Such investors haven’t put a lot of money into games in the past, but the pandemic highlighted the opportunity as games grew 23% in revenues in 2020 while many other industries shrank. Virtuous is taking advantage of that growth to level up its business, which focuses on external development of core game assets for triple-A games for consoles and PCs. While it started providing art, now it has a deeper role in game development, providing assets inside a game engine that are more easily integrated in a game.
As such, the Singapore-based company gets a lot of insight into gaming trends and how to deal with challenges such as the labor shortage in game development, crunch (unpaid or forced overtime), how to attract more women into the industry, and the never-ending need to feed more content to gamers. I spoke to CEO Gilles Langourieux about a variety of topics in an interview.
The company started in China in 2004 with a studio in Shanghai. It expanded to other cities like Chengdu and Xian. Then it acquired Sparx in 2011 and moved out of China to relocate its headquarters to Singapore in 2018. Langourieux said that helped the company operate more easily on a global basis and expand into new markets. Now the company is making acquisitions such as the purchase of Sparx, which grew from 50 people to more than 400 now.
Three top investment pros open up about what it takes to get your video game funded.
Overall, Virtuos has more than 2,300 game developers across 13 locations in places around the world from Los Angeles to Montreal. It works with 18 of the top 20 digital entertainment companies including Activision Blizzard, Bandai Namco, Take Two Interactive, and Ubisoft. And it has been involved in some of the industry’s most successful game titles, including Assassin’s Creed, Call of Duty, Final Fantasy XII: The Zodiac Age, Horizon Zero Dawn, League of Legends, NBA 2K18, and Shadow of The Tomb Raider.
Virtuos has also contributed art services to some of the film industry’s biggest blockbuster franchises such as Black Panther, Jurassic World, The Avengers, and Star Wars: The Force Awakens. To date, it has worked on more than 1,300 projects.
Here’s an edited transcript of our interview.
GamesBeat: I saw you had a very big funding round. That was eye-opening. Can you start with some of the history of the company?
Gilles Langourieux: You may remember we started the company in China back in 2004. We had a studio in Shanghai. Since then we’ve grown the group in China first by opening other studios in other cities, Chengdu and Xi’an. We started to grow the group outside China with the acquisition of Sparx in 2011, and then other acquisitions took place over the years. So much so that in 2018 we decided to move the headquarters of the group outside of China into Singapore.
There were three reasons behind this. There was the need to be perceived as a more international group by clients as well as team members. There was the need to access more international management talent, the kind you can find in Singapore. Also, the need to be better funded, because as a foreign entrepreneur in China, I had limited access to financing from the banks or investors. That changed a lot with the move in 2018.
If you recall previous conversations, the company has two divisions, an art division and a game division. Both divisions are focused on helping major game studios produce bigger games and generate more revenue with their games by ensuring they can grow on more platforms, or that there is more content to be sold to their clients. Over the years, with 2,500 employees, we’ve become one of the largest external development partners.
GamesBeat: When was the stage where you started growing a lot in terms of the number of employees?
Langourieux: If I showed you the curve, it’s surprisingly regular. We went over the 1,000 mark back in 2011, something like that. We’ve grown staff numbers by 15 percent on average year after year. What we’ve seen in the last three years is not necessarily an acceleration in the number of staff, because it’s just continued at a steady pace, but more acceleration in revenue. In 2020 revenue grew by 35 percent. This year it’s growing by close to 50 percent. That’s happening because the solutions we’re delivering are more advanced, more complex than when we started the company.
To give an example, our art division, when we started the company, our clients were sending us photo references and we were sending them 3D art assets back. There’s a cap on how much you can charge for that kind of work. Now 80 percent of the work we deliver to our clients is delivered in-engine, in a playable format. We’re able to take, for example, concept art on one end, and go all the way to the other end, an animated asset with VFX and lighting in the environment. We can deliver something fully playable at final quality to our clients. There are fewer steps to take on their end. We get to higher quality faster. They save money, but we can also charge a premium for this type of service because so few of our competitors can do it at the scale that we can.
GamesBeat: Have you noticed how game development itself has changed? Are you working on longer projects? Are you having to put more people to work for very short amounts of time? I wonder how much flexibility customers require from you now.
