This week, Knowledge examines changes in the world of co-dev, noting the dual trend of a reduction of large projects while studios providing external work are being involved earlier in the creation process. James Batchelor reports.

Then we speak to Little Chicken Game Company about turning away from work-for-hire after 25 years to release its first original IP, the XSEED/Marvelous-published vampire life sim Moonlight Peaks, to instant success.

Then some K-holing advice in Social Commentary, a first look at Introversion's new project in Extra, and a summary of the new Edge, headlined by Netease's Blood Message.

Co-development is, in many ways, the lifeblood of the modern game industry. Read the credits of any triple-A blockbuster, or indeed many indie titles, and you'll almost certainly find a handful of external companies that have contributed to the game's development. 

But while these studios often sit in the background, they're not so distanced as to be unaffected by widespread layoffs and closures across the industry.  

Pete Murdoch, managing director of Selkie Games, reports his team are seeing "a bit of a lull" in terms of co-dev opportunities, due in no small part to the downsizing of the triple-A scene.  

"We've had a couple of potential projects in the last year that ended up not going ahead, either because the project was cancelled or the studio closed before we could even start on it," he says. 

Jon Gibson, global head of transformation at services empire Keywords Studios, agrees, noting two simultaneous trends: fewer projects are being greenlit, and surviving projects are being scrutinised much harder. 

"This presents real challenges," he says, "and nobody should pretend otherwise. Projects are also running with leaner internal teams and they still have to ship, so the work doesn't vanish, it just gets bought differently. 

"The big change we've seen is behaviour rather than volume. Clients are consolidating, going deeper with two or three partners instead of spreading work across nine, because managing a long tail of vendors carries its own cost."

Co-dev still reduces risk, development time 

Virtuous CEO Gilles Langourieux believes that, despite fluctuations in demand, co-development is becoming more crucial as studios look to reduce costs and accelerate time to market.  

"More than ever, there is a will to embrace a more flexible and sustainable game development model," he says. "Co-dev helps studios manage costs up-front, which can then encourage them to take creative risks and deliver new experiences to players. This reinvestment in creativity is needed for the long-term growth of our industry." 

Just as the wider industry is going through some tumultuous changes, so too is the co-dev sector. 

Gibson believes co-dev is "moving up the value chain"; while such studios were predominantly called in to handle "overflow work" in the past, now publishers are running smaller teams and using partners "as part of how they build, rather than a pressure valve." 

"We're in the room much earlier and we're being handed whole chunks of work: a game mode, a feature, a live-ops season," he says. "And that changes what you have to be good at – you used to compete on capacity and rate, and now it's whether you can maintain quality without supervision and plug into someone else's pipeline without breaking it. More like being a partner than a supplier." 

Langourieux agrees: "Co-dev has shifted from pure execution to a strategic capacity, becoming part of studios' development plans with partners embedded earlier in production. Early involvement allows better goal alignment and faster iteration between studio teams and external devs. This is how we create solutions that best address project needs beyond predefined scopes."

Murdoch observes there has been consolidation within the co-dev sector itself – a prime example being Keywords' many acquisitions in recent years – and that clients are often returning to existing partners rather than bringing someone new up to speed, especially when it comes to service-game projects.  

"It's becoming harder to position yourself as a smaller co-dev partner as a result," he says. "More and more, the projects we've been in discussion about haven't been directly with the core teams, but with another, larger, co-dev partner who are interacting with the core team and then talking to us to fill in their own gaps." 

So, what does the future hold for the co-dev space? Gibson believes we'll see fewer studios doing more work, but with more focus on the two ends of the spectrum. 

"A small, sharp specialist studio will always find work, as will a partner big enough to take big mandates or scope off a publisher's hands," he says. "A mid-sized generalist selling capacity at a decent rate is in a genuinely tough spot, though, and I don't think that will reverse." 

Murdoch sees the rise of non-game industries using games tech – including film, TV and even healthcare – as a major opportunity.  

