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Virtuos has carved out a big business since 2004 as a company that handles outsourced game development for both developers and publishers. With more than 3,500 people around the world, it also has a big window into the state of the gaming industry.
I talked about this point of view in an interview with Gilles Langourieux, CEO of Virtuos, during a meeting at the recent Game Developers Conference in San Francisco. We noted that everybody is looking for tea leaves now amid a global recession that has seen the tech sector slash jobs and industry titans cut their outlooks.
It will be interesting to see how gaming investors react in the coming months. In 2021, Virtuos raised $150 million from private equity firm Baring Private Equity Asia, a new kind of investor coming into the game industry.
We’re also witnessing evolving consumer habits that are forcing publishers to reconsider business models, from free-to-play and live service games continuing to increase their market share to the emergence of self-publishing. Add to this the entrance of new heavyweights that have intensified talent competition, and it is clear that video game studios are headed for an eventful year.
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In spite of the challenging outlook, Virtuos’ CEO remains incredibly optimistic about his plans for the global co-development company based out of Singapore. Having taken the studio from its early days in China to the current global network of studios that has worked with every top publisher in the world today, Gilles only sees growth ahead for Virtuos.
The company has worked on more than 1,300 projects for clients including 19 of the top 20 digital entertainment companies in the world. The company’s game development and 3D art production cover games for consoles, the PC and mobile devices.
Despite the slowdown, the company is engaged in global expansion as the largest player in Vietnam and Southeast Asia, and the company is also making original intellectual properties.
Here’s an edited transcript of our interview.
GamesBeat: How is the company?
Gilles Langourieux: The main thing is that we’re all coming out of two years that have been too good. We’ve seen, at the end of last year, reality coming back. The fact that we’re all getting together at this time is ideal, because we do need to make some changes if we want to get this industry to grow again.
For us, the number one topic of conversation was, where are the extra pockets of interest, the extra pockets of gamers, the extra pockets of revenue that can be found and leveraged? What efforts can we do to go after that? Things have been so good, so maybe we all got a bit complacent. Or we didn’t have, with COVID, the right circumstances to up our game and go after these extra pockets. That has been, for me, the number one topic with many publishers. It’s been great overall, but things haven’t changed that much.
GamesBeat: It feels like mobile gaming in particular has slowed down. The PC and console industries still seem to be producing good games. Maybe they could be the ones that will hit their numbers this year. But I don’t think mobile will come close to hitting whatever expectations people hope for.
Langourieux: If you look at how successful we’ve been at converting IPs from a premium model to free-to-play and generating digital revenue by keeping players engaged for a long period of time inside the same games, inside the same IPs, this is all great. But at what point do players start to think, “I’ve been in this long enough, I need something new”? For many games, that point is already there, or it’s coming quickly.
You see some franchises making interesting efforts to go and find–when I see Fortnite making partnerships to go after the Japanese audience, or we see the success of Apex Legends in Japan as well, this move to go after another audience, that’s a good example of extra effort being made. But it’s not just going after other countries. It’s also going after the clients in our country with something new.
GamesBeat: What does your company see? Your customers have such wide variation. There are so many trends that you might see. Which ones do you think are the bigger ones? Geopolitics is definitely an unwelcome trend.
Langourieux: But that’s not affecting games yet. That’s in the background for everyone, but I don’t see it affecting games. What’s happening in the local market is what affects games. What’s going on in the Chinese market is what motivates Chinese publishers to go more toward the West. But that’s not geopolitics. That’s the reality of how the game market is functioning in China.
As far as global trends, the first one that seems obvious–in the face of decreasing sales, we’re seeing a refocus on de-risking. Keeping some money in the bigger IPs, cutting the projects that are less well-known and more risky. The second one is cross-everything. Cross-platform, cross-country. Ensuring that titles are able to leverage different platforms. Newzoo made an interesting point today. They were showing that the more platforms people are engaged on, the more they are likely to generate revenue. That’s very consistent with what we see on our end, with clients who want to ensure that their games are cross-platform playable as quickly as possible.
And then efforts to go after audiences in all the markets, as opposed to a one-size-fits-all approach. That might have been the traditional approach in the past. You had the same game in one box. When we moved to digital, you had the same game for the whole audience. Now you can customize your game for different audiences, or even for different moments in time. Leveraging that is a way to go get extra revenue.
What this means for us–we’re a business that started in Asia. We have close to 4,000 people now, I think 3,700 to be price. I believe 70% of them are in Asia. We need to make sure that, as a company, we have a presence in all the major cities where games are made. We’re trying to build or buy studios in all these major cities so that we’re not only close to the developers, but we also better understand each market.
GamesBeat: Do you find that the workforce is there for you to hire? Is that easier now after so many cutbacks across the industry?
