The games industry has changed dramatically over the years, with the pace of change only accelerating.
From what started as strictly solo projects to tightly knit in-house teams and now collaborations that span the globe, modern game development has evolved into a sophisticated system of supply chains and specialized contributors.
This transformation has not only reshaped how games are made but also challenges deeply-held assumptions about optimal team composition and production efficiency. After all, what worked well just a decade ago may not today.
Amid this evolution, one area of transformation stands out: the evolving integration of external developers. While many still hold on to outdated beliefs about the limitations of outsourcing and perceived efficiency of keeping everything in-house, the reality is clear—external development isn’t just a natural evolution for games, it’s a strategic advantage, one that other industries have long mastered.
In this article, we’ll explore how game development partnerships first emerged, why they’ve become essential, and how they can define the future success of your studio.
The Film Industry Model
To understand where game development is heading, let’s look at how a much older and more mature creative industry—film—handles production. Credit to Sam Carlisle for an excellent overview on this topic.1
Despite the enormity of their productions, movie studios like Disney or Universal maintain an extremely small core of "above the line" full-time staff—typically the executive producer, director, writer, a few key creative leads, and perhaps some lead actors due to complex contracts. Everyone else? Contractors! From VFX teams to sound engineers, camera operators to casting agencies, 90% of the people who make a movie happen do so as external contributors.
This model works because, like games, films are inherently project-based. But even more importantly, the service industry in film has matured to the point where the world’s best talent is most often found in specialized service studios. Take Industrial Light & Magic (ILM). If Disney wanted to create an internal VFX department, they’d have to compete with a company that handles effects for virtually every major motion picture. Disney can’t beat that, so instead, they hire ILM. These specialized studios have become such deeply entrenched experts that it would be impractical for production companies to try to replicate that expertise in-house.
The Early Days of Game Development
Games are a much younger industry. What started as one-person projects in the '70s and '80s (remember the infamous ET game?) grew to 20-person teams and then suddenly exploded to thousands of people with multi-million dollar budgets, as you’ve no doubt read about recently.2
Electronic Arts was arguably the first major company to tackle the problem of scaling labor through outsourcing. Their initial motivation was straightforward: production costs were exploding, largely driven by the labor-intensive requirements of art assets for increasingly realistic games. EA correctly recognized that by moving this work to regions with lower labor costs—initially India and China—they could significantly reduce overall production expenditures.
And that was it. While the primary motivation was initially cost reduction (and it worked), EA had stumbled into a model that would revolutionize game development, with every single major studio shortly following suit.3
All Fun and Games?
But there was a catch.
Fifteen years ago, remote collaboration tools were primitive by today's standards. There was no Slack, no video meetings, no screenshare. I've heard stories from Call of Duty producers who flew commercial across oceans with suitcases packed with hard drives full of game assets because internet bandwidth at the time was simply too limited.
Needless to say, back then the costs of collaborating with external studios were enormous. This environment created a specific mindset about outsourcing: minimize communication, document everything extensively, and "throw it over the ocean" with crystal-clear requirements and hope it all comes back ok.
The Digital Revolution
Fast forward to today, and several massive changes have transformed how we think about external development:
First, the cost of collaboration has plummeted. In the now remote world of Slack and Zoom, what's the real difference between working with someone internal or external? The communication barriers that once made external partnerships so challenging have largely evaporated.
Second, we've seen an unprecedented democratization of game development tools. Remember when you had to pay seven figures for an Unreal Engine license? Today, professional-grade tools like Unreal, Unity, and Blender are freely available worldwide. This has created a global talent pool that has learned gamedev using the same exact tools as AAA professionals.
Third, games have become exponentially more complex. The days when one person could realistically ship a big commercial game are largely behind us.4 Modern games require expertise across an ever-growing list of disciplines—UI/UX, animation, sound design, and so many more. It's becoming increasingly impractical for studios to maintain all this expertise in-house.
The resulting effects of these macroshifts on external operations happened naturally over time. Even with the difficult collaboration circumstances, studios quickly recognized the enormous benefits of complementing their internal teams with external resources.
From Cost Savings to Strategic Advantages
Beyond cost savings, the flexibility gains of ExDev also solved a crucial problem for studio management: what do you do with all these people between development cycles? You can't just staff up to thousands in production…after all, what should all those people do after the game launches? Exploding team size + unpredictable outcomes inherent to the games business naturally led to the infamous cycle of hiring and layoffs that still plagues our industry.
As ExDev became more and more entrenched in AAA production, studios turned their attention from the question of whether they should outsource, to how can we do it better.
Much of this efficiency came in the form of distributed responsibility: rather than asking an outsource team to make 100 different buildings based on an exhaustively detailed spec, studios began trusting their maturing external partners to simply deliver “a really good” level. Today, external teams consistently demonstrate that they can produce work at the same, or even higher, quality than internal teams, thanks to their specialized expertise and refined workflows.
These factors have not only made ExDev more relevant than ever, it’s changed the entire way studios think about External Development in the first place…from purely cost-cutting to creating a competitive edge.
Where We Are Now
The modern game development landscape is starting to look more and more like the film industry model: a lean core team of highly skilled creatives who own the project's success, working flexibly with specialized external partners who bring the game to life.
Gone are the days of “throw it over the wall and pray it comes back correct.” Modern external teams are now often treated virtually the same as internal teams, with goals and requirements that they own and report on.
Here’s what it all adds up to: if you still think outsourcing just means "cheap and inflexible," you're missing out on a world of talent. Today's games service industry is excellent, and it's getting better all the time. The talent pool keeps growing, the processes keep improving, and the tools just keep getting sharper. Sticking to old views isn't just costing you money—it's keeping you from tapping into an incredible global network of talent that could completely change how you make products.
Looking Forward
The future of game development isn't about choosing between internal or external development—it's about taking a principled approach to how you resource your project to accomplish your business objective with the right mix of core expertise and specialized partnerships. Just as no modern film studio would consider handling all production internally, game studios are learning that strategic partnerships are often the most effective way to access world-class capabilities .
In next month’s newsletter, we’ll talk about this decision making process in more detail, and where studios are finding the biggest production efficiency gains.
1. Sam Carlisle - XDS 2022 | Game Development and the Movie Method
2. Jason Schreier, Why So Many Video Games Cost So Much to Make. Jan 10, 2025 https://www.bloomberg.com/news/newsletters/2025-01-10/why-so-many-video-games-cost-so-much-to-make
Zachary Small, Video Games Can't Afford To Look This Good. Dec 26, 2024
https://www.nytimes.com/2024/12/26/arts/video-games-graphics-budgets.html
3. EA’s leadership in external development also inspired the creation of the External Development Summit (XDS), game’s leading ExDev conference. https://www.xdsummit.com
4. “Largely”… shout out to LocalThunk, ConcernedApe, Lucas Pope and all others crazy enough to build entire games on their own.
