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2017 INSIGHTSon External Development for the Video Game Industry
advancing external development for the games industry
2
04 WHO PARTICIPATED IN THE SURVEY
06 QUICK STATS
07 2017 EXTERNAL DEVELOPMENT INDUSTRY OBSERVATIONS
11 FINDING AND SELECTING PARTNERS/CLIENTS
14 TOP ISSUES IN ENGAGEMENTS
15 EXTERNAL DEVELOPMENT TOOLS AND TECH RESOURCES
16 PROJECT DISCIPLINES AND PLATFORMS
21 SERVICE PROVIDER AVERAGE RATES BY COUNTRY
23 THE FUTURE OF EXTERNAL DEVELOPMENT
26 GLOSSARY OF TERMS
TABLE OF CONTENTS
Guest Authors
3
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.
What’s Inside?
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.
Who We Are
Jason Harris
Senior Director, Worldwide External Development, EA
Dilber Mann
Senior Producer,The Coalition, Microsoft
Andrea Wood
Telfer School of Management Graduate
ABOUT
Client Make-up
85% of these service providers have been in business for MORE THAN 5 YEARS
44% over 10 years
4% less than 2 years
55% of service providers surveyed have LESS THAN 50 EMPLOYEES with only 14% having more than 250
50% of service providers that participated have only ONE LOCATION
6% operate out of more than 5 LOCATIONS
EMPLOYEES LOCATIONS TIME IN BUSINESS
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%
MOBA 2%
ESports 0%
SERVICE PROVIDER OVERVIEW
Service Offerings
Art
Animation
Engineering
Cinematics/VFX
UX-UI
QA
Localization
Audio
32%
21%
14%
9%
9%
7%
4%
4%
Service providers participating in the report represent a range of different disciplines
4WHO PARTICIPATED
DEVELOPER / PUBLISHER OVERVIEW
Developer / publishers
expect to work with
the same service
providers again after
project completion
Average team size
managing service
providers
5Foresee a growth in
demand for external
development services
Average number of
service providers a
developer / publisher
works with annually
93%93%14
Developer / Publishers Platform Focus
Console games
Mobile games
Browser/PC games
VR games
Facebook games
Social Casino Games
• 100% are the same
• 75% are the same
• 50% are the same
• < 50% are the same 75%
of service providers are the same year after year for the majority of developers/
publishers
Frequency of Changing Partners Year Over Year
4%
12%
14%
41%
47%
72%
5WHO PARTICIPATED
TOP 3most important factors when selecting a service provider:
3RATES
2EXPERIENCE
1QUALITY
ARTaccounts for 80% of all external development projects.
GAME INDUSTRY EVENTS are the #1 place service providers meet new clients
#1 Reason Companies Engage Service Providers:
to scale teams to deliver more content & features
6QUICK STATS
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.
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% Audio
What services are companies interested in acquiring?
30%SERVICE
PROVIDERS Looking for M&A Targets
Mergers and Acquisitions Activity is Leading to Consolidation in the Industry
72%of service providers say they are open to being acquired
72017 EXTERNAL DEVELOPMENT INDUSTRY OBSERVATIONS
www.superdataresearch.com/market-data/market-brief-year-in-review/
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.
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.
Increasing Number of External Development Projects from Mobile Companies
Service providers cited Mobile Games Companies as the #1 growing client segment over the past 12 months, followed by online casino games companies.
1
2
Mobile Game Developer
Online Casino / Gambling Company
3 Multinational Games Developer / Publisher
TOP 3 areas of increase in the past 12 months
82017 EXTERNAL DEVELOPMENT INDUSTRY TRENDS
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.
n Multinational Games Developer / publishern Small Independent Console Game Developern Mobile Game Developern MMO Game Developern Online Social Game Developer
n Motion Picture Companyn TV/Media Companyn Online Casino/Gambling Companyn Other
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2017
2013
26%
38%
14%
12%
29%
6% 7% 10% 4%1% 4%
6% 3% 4% 9% 8%
18%
1%
n Multinational Games Developer / publishern Small Independent Console Game Developern Mobile Game Developern MMO Game Developern Online Social Game Developer
n Motion Picture Companyn TV/Media Companyn Online Casino/Gambling Companyn Other
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2017 31% 17% 21% 9% 3% 6% 7% 5%
36% 23% 10% 10% 9% 4% 4%3%
1%
2013 1%
Service Provider Art Client Portfolio by Segment, 2013 vs. 2017
Service Provider Engineering Client Portfolio by Segment, 2013 vs. 2017
92017 EXTERNAL DEVELOPMENT INDUSTRY TRENDS
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
Although service providers are optimistic about the impact of VR/AR, developers / publishers are less convinced this will drive demand for external development.
VR/AR Not So Hot for External Development
102017 EXTERNAL DEVELOPMENT INDUSTRY TRENDS
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.”
