2017 INSIGHTS - External Development Summitxdsummit.com/wp...2017-Insights-On...Game-Industry.pdf · 2017 INSIGHTS on External ... industry event held in Canada, with a primary focus

2017 INSIGHTSon External Development for the Video Game Industry

advancing external development for the games industry

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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

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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



• < 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


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


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).


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


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


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


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


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


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


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.


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:

[email protected]

EXTERNAL DEVELOPMENT SUMMIT

Documents

2017 INSIGHTS - External Development Summitxdsummit.com/wp...2017-Insights-On...Game-Industry.pdf · 2017 INSIGHTS on External ... industry event held in Canada, with a primary focus