Elliot de la Valiere on the rise of the Russian machines

Recently Elliot de la Valiere send me his views and insights on what is happening and gave me permission to share this with the rest of the world. Have fun reading it, Ashu.

U.S. and Japanese game publishers, (who fund and distribute video games) are dominating the world’s market of gaming consumers, which now stands at around $14 billion in sales. California game developers are currently the major producers of the games. 30% of all of this money currently goes to Electronic Arts, the world’s biggest game publisher and the video game maker behind popular games such as Harry Potter and the Sims.

However, outsourcing of video-game production is starting to be done in places like China, India, and Russia & Ukraine. The part of a video game that is easiest to outsource is the art.

The part of the development process that is the most difficult to outsource, or to offshore,

is the actual programming and design of the interaction and characters in the game; these tend to be done in-house because they require frequent and dynamic specification adjustment, which requires close supervision.

Electronic Arts, is still not using any foreign game development firms, but Activision (U.S. #2) is already starting to consider Russian game development firms, and the French game publisher Ubi Soft has opened two studios for developing games in China.

The main players have confusing arrangements in the gaming industry. Usually independent game development firms work together with a game publisher (example Epic Games & id Software). While the game publisher funds, markets and distributes the final game. But often game publishers vertically integrate, by buying or creating their own development firms, and work as one unit.

Example 1, Electronic Arts, a game publisher, purchased Criterion Software Group, the UK-based game developer of Burnout driving game.

Example 2, Microsoft is a game publisher, who also owns the Bungie game development firm, and funds, develops and markets the game Halo. (Ditto for Sega’s Sonic Team and Infogrames, which own game development firms.)

Lastly, some independent game development firms also act as game publishers for their own games. Blizzard Entertainment is a game developer that also internally finances the marketing and distribution of its games without having to work with big publishers like Infogrames or Electronic Arts.

Russian and Ukrainian game development firms are starting to emerge onto the world market. Two of the most successful Russian firms are Akella(developed “Sea Dogs” the “Pirates of the Caribbean”/for Disney) and Nival Interactive, (created the World War II strategy game “Blitzkrieg.”) Both sold hundreds of thousands of copies in Europe and North America.

Other Russian game development firms are:

  • Turbine Entertainment /Middle Earth Online, which created Orcs.
  • K-D LAB, which developed the strategy game “Perimeter”, which was, in turn, marketed and distributed by 1C, winning “Best PC Game” and “Best Game Design” at the 2004 Russian Game Developers Conference.
  • Lesta Studio, which developed “The Entente: World War I Battlefields”.
  • Target, which developed “Battle Mages”.
  • Ukrainian development firm, GSC Game World, created “STALKER: Shadow of Chernobyl”.

Russian game development firms promote and sell their games to foreign game publishers, such as Activision. But they also sell their games to Russian game publishers, such as 1C, which is Russia’s #1 game publisher and Buka Entertainment.

Another Russian game development firm, PlayMobile, specialises in mobile gaming. PlayMobile makes games for Nokia and Siemens mobile phones.

Some Russian game development firms are not happy about being forced to work only through game publishers if they want to get their game out to the retail stores. Earlier this year, the game development firm, Gaijin Entertainment, based in Moscow, developed “Flight of Fantasy,” and won an award for best game without a publisher.