increases for the top companies that have
been acquired
• o
ne bad decision by the parent company could be
detrimental to all of the entities that have been acquired
• w
ork may be sub-contracted to different entities that
have been acquired
Increase in competition due to both tax credits reducing
costs in some regions and an influx of new service
providers.
Service providers moving in to co-development and
creating their own IP means they could become future
competitors to their current clients.
evelopers / publishers do not always take cultural
D
differences in to consideration in communication.
Lack of capacity can mean teams are fighting for the best
talent and bandwidth.
Political and economic instability in some countries can
cause issues working with partners.
Talented artists leaving credible companies to start their
own art studio, but without knowing how to run and
establish a credible business.
GLOSSARY OF TERMS
26
The following definitions may be subject to the context in which they were used in this report.
Co-Development
Cooperative engagement where significant
parts of development are shared by a client
and service provider
Conventional Art External Development
(without tool pipeline)
A service provider builds art content without
any tools to integrate or export the assets to
the developer
Conventional Art External Development
(with partial tool pipeline)
A service provider builds art content with the
support of tools that allow them to export
content, or use a viewer to check their work
Developers / Publishers (buyers)
Companies that develop video games and/or
publish games that they own, or publish games
on behalf of other developers
External Development
The practice of video game developers and
publishers (buyers) leveraging third party service
providers (sellers) in any aspect of development
Full Development
A developer requires a full game to be
developed by service providers
Industry Professional (buyer)
An individual under the employment of a
video game developer responsible for
managing, influencing or decision making
for external development.
Integrated Art Development
A developer’s full technical pipeline is used
by the service provider
Photo Real Art
Art that is intended to simulate aspects of the
real world, whether organic or inorganic,
as realistically as possible
Service Provider (seller)
A third party external partner hired to contribute
to certain or all aspects of game development
Stylized Art
Design according to a style or stylistic pattern
rather than according to nature or tradition
EXTERNAL DEVELOPMENT SUMMIT
For more information about the External Development
Summit (XDS), please contact us at:
[email protected]
www.xdsummit.com