Langourieux: If I narrow down the question to the last 18 months, two things have happened at the same time. On the one hand, it’s been more difficult to ship new games. You see more delays on some bigger games. On the other hand, players are playing the same games longer, and they’re asking for new content, innovative content, inside those existing games. That translates into longer-term contracts for us, longer relationships, helping clients produce this additional content for their audience, or taking existing content to a new platform for an audience that hasn’t had a chance to play it yet. We’re definitely seeing longer cycles.
Something else that’s different from the previous console cycle is a strong uptick for the new consoles. Back in 2013, there was hesitation from many publishers around investing heavily in the PlayStation 4 and Xbox One. That resulted in a slower 2013 and 2014 for us on the business side, with less growth than usual. For this cycle, all the publishers from the U.S., from Europe, from Asia are investing heavily in the new generation. That’s also driving demand for content.
GamesBeat: Does that help improve your business, or simplify the business, when you get to work on some of these games for a longer time?
Langourieux: Yes, because it gives everybody a stronger reason for investing in more complex relationships. The clients are willing to invest more. We can invest more because we know the return on the investment will be there. You can take on bigger chunks of a title. You can take on entire levels, entire gameplay features, an entire set of cinematics, and deliver those at higher quality to the client.
If you’re in a shorter cycle with faster iterations, you have less time to understand how the client’s pipeline works. The client also has less time to adjust their working methods to what’s required for good external collaboration. Therefore you can’t go as deep as we’re going now.
GamesBeat: Are we in a kind of labor shortage, or at least a shortage of the best game development talent? I see the contractors expanding so much, and so many acquisitions have happened. I’ve been asking Activision Blizzard every quarter how many openings they have, and that number hasn’t changed. They still have 2,000 openings. It’s hard for them to fill them all. I get the sense that with this latest boom in gaming and all the investment in new startups, the increase in the number of major funding deals, it looks like we have that labor shortage.
Langourieux: I don’t disagree. There’s a stronger labor shortage than there has been in the past, due to increasing investment in content. I don’t think it’s artificial. The numbers are backed by more purchases made by consumers. Consumers are spending more on games, and we have to give them more content to consume. There’s a logical cycle in that.
On our end at Virtuos, we’ve always been in the business of training and making teams of game professionals work together at scale. When others were investing in IP, in brands, in tech, we’ve always been primarily investing in people. We’re not afraid — and we’ve always done this — of taking loads of fresh graduates, training them up, and turning them into game professionals. By doing this regularly over the years, we’ve created value for ourselves, but also for our clients, who are now able to tap into these thousands of professionals we’ve trained.
GamesBeat: And you have to do this in different regions of the world as much as possible, right?
Langourieux: Yes. Our strategy–why are we raising so much funding? That’s for a number of reasons. One, we wanted stronger recognition for the scale we’ve reached and our ability to deliver results to our clients. Second, we want to be able to have studios in more parts of the world. We have studios in countries where there’s a deep talent pool. We have studios in cities where games are made, in order to be closer to our clients. We make these studios work all together on the same platform.
Our model, our purpose is to make games better together, and “together” is very important. Every studio is working on the same platform, the same project management and communication tools. They can interoperate fairly easily together. That’s how we’re able to line up 100, or in some cases 200 people to work on a single project, which as you know is probably more than the average size of most of our competitors.
GamesBeat: What sort of competition do you face with Keywords? They’re a lot bigger, but do you specialize in different things than they do?
Langourieux: I think our starting points are very different. Keywords started in QA and localization, and they’re still very strong in those areas. We started in core content production, and we remain solely focused on core content production. We’re not interested in other ancillary services. We just want to be the best and the largest at helping studios create core content. That’s how we differentiate.
Another differentiation, as I was saying earlier about the integration of the studios we’ve built or bought, we make sure that they’re working on the same platform and can interoperate extremely well together, rather than letting them run as independent kingdoms. We have an industrial strategy, whereas Keywords has a more horizontal strategy. That’s working well for them. Ours is just different.
GamesBeat: How many acquisitions have you made over the years?