How do you meet the majority of your partners?
SERVICE PROVIDERS: Factors Considered When Accepting a New Client Project
Developers / Publishers
39%
41%
12%
4%4%Networking sites
Other
Games industry events
Industry Peer Referrals
Internal referrals & company resourcesService
Providers13%
3%
31%
7%
27%
18%
Online research
Games industry events
Buyer Reaches OutOther
Referrals
Internal company resources
Games events and referrals are the top ways that companies connect.
TIP FOR SERVICE PROVIDER Prioritize attending industry events to meet potential clients’ verses relying on outreach through networking sites.
1 Potential for future projects
2 Prestige of project/client
3 Rates the client can pay
FINDING AND SELECTING PARTNERS/CLIENTS 11
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.
http://www-03.ibm.com/security/data-breach/
QUALITY
EXPERIENCE
RATES
Credibility4
3
2
1
5
6
7/8/9
7/8/9
7/8/9
12
11
10
Language/Communication Skills
Previous Clients & portfolio
Size of company
Studio leadership
Technology Experience
Security controls
Financial stability
Proximity
12FINDING AND SELECTING PARTNERS/CLIENTS
Scale teams to deliver more content and features
Cost savings
Flexible skill-set ramp-up/ramp-down
Access hard to find skills
Lack of available local resources
Support content needs for live services
Speed up development through follow-the-sun model
31%
18%
16%
12%
11%
7%
5%
TOP REASONS Developers / Publishers Engage Service Providers
#1 ReasonScale teams to deliver more content & features
FINDING AND SELECTING PARTNERS/CLIENTS 13FINDING AND SELECTING PARTNERS/CLIENTS
DEVELOPERS / PUBLISHERS SERVICE PROVIDERS
TOP ISSUES Encountered with External Development in 2016
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.
14
11
44
55
33
22
TOP ISSUES IN ENGAGEMENTS
Inadequate documentation and direction
Differences between internal & client time estimates
Communication challenges
Iteration issues (volume, speed)
Acquisition of client
Partners lack capacity
Communication challenges
Iteration issues (volume, speed)
Poor quality deliverables
Pipeline set-up
TOP TOOLS
Project Management
Jira Trello ShotgunBasecamp
MS Excel Jira Shotgun
CommunicationSkypeEmailSlack
Email Skype
File Transfer
FTPDropbox Aspera Faspex
Aspera Faspex PerforceFTP
Art Review
Basecamp Shotgun Jira
Shotgun Internal tool
Code Review Github Github
External Company Database (CRM)
Pipedrive Salesforce/Internal tool
Internal tool
</>
For the second year in a row, Substance was named as the top emerging tool adopted by service providers.
Emerging Tools
SERVICE PROVIDERS DEVELOPERS / PUBLISHERS
Tools commonly used to support external development displayed in order of highest usage.
15EXTERNAL DEVELOPMENTS TOOLS AND TECH RESOURCES
Integrated Art Development full pipeline
Conventional Art External Development with partial tool pipeline
Co-Development
Programming
Other (Programming and Full Development)
Full Development
Convectional Art External Development without partial tool pipeline
36%
25%
19%
8%
8%
2%
2%
Of all external projects, 84% are for production (-6% YOY) with very few projects for R&D, pre-production, live services updates or DLC.
PROJECTS BY PLATFORM
TYPES OF ENGAGEMENT
Console
Mobile/Tablet
Browser/PC
VR/AR
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.
58% (+3% YOY)
22% (-8% YOY)
21% (+3% YOY)
2% (+2% YOY)
16PROJECT DISCIPLINES AND PLATFORMS
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.
By Project Duration
months
60%
< 3 >129 < > 126 < > 93 < > 6
% of project
engagements 51%
10%11%
30%
12%
20%
6%
art
engineering
Photo Real
Cartoon
Stylized
63%
4%
33%
PROJECT TYPES BY
ART STYLE
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).
17PROJECT DISCIPLINES AND PLATFORMS
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 UX-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.
< 1 year
2 - 4 years
5 - 9 years
> 10 years
3D Characters3D Weapons2D Weapons
3D Props 3D Environments
2D Environments2D Characters
2D Vehicles2D Props
Concept Art3D Animation2D Animation
Cinematics
VFX
UX-UI
Remains Internal
VFX 45%
UX-UI 23%
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%
Cinematics 3%
3D Characters 2%
3D Props 0%
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.
ART TIMELINE: When developers / publishers started sending art disciplines out-of-house
18PROJECT DISCIPLINES AND PLATFORMS
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 out-of-house.
