The stereotype of a lot of outsourcing is that the Westerners sort of come in and run the show. And the impression I get is that's actually going to be very bad for retaining talent for the satisfaction of the people who work in the studio.
GL: Yes, you would be right. It wouldn't be the right approach to set up a foreign company in China, and we've tried to stay away from that in different ways. So the first point that I made earlier is that two third of the management here is Chinese. It turns out I'm the CEO and the face, but if you walk through the studio you will find that a lot of it is operated in Chinese.
Secondly in terms of shelling structure our only external investor is a Chinese company, and it's actually a company that depends on the Ministry of Science because it's a venture fund.
So we're not isolated foreigners in China... We're very much about growing our local staff as fast as we can from junior artists, senior artists, leads, directors, so that we have the largest possible pool of Chinese directors to seed our new projects and to seed our new ventures.
When we opened our Chengdu studio, we were able to hit the ground running because we had -- in the company in Shanghai -- 20 employees from Chengdu in different senior leadership positions inside Shanghai studio. And when we selected Chengdu, we were able to have 10 of them volunteer to go there and start the Chengdu studio.
So if you look at the Chengdu studio today, the general manager is Taiwanese; the other three art directors, two of them are Chinese, one is British; and all the producers are Chinese.
We've got that right balance between having foreigners who can communicate well with clients -- because it's all about communication -- and having strong local talent that has been through the different steps of experience and growth that are required to do the job at the right query level. A final point on that note, our largest competitors in the outsourcing field are Chinese or Taiwanese companies -- and you mentioned one today -- they're not Western-run companies necessarily.
I found it interesting that you said that your strategy is to avoid new IP creation. Obviously for a lot of development studios that's both creatively satisfying and also seen as building potential equity.
GL: I've always thought that if you want to do something, you have to be the best at what you do. So we want to be the best at digital content outsourcing, and that's all we do and that's where we put our biggest energy in.
The bet paid off, because in six years we were able to overtake every single competitor that already existed when we started the company and grow bigger than them. So there's something that we must be doing right.
Beyond this, I think it's a very simple question. You can't compete with your clients. You can't at the same time tell the clients, "Hey! To leverage, to make the most out of outsourcing, you have to establish processes where you're sharing best practices, where you're sharing technology so that we work on par with your teams!", while at the same time, have [your own] team next door trying to build a competing product.
I think it's good sense, but I seem to be isolated in thinking this because too many people view outsourcing as a stepping stone to do your own thing. I just view outsourcing as my end goal. I mean my end goal is to be the best at doing this for the games industry, for the other digital content industries as well.
And there's a lot of equity in value at being a reliable, high quality, profitable outsourcing company; it's just a different path.
So is the bulk of your work, in terms of the outsourcing, is still in the game industry?
GL: Yes. We've been involved on some movie production, and one of the examples I can talk about is Terminator Salvation, for which we produced a number of assets. And after Terminator Salvation, we've worked on more movies and we see this as a growing area, but the bulk is still in games.
When the convergence happens, or as it happens, we want to be right there in the middle; we want to have the skill sets and the teams capable of producing assets or shots or levels, which can work seamlessly between games and movies. Some of our clients are going there very fast, and we're going there with them.
At this point, how important is outsourcing to production of current generation, PlayStation 3/Xbox 360 type games for developers?
GL: I think it's becoming quite important. I was having dinner with an independent triple-A developer yesterday night, and they told me very clearly when we talk to publishers today, they tell us that outsourcing needs to be part of the mix.
We need to have established relationships in place with solid outsourcers; we need to have a plan for how we're going to lead our outsourcing if we want to be taken seriously by publishers, because it's not considered as a way not just to arrive at a lower cost for the project, but also as a way to secure the deadlines of the project, because it eliminates a lot of the uncertainties around ramp up times and it also eliminates some of the uncertainties around the ability of the studio to survive post project.
If you... have too long of a period between two projects, it puts the life of the studio in jeopardy in some cases, in the worst cases…
We see it all the time, frankly.
GL: We see it all the time. But if you're able to focus on the core team, that problem goes away. And this is really what is making our life easier and our existence more meaningful is the ability to tell the core teams at the end of the day, you'll have more royalty to share between yourselves because it's a smaller core group and you are more agile because it's more of a team; you can more easily jump from one project to another or wait for a new project because you have less mouths to feed.
We address the same problem from the opposite angle. We have lots of mouths to feed, but the way we address that problem is by working across a lot of different clients and a lot of different projects at the same time. So it's the opposite and therefore complementary approach that we have.