Langourieux: We haven’t made many until now. There have been three notable acquisitions we can speak of. You have Sparx, which was a 50-person animation studio in Vietnam when we acquired them. It’s now more than 400 people, one of the largest game studios in the country. We have Black Shamrock in Ireland, which was acquired in 2017. They were a 15-person single-project studio working on game creation, working on an RPG. They’re now close to 100 people working on different types of projects for different triple-A clients. Finally there is Counterpunch in Los Angeles, which is a facial animation specialist we acquired last year. They were around 15 people at the time, and they’ve doubled in size already.
We’re not trying to make a lot of acquisitions. We’re trying to make acquisitions where the culture fit is there and we know there are synergies which will allow us to make that studio grow very rapidly. We’re looking for studios that we can help scale up rapidly by giving them access to our clients or by giving them access to complementary skills we have in other studios.
GamesBeat: As far as the road map from here, what does the business look like for you in the coming years?
Langourieux: You can expect two main things from us. The first one is to see us associated with co-development on bigger titles. We’re going to take on more gameplay, game design, and engineering-related responsibilities as games continue to get bigger and more complex. The second thing is having a relevant presence in all the key cities where games are made. I mentioned earlier that we want to be the largest, but we also want to be the easiest to work with. To be easy to work with we need to be in the same time zone. People need to know us and we need to know them, so there’s no friction in partnering with us. We’re working to reduce that friction, because we started as a group based in Asia, and we now have to make sure we’re a group that’s very close to you. I wouldn’t say in your neighborhood, but very close to your neck of the woods.
GamesBeat: Have you had to change a lot because of remote working requirements and the pandemic?
Langourieux: We were hit first, because we have our largest studios in China. Because China reacted so fast, though, we also recovered the fastest. By April 2020 our studios were back to work. The lessons were learned quite fast and applied to the other studios, which were able to move to working from home fairly rapidly due to the lessons learned by the Chinese studios. The negative impact was absorbed quite easily.
Today the situation is–we still have studios in China that are working in the office. I’d say normally, or in the historic way. All the other studios in Vietnam, in Europe, in North America are essentially working from home. Like most of our clients, we’re in the mode where we have to figure out how this situation is going to evolve. Our position on this is that we have to be pragmatic and flexible. We’re giving flexibility to our staff. If they want to work in the office on a voluntary basis, they can. We’re always being careful and ensuring that the teams spend quality time together. If people aren’t coming to the office, we try to make sure that the teams are coming together. We’re not setting any policies in stone. We realize that as long as the pandemic is ongoing, things will keep changing every month. That’s why we have to be pragmatic.
We don’t see an impact, a major impact, on our output. We’re able to deliver. We wouldn’t be able to deliver growth if there was a major impact. We just observe that it’s more difficult to polish titles than it was before with this remote work situation. Complex issues are more difficult to resolve when you do it remotely. We have many examples of that.
GamesBeat: Is that turning into something like–are games taking longer to make in general? Does this console generation have some unique characteristics about it? It sounds like people moved into making games for this generation faster than the last, but it’s still taking longer to make games. I notice holes in the launch schedules because a lot of games have been delayed. Last year Microsoft didn’t have that many marquee titles, while this year it looks like Sony doesn’t have that many. A lot of good games are coming around February. Is it this added layer of difficulty because of the pandemic?
Langourieux: Yeah, I think it’s entirely that. If anything, this new generation of consoles is more compatible with the previous one than its predecessor. It’s easier to work with. The tools and the tech are similar. There’s less of a technological jump, I’m told. I can’t testify myself. I don’t code. But I’m told that the jump is not so high compared to the previous time. These delays are more about the difficulty of collaborating remotely, at the creative level and at the polishing level.
GamesBeat: Are there some categories here that are starting to look very interesting to you, or that you think might be overhyped? I think of things like NFTs in games, AR and VR, the metaverse. All these things that are very popular subjects to talk about, but I wonder if that’s resulting in actual work being done.
Langourieux: Objectively — not in terms of opinion, but in terms of work — VR is still driving work for us. NFTs, no. The metaverse and bigger online games in general, yes, that’s also driving a lot of work as studios are looking for new activities, new gameplay to give to an existing community inside an existing game.