Langourieux: Over the last three years the pressure on the hiring markets has never been higher. Historically we saw a lot of pressure in fast-growing Asia and less pressure in Europe and the west. In 2021, the beginning of 2022, there was more pressure in the west than Asia. Since the end of 2022, beginning of 2023, things have cooled down in all geographies. That translates into us having more choice of who we want to hire. Retention rates are better, and turnover rates are at their lowest historical level.
GamesBeat: Do you hire fewer people yourself because that’s slowed down, or is your business still strong?
Langourieux: We’re still growing. We are hiring less, because like everyone else we’ve seen cancellations. We have to be cautious. We’re not laying off. There’s still growth to be achieved. Many opportunities are ahead of us, in two main areas. There’s the area I already mentioned, which is seizing new pockets of opportunity to generate more revenue. There’s also the other area of giving more flexibility to developers who want to be conservative around their own costs. Instead of them building a high fixed cost base, they will be building a smaller core team and relying on external developers like us to add flexibility in production.
GamesBeat: What is the competition like in your field? Keywords has gotten pretty big.
Langourieux: They’re bigger than us overall. If you just look at the area that we’re focusing on, which is core content production, we’re probably at a similar size, plus or minus 20%. I think it’s a healthy competition. There’s work for all the serious players. It’s probably more difficult for the smaller players now, because the top studios want to concentrate on partnering with a smaller number of reliable partners who can solve problems end to end.
This has been demonstrated by Virtuos and some of our competitors. It’s that ability to align different skill sets in the face of a problem and deliver something in the game pipeline, fully playable, that solves a problem. To illustrate what I mean, if you need an extra cinematic, instead of working with concept artists to imagine what it will be like, 3D modelers to create the model, animators to do the animation, and your own team to integrate it into Unreal Engine, someone like Virtuos can take it all on and deliver it in your engine – high quality, end to end cinematics. The same is true if you need extra skins to monetize your game. Instead of working with all the different fields, a company like us can take ideas on paper and deliver fully animated, lit skins you can sell directly in the game. There’s an element of concentration that’s happening as we move up the value chain.
GamesBeat: Do you understand how generative AI might affect your business yet?
Langourieux: Not fully, no. I think it’s exciting. We’re a people business. Games are made by game creators. The fact that we can give them much more powerful tools, that’s very exciting. It’s going to facilitate another area of growth and innovation for the industry. I’m convinced of that. My job is to make sure that, just like we’ve done with some of the procedural tools–we were one of the first adopters of Adobe Substance 10 years ago. We intend to be one of the fastest, earliest adopters of generative AI solutions. That’s how we’re going to make our artists the best in the business.
GamesBeat: What was that tree creator tool?
Langourieux: SpeedTree? Excellent example. You could have mentioned, there’s also the garment–it’s a Korean company that has a solution to produce clothing. Marvelous Designer. We haven’t had fewer artists producing clothing because of Marvelous Designer, though. We’ve had Marvelous Designer-trained artists producing better quality and wider variety in clothing thanks to that combination. And more quickly as well. You can do more beautiful things faster. I’m extremely excited. But we have a lot of work to do. It’s still new. We still need to understand where the difference is made.
GamesBeat: Do you see more projects in certain areas that have gotten a lot of attention, like metaverse or blockchain or elsewhere?
Langourieux: We had a discussion about this a couple of years ago. The demand for those two areas is significantly down. There was a wave of excitement at the end of 2021, early 2022. Most of the conversation came more from consultants and bankers than game companies. Much less now.
GamesBeat: It does feel like the game industry is operating on a different cycle than the technology companies and the overall global economy. There are these interrelationships, though. Bankers, limited partners for the venture capital funds, and brands are all connectors between the game economy and the global economy. Brands are affected in some way and they cut back. The projects they were doing around things like the metaverse maybe wind up affecting the game industry.
Langourieux: The digitalization of every industry, every consumer product and service, that’s certainly still happening. Are they all interconnected and will they all be accessible in one single shard? That’s what’s in question. That’s why “the” metaverse–everybody’s much more quiet about that. But digitalization is still happening. A lot of content is still being produced. Brands going into things like Roblox is one angle. Another angle is brands making sure that there’s a digital double for everything they do – their store, their products – that people can use to experience and test their products. All that requires tools and know-how that are similar to what we’ve invented in the game industry.
As a company, we remain dedicated to the game industry. We haven’t gotten on that train because there’s still so much to do with game studios and game IP. That’s what our people are excited about. I could have hundreds of people producing 3D shoes, but we’re much more excited about finding solutions with our clients to go after new players and extend the worlds of their IP.
GamesBeat: One of those hopes around the metaverse was that everything would be interoperable. We’d have so much asset reusability. Is that reusability already here? Is it coming soon, or is it maybe never coming?
