For Gamasutra's coverage of the Chinese game market thus far this week, we've been covering the Chinese MMO and casual game business. The bulk of the country's own game revenues are via these PC online games such as World Of Warcraft
. However, there's another major market that is particularly important for Western game professionals - that of game asset outsourcing to China.
Though there are only a very few Chinese game companies capable of high-end outsourcing (mainly formed by ex-Ubisoft Shanghai employees, the only Chinese studio producing AAA console titles for many years), it's clear that game outsourcing is rapidly scaling up. The top companies located in Shanghai can produce art assets, programming elements, and even entire console game projects at a cost significantly below that of Western titles.
To better understand the business, we visited the offices of Virtuos CEO Gilles Langourieux, who's been operating his firm in Shanghai since the end of 2004. He has a team of around 110 people, working on both art outsourcing and game porting for major publishers including EA, Microsoft, Vivendi, THQ, Atari, and Ubisoft.
Virtuos is at the high end of the Chinese outsourcing boom right now in terms of quality and pricing. But its CEO suggests that even his top-end service provides a 50% saving over most Western development costs for any of its services, whether it be a full PSP game port or next-gen art production. In other words, it appears that this is a significant market waiting to be unlocked.
Gilles' background, like many of the top outsourcers in China, was at Ubisoft Shanghai, which he originally helped to set up in 1997. He oversaw the swift growth of the Ubisoft development studio in China, which has worked on many of the Splinter Cell
games, and grew from 30 people in December 1997 to 300 people in March 2000. In 2000, he went back to France to manage the Ubi.com division, and then returned to Shanghai to found Virtuos, which includes technical managers formerly from Atari Melbourne House and Guerrilla Games, but is staffed almost entirely by Chinese game developers.
The company has worked on games from Funcom's Dreamfall
through Atari's Test Drive Unlimited
, and has also completed an entire PSP port, for Ubisoft's Street Riders
. It's also working on multiple next-gen projects, currently under NDA, and on two titles for the PSP and one game for Nintendo DS. The company recently received investment from Legend Capital, the VC arm of top Chinese tech firm Lenovo.
Enter The Gamestar
Another notable outsourcing firm in Shanghai is Gamestar, which was founded in 2002, and which Gamasutra also visited during our time in China. The studio was, according to founder David Zhu, the first independent studio in China that focused on outsourcing, and is staffed by senior ex-technical staff from Ubisoft Shanghai, headed by game tools veteran Zhu.
Zhu noted that his company, which has around 60 employees in Shanghai, started out by creating PC casual game projects for U.S. studio WildTangent. Like Virtuous, it has been dealing with the "much shorter history of game development in China", taking the art and programming managers from Ubisoft staff, but hiring and training the rest of its staff from scratch. It has worked on titles for PlayStation 2, GameCube, and Xbox (including Midway Arcade Treasures 3
as a cross-platform multi-SKU project), as well as next-gen art projects, and is also working on a PSP game engine.
The Growth Of Opportunity
Virtuos' Langorieux explained that he made the move into the field since "there was a big opportunity in outsourcing" - demand was going up for quality and quantity, and he felt that there was an opportunity to differentiate from local Chinese firms. Many of these, he suggested, were "developers but also want to do outsourcing... and still dream of making a AAA game", yet outsourcing pays the bills. These firms will certainly still have a good opportunity to sign deals with Western companies to create assets for them.
Virtuos, however, is focused purely on services that can be outsourced - Gilles noted: "You can't outsource everything." Many game elements are complex, have many iterations, and a strong cultural element, making them not a good candidate for localization. Thus, Virtuos works entirely on production for clients who keep the pre-production and design in-house, making deliverables much simpler.
Too Much Opportunity?
Interestingly, Gamestar's Zhu notes that, with the bursting of a major Chinese game development bubble based around online games (many Chinese developers making MMOs have gone out of business in the past year or so), a lot of Chinese game companies may be looking to move into the outsourcing market.
Zhu cites that, of 40 or 50 online game companies, half closed down, and much of the other half have shifted their focus - he commented: "My concern is that this may create a bubble." He noted that having a number of high-level competitors in the game outsourcing market may enhance the business, but having a lot of low-level competitors "may ruin the market", especially if they bombard Western publishers with pitches for projects that they cannot effectively follow through on.
As for game companies who are well-established in this console outsourcing market, Virtuos' Langourieux cites Tose, "a very interesting competitor" which Gamasutra famously covered
as 'Game Development Ninjas' a few weeks ago. (Tose itself was evidently so pleased by Gamasutra's description of them that a presentation by Tose China's head at a Shanghai conference this week included the phrase!)
However, Tose is very Asian focused, and its cost structure different - 80% of the company's staff are in Japan and just 20% (around 230 staff in 2 locations) in China. The majority of its outsourcing is still for Japanese-headquartered console publishers. In addition, another firm cited was InterServ, a Taiwanese company which has produced console titles, and is also helping to lead outsourcing efforts for console games in Asia.
What Can Be Outsourced?
At a basic level, even if they don't announce it in a high profile way, Western publishers are starting to get comfortable with outsourcing individual art assets, whether it be vehicles for racing games or detailed character and environment art. Since the art can be modeled in 3DS Max or Maya and then simply sent in mesh and texture form to the Western developer to be integrated into the game, it's the most 'safe' option, and the first step that many companies are taking toward outsourcing.
However, it's clear that game companies are starting to look to outsource more. Virtuos' Langourieux mentioned that his business is currently 50 percent art outsourcing, but 50 percent game ports, and believed that there's the ability to grow in many other areas as well. He notes that animation outsourcing is ramping up, and QA outsourcing is something he is looking at, describing as "nonsense" the idea that Western publishers have tens or hundreds of testers in their Los Angeles basement, when the act of testing could be outsourced.
Losing Game Jobs In The West?
But should Western game developers be concerned about the Chinese game outsourcing movement, which is still at an extremely early stage? Will it actually take away their jobs, effectively offshoring and outsourcing them, as has happened for portions of the IT industry? Virtuos' Langourieux doesn't think so. He suggests that the West has "always seen the game job market very tight", with suitably experienced game developers still difficult to find.
He also points out that the number of man months to make next-gen games is much higher, and the number of platforms for many game releases has increased from 3 platforms to as many 10 platforms. Thus, he "doesn't think it's a disservice to the industry in West" to offer this service, suggesting: "It's a win win proposal."
Whatever the eventual result, it's obvious that the Chinese outsourcing market is set for significant growth over the next few years, and is an area to keep a careful eye on, whether you're a businessman or simply an artist in the game industry.
[Gamasutra and Game Developer magazine editorial director Simon Carless will be reporting from Shanghai all this week on the Chinese video game market. Previous reports filed this week have included an introduction to the Chinese MMO market, alongside a look at what Chinese gamers look for in the top MMO titles.]