GamesBeat: I talked to Brendan Green about his giant project after PUBG, this Artemis project. He said that he wants to build this huge world, and it’s an interesting mix of human game design, machine learning, and user-generated content. It’s all these different levers that can produce a gigantic world and fill it up with interesting things. I thought that was an interesting way to look at things designers can control relative to how big their projects can be.
Langourieux: There’s certainly a large enough audience, enough gamers spending time in games, that we can look for those kinds of innovative ways to add content. Systems that don’t just depend on game creators, but also rely on AI or rely on user-created content. It’s an extremely interesting move.
GamesBeat: When you talk about the metaverse, what kind of things do you see people having in mind there? Are they building connected worlds, or just building very large worlds that can carry that name?
Langourieux: When we spend a lot of time creating gameplay, designing games, there’s more time spent adapting real-world activities. Having gamers interact through a digital version of real-world activities. There are well-known examples like music or sporting events. We see efforts across any kind of human activity.
GamesBeat: Almost more like the Niantic view of things, with games like Pokemon Go?
Langourieux: We have a company in France called United Nations. They want to build an online democracy, where people get to vote and decide where a virtual country goes. That’s an example of re-creating political activity in a digital way. It’s not very far from there to some of the economic activities or political activities that some MMOs would like to embed in their games.
GamesBeat: That seems like one of the more interesting parts of your business, that you get an insight into what a lot of game companies are doing, what trends they’re putting a lot of manpower behind.
Langourieux: Yes, although to be honest, the projects we work on are fairly segregated. I don’t get to see all the games, and none of my teams get to see all the games the group is working on. We could probably do a better job at analyzing what’s happening across the industry. But we’re spending more time solving our clients’ problems and delivering what they expect for their gamers than transforming what we see into predictions or analysis of what’s going on in the market.
GamesBeat: How much of the business might be games versus non-games for you? Is film in particular a big area for you?
Langourieux: We’re still doing a bit of work on movies. Historically we’ve had ILM as a client. We love them and they love us. We’ve learned a lot from that relationship, and they seem to find some value in working with us. That’s continuing. But it’s more the exception, because the rest of the business is solely focused on games.
For a while we wondered if it would make sense to extend the know-how that we’ve built with game engines into other industries. We see the efforts from Unity and Unreal to go into other industries. But there are still so many opportunities in the games business, and our people want to make great games. Trying to go into different industries might be more of a distraction than something useful for the business. Right now we remain almost solely focused on games.
GamesBeat: Is there a particular way you like to describe this whole category you’re in, this sub-industry?
Langourieux: External development of core content, or triple-A external development. That’s what we’re focusing on. We’ve found it varies. Not every venture investor understands games in general. Even if they do, they don’t necessarily understand how the value chain works. Baring is interesting because they were an early investor in NetEase. They also invested in Giant. As we speak they hold investments in 14 technology services companies. It gave them an interesting eye as far as understanding our business, as well as having good ideas about how to keep improving the business based on what they’ve seen their other investments do successfully. We’re very fortunate to have this big fund with us. It’s a $20 billion fund based in Asia. We’re very lucky to have them as partners, I think. Time will tell.
GamesBeat: It’s one of the different things about the game industry now, the types of investors that are willing to come in.
Langourieux: For a long time our clients would tell me, “Oh, you’re going to get acquired by X, Y, or Z.” I can see that many of our competitors have been acquired by game publishers. With this investment, we’re trying to make a statement that there is another way. There’s a way to remain independent and build a group which has solid legs, which can have a real use, but also independence from the big game publishers. That’s my dream. A lot of the team members are happy that we’re able to reaffirm that independence and our focus on games.
GamesBeat: I do wonder about the different flexible models that companies have right now. Having this layer available helps so much, it seems, with changes in plans or changes in workloads. Companies can be flexible about their development schedules.
Langourieux: In theory, yes. But I think there’s not enough of us external developers. Today we hardly represent five percent of the workforce for our biggest clients. We’re making an impact, but there’s still a lot of room to make a bigger impact. It’s going to require us to make bigger investments, maybe some of our competitors as well, and scaling up before that flexibility you’re thinking about is really very significant.
We’re going to get there. The industry is maturing. Other industries have done that. Every industry has more clearly separated creation from production and specialized tasks. There’s no reason why the game industry doesn’t go in that direction as well, at least to a reasonable extent.