ENGINEERING TIMELINE: When developers / publishers started sending engineering disciplines out-of-house
< 1 year
2 - 4 years
5 - 9 years
Web development Full SKU mobile developmentFull SKU console developmentFront-end development
Console game modesTools development
Engine developmentTelemetry
Server-Side developmentLevel Design/Building
Rapid prototyping
Remains Internal
Rapid prototyping 83%
Front-end development 75%
Engine development 70%
Telemetry 60%
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%
</>
Maturity of ENGINEERING External Development Disciplines
19PROJECT DISCIPLINES AND PLATFORMS
TOP COUNTRIES for Different Types of Work
1
1
1
1
1
3 3
3
3
2 2
2
2
4 4
4
4
China
India
Vietnam
Spain
United Kingdom
Ukraine
India
Russia
Argentina
United Kingdom
Mexico
India
Canada
USA
United Kingdom
Russia
Canada
CONCEPT ART
3D ART
UX-UI
ENGINEERING FULL DEVELOPMENT
*Backed up by the data on where game engineering work is being sent
TOP EMERGING markets for game development*
India and Ukraine
TOP EMERGING markets for game development*
India and Ukraine
20PROJECT DISCIPLINES AND PLATFORMS
SPAIN
3D Art $6,4902D Art $5,280Mobile Dev $6,600
UNITED KINGDOM
Concept Art $11,200Console Dev $11,327VR Dev $8,580Mobile Dev $10,171
UKRAINE
3D Art $4,4642D Art $4,162Mobile Dev $4,400VR Dev $5,368
All rates are staff month rates in USD and calculated at 22 days per month.
CANADA
3D Animation $12,540Concept Art $14,200Console Dev $9,975Mobile Dev $11,702
USA
3D Animation $10,313 Concept Art $9,790 Console Dev $13,734 Mobile Dev $13,659 VR Dev $13,200
)
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.
21SERVICE PROVIDER AVERAGE RATES BY COUNTRY
RUSSIA
3D Art $5,0753D Animation $4,928Console Dev $6,774 Concept Art $4,928
PHILIPPINES
3D Art $3,483
VIETNAM
2D Art $4,4003D Art $4,635Mobile Dev $4,500
MALAYSIA
3D Art $4,8803D Animation $4,840Concept Art $5,030
CHINA
3D Art $4,0823D Animation $5,4352D Art $3,874Concept Art $4,449
INDIA
3D Art $4,2533D Animation $3,300
All rates are staff month rates in USD and calculated at 22 days per month.
22SERVICE PROVIDER AVERAGE RATES BY COUNTRY
23
11
44
33
22
Q1 What are the main drivers for an increased demand in external development services over the next 3 to 5 years?
Q2 For what disciplines are service providers optimistic about growth in demand for services over the next 12 to 18 months?
Virtual Reality
Players demand for more content
Augmented Reality
Need for developers to decrease development costs
Demand for more content
Richer/deeper games
Need to decrease development costs
Virtual Reality/Augmented Reality
EngineeringArtAnimationAudioQAUX-U Cinematic/VFXLocalization
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.
85%
UX-UI and concept art are two new areas seeing significant growth.
THE FUTURE OF EXTERNAL DEVELOPMENT THE FUTURE OF EXTERNAL DEVELOPMENT
SERVICE PROVIDERS DEVELOPERS / PUBLISHERS
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.
Engineering
Art
Animation
Audio
QA
UX-U
Cinematic/VFX
Localization
Most Optimistic (10 is highest)
1 10
of developer / publishers responded that the need for more content is driving demand.
24
Q3 In what areas have developers / publishers seen a growing demand for external services in the past 12 months?
Q4 In what areas do developers / publishers expect to see growth/demand in the next 18 months?
3D CHARACTERS 81%
3D PROPS 75%
ALL OTHER 3D ART 70%
UX-UI 69%
CONCEPT ART 58%
3D Props
3D Characters
VFX
UX-UI
Concept Art
THE FUTURE OF EXTERNAL DEVELOPMENT THE FUTURE OF EXTERNAL DEVELOPMENT
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
1
4
5
3
2
DEVELOPERS / PUBLISHERS
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.
Consolidation is pushing out high-quality, niche service providers.
Developers / publishers often want hard to find niche skills but do not always want to pay the higher rates.
Increase in competition due to both tax credits reducing costs in some regions and an influx of new service providers.
Developers / publishers do not always take cultural differences in to consideration in communication.
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
• one bad decision by the parent company could be detrimental to all of the entities that have been acquired
• work may be sub-contracted to different entities that have been acquired
Service providers moving in to co-development and creating their own IP means they could become future competitors to their current clients.
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.
THE FUTURE OF EXTERNAL DEVELOPMENT THE FUTURE OF EXTERNAL DEVELOPMENT
Co-DevelopmentCooperative 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 DevelopmentThe 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 DevelopmentA developer’s full technical pipeline is used by the service provider
Photo Real ArtArt 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
The following definitions may be subject to the context in which they were used in this report.
26GLOSSARY OF TERMS
For more information about the External Development Summit (XDS), please contact us at:
EXTERNAL DEVELOPMENT SUMMIT