Langourieux: Something that was interesting during this year’s GDC was the announcement–I don’t know if it’s already done, but the announcement that Adobe and Autodesk have agreed on the USD standard. It’s a great step, but it’s only one of the many steps that will be required until we get to that interoperability that you mentioned.
Even after we go through these steps, what I’ve not wrapped my head around is how we will ensure continuity. Every five to seven years you have that leap in technology that translates into a complete change, if you want to take advantage of what the state of the art allows you to do. If we’re building multiverses or metaverses and we have to reset every five to seven years, because there’s a leap in technology, I don’t see how this idea can survive.
I see the effort that it takes to get the same game running on two contiguous generations of hardware, like PS4 and PS5. If it’s that difficult for just one game–first, problem number one, how is it possible that the next generation will still be compatible with N-1? And then problem number two, how do you get compatibility across so many different universes? But with USD we’re on the right track.
GamesBeat: In different geographies, do you detect anything strengthening?
Langourieux: We have roots in Asia. We used to have the majority of our talent in Asia, but the majority of our business coming from the west. What we’ve done over the last two, two and a half years is add more studios in the west. We’ve gone from two studios in the west to nine. When we last talked we had a studio in France and a studio in Ireland. In addition to that now, we have one in Ukraine, one in Poland, two new ones in France for three in total, one in Canada, and two in North America. We’ve covering Montreal, San Francisco, Los Angeles, Dublin, Paris, Lyon, Montpelier, Warsaw, and Kyiv.
GamesBeat: Is the Kyiv studio able to operate on a close to normal footing?
Langourieux: That’s a huge topic. We can’t call the situation normal, but they are operating. They’re working and maintaining activity. It’s a way for them to resist. That team, like many other Ukrainian companies, is doing an amazing job. They’ve not missed a beat. They’re continuing to grow. I have tremendous respect for how they’re doing that. Remote work, of course, is the main solution to the situation that they’re in. The team is no longer always operating from a single location. But it works.
GamesBeat: Is remote work the standard for the rest of the company? Or have you started going back to your offices?
Langourieux: We live in two different worlds. In Asia, China, Vietnam, also Singapore, you have 80% to 95% of the staff in the office. Europe and North America, you still have less than 50%, because most people are on two to three day cadence at the office. We’re not proponents of full remote when we can avoid it, because we’ve seen–we have so many companies telling us that remote work has caused difficulty in getting projects off the ground, or difficulty in shipping projects. We don’t deny that a couple of teams have successfully done it, but most teams haven’t found the recipe for working as well fully remote compared to hybrid or in-office.
GamesBeat: In this kind of situation, how do you keep your people happy? Are there particular steps you have to take these days, because we’ve had such a hard few years?
Langourieux: I have two ideas in mind to answer that. The first one is, you need to have a purpose that you live up to, and that aligns with people’s interests. Our purpose is that we make games better together. We’re all about working on different games, ensuring that they’re of high quality, and doing this in a collaborative manner. People who align with this are going to have a great time with us. We try to live up to that purpose.
My second observation is that the biggest gain coming out of work from home and so on is flexibility. If you give that extra flexibility while retaining what’s good about working together in the office – the camaraderie, the ability to train, to coach, to iterate faster – I think you get the best of both worlds. What comes first is ensuring the alignment between a legitimate purpose, a purpose that makes sense in the long run, and what the people who have chosen you want to do.
GamesBeat: What do you still enjoy about the business?
Langourieux: There are so many fantastic teams to work with. The progression we’ve made in combining skill sets to offer end to end solutions, seeing that happen, seeing clients say, “Hey, we had no idea Virtuos could work at that level to help us up our game,” that’s extremely enjoyable. I’m an entrepreneur in the sense that I love to create jobs. Seeing that the jobs we create are sustainable, and we have more and more, that’s another source of great satisfaction.
We’ve recently announced something called Virtuos Originals, which is an effort on our end to fund pre-production and propose games to publishing partners who will co-produce and co-publish with us. We have one game, our first game, that released earlier this year, a card battle game called Mahokenshi. It was released by Iceberg Interactive on Steam. It’s rated in the high 70s now on a small budget.
The reason we’re doing this is we feel the need to understand what companies go through to ship a game. We want to be able to demonstrate to them that we have that credibility. We want to give a bucket of oxygen to some teams on our end as well. It’s very complementary to the business. I wouldn’t call it an IP-building strategy. I’d say the strategy is moving up the value chain. Every studio has a few projects in production that we’re showing on a regular basis to our publishing clients, and when we can get a client excited, we’ll co-produce with them. We’ll continue to do that on a regular cadence.
GamesBeat: But you don’t see yourselves becoming a large original publisher?
Langourieux: We have no self-publishing intent there. The way it works today, we can show our creativity. We can do something different with our clients who are looking to add new content, offer new content to their audience. The best outcome is if we have a game that’s successful on one hand, and our clients view us in a different light on the other hand.
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