GamesBeat: Do you think something like the Hollywood model, where people just work on projects and then disband, might happen?
Langourieux: We both know that we’re too dependent on technology. The way gameplay is created requires so many iterations that I don’t think the Hollywood model is the right model. I think we have to invent our own model. There is a model where more flexibility is possible, and is also necessary. It’s part of the answer to crunch. One reason crunch happens is because you have the same team working on different phases of the project. Creation, production, finale, and polishing. If you could have more flexibility during these more time-intensive phases, in theory you would significantly reduce the need for crunch. It’s not that easy, but there’s something that can be done around bringing more flexibility into how games are made.
On technology, by the way, one thing that happened with COVID, it forced us to do more collaboration in the cloud. The good thing about that is having the pipeline in the cloud gives you more technology-driven flexibility around how you make games. That could also have a positive impact as far as the pressure on teams.
GamesBeat: I was wondering about your unique perspectives on both crunch and how technology is making teams more efficient. Those seem like separate but related questions.
Langourieux: On crunch, we work in a world where the work we do is more precisely defined than the world that our clients work in. It’s easier for us to better control crunch. To give one element of data, what we measure indicates is that we have an average of one hour extra per week of presence above the legal presence time in China, which is 40 hours. So it’s 41 versus 40. That’s reassuring, because it doesn’t mean we’ve totally removed crunch. We do have some. It’s isolated on some teams. But it shows we’re able to control it.
It’s certainly more difficult for our clients, who are under very different pressures. I don’t think our model can work everywhere. But it’s definitely something we pay a lot of attention to.
GamesBeat: Do you see much need to generate talent in parts of the world where we haven’t seen it as much before? Places like Africa, the Middle East, or other regions that are less known for game development.
Langourieux: My real fight is to generate talent as far as women in the talent pool. This is where the real deep talent pool of the future is. When I see that the industry as a whole is less than 20 percent women–games are now played more or less 50-50 by women. That shows there’s a lot that can be done in this area. We’re currently at 30 percent women across the entire group. Getting to 50 is going to be super hard, but I can see how we can get to 40.
Rather than looking at other parts of the world, my first priority as far as the talent pool is, how do we seed interest for making games among women in secondary education? How do we speak to university students and explain to them that there is a future for them in games, that there are companies where you can have an interesting job and a good work-life balance? We have a ton of work to do there, but the return on investment should be huge.
GamesBeat: It feels like the industry has to grow beyond some of its sexist roots. We’re still seeing big legal problems related to things like harassment. I wonder if even now that scares off potential talent.
Langourieux: As I said, therefore we have to go back. We have to go and win them back. We have to improve our game. We have to be very active at winning women back.
GamesBeat: You mentioned that you have a history of creating your own game developers, training them yourselves. Is that the way to approach bringing women in as well? You want to convert people into becoming new developers?
Langourieux: Absolutely. We’re fortunate to be in an industry which is growing fast. We all have to do our homework, our preparation work, in recruiting young people and training them up. That includes, as early as possible in the cycle, speaking to women students. Explaining what kind of careers exist for them and why it’s a totally viable career option for them. Our biggest studio was founded by a woman. Some of the best managers in the group are women. We’re trying to leverage them as role models as much as we can to try and get that message across.
But it’s not very different from what you and I knew 30 or 40 years ago. When you started a career in games 30 years ago, your parents would think you were crazy. There was no future in games. What we faced 30 years ago is probably what we’re facing, more than anything, with a lot of young women. We have to reassure them and encourage them to move in. It’s a viable career for women, and there’s a ton of cool options.
GamesBeat: I don’t know if your initial focus on Asia means you’re known better there, but do you find that you’re known equally well in the west now as far as the balance of your work and where your people are based? Is that something you’re trying to change, to have more awareness of the company in the west?
Langourieux: We don’t have a rock star culture. We have a discreet culture. Our clients are the rock stars. We’ve not made a lot of noise. But if you speak to studio heads at triple-A studios in North America or Europe, I don’t think many of them would say, “We’ve never heard of Virtuos.” They’re very likely either working with us or considering working with us. 50 percent of our revenue comes from North America, 25 percent from Europe, and 25 percent from Asia. To achieve that we had to be fairly well-known in the right circles.
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