"My dentist recently did a 3D scan of my mouth using a tool made in Unity – that was neat," he laughs. "Splitting the work across sectors like this is good for stability and longevity, and you might get to work on cool things that may have passed you by with a pure games focus. Which, in turn, is good for attracting people to work, especially with a large number of people who have games-centric skillsets looking for non-games work, by choice or otherwise. I think that's going to help bring some stability to the co-dev studios while the big projects are up in the air."

How AI is impacting the world of co-dev 

Another factor is the rise of AI tools. Companies around the world are experimenting with how AI can improve efficiency and increase their output, theoretically having a knock-on effect on the need for co-developers.  

Langourieux observes that AI adoption varies between markets ("It's happening faster in Asia, but more slowly in the west") and adds that these same tools can potentially enhance co-developers' capabilities "[in terms of] workflows and quality, but not in replacing the expertise of skilled professionals." 

Gibson says AI is "definitely having an impact," as previously paid work can now "be done by a client with an AI tool."  

"But it doesn't take the whole job because generating something is the easy bit. Making it consistent with an art direction, in-engine, performing on target hardware and holding up across 30 hours of gameplay is the actual work," he says. 

The many unresolved legal questions around generative AI also come into play, with Gibson reporting that publishers' legal teams are now "very interested in where things came from": which tool was used, what was it trained on, and so on.  

"Being able to show your working is becoming increasingly more important for service providers, and once the EU AI [regulation] comes into effect, it’ll be mandatory. So that will become a thing that separates studios who've properly industrialised from studios who've just hired a few devs and given them some off-the-shelf AI tooling." 

Murdoch, meanwhile, says his team adopt a strict "no AI" policy, partly due to the "unnavigable minefield" from a legal and contractual standpoint. 

"You can't expect someone to be a repeat customer after you've fed their multi-million-pound project through the Internet Content Woodchipper," he says. "If we're working with someone else's IP, we don't have the right to start mulching it through machine-learning tools, or tacking on bits where the true copyright holder can't even be attributed."

Dutch developer Little Chicken Game Company has spent most of its 25-year history building other people's games: serious titles and work-for-hire across mobile, VR and AR. Moonlight Peaks is its first title built and funded as owned IP.

For chief executive Yannis Bolman, the shift away from client work goes back to around 2017. 

"We said, OK, we're going to do the games that we actually want to make, rather than client projects," he tells Knowledge. A life-sim had been "simmering in the back" of the studio's mind, and when a racing game the studio was developing for a publisher fell through around 2021, the studio decided to move ahead with its own game. The project was born as a surfing-themed life-sim.

"The surfing mechanics weren't quite there yet and didn't really come together," Bolman says. The studio tried several themes before landing on vampires, based on audience research.

"We knew life-sims were mostly played by women, and vampire movies and stories in general resonate really well with that audience," he says. "There's actually a niche within life-sims that wasn't really covered, and people were really yearning for it." 

What followed reversed the usual indie funding story. Little Chicken began posting development footage almost as soon as work started, mainly to gauge demand. One TikTok video went viral, wishlists grew, and, before the studio had secured funding, publishers started approaching the developer rather than the other way round.

"Most times you as a developer have to chase publishers endlessly to get your game funded," Bolman says.  

Landing XSEED and Marvelous 

Among the publishers who got in touch was Marvelous USA, working under its XSEED Games label. Little Chicken had been weighing a Kickstarter campaign at the time; XSEED suggested talking first.

"We were also thinking about maybe doing a Kickstarter or something, and they said, 'Let's have a chat before you do that, because it might also complicate things a bit more,'" Bolman says. 

Little Chicken held parallel talks with other publishers; some balked at its budget. Marvelous's offer, and its portfolio, stood out. "The deal that we got with Marvelous actually was the best of the bunch. Also, looking at their track record and history, they also seemed like the best match."

The deal was signed with Marvelous USA, but the wider Marvelous Group, headquartered in Japan with a European arm, was involved early.

"Once you talk to one, you pretty much talk to all of them," Bolman says. Despite this, Marvelous's Japanese office chose not to publish the game domestically. Marvelous USA instead sourced a separate partner for Asia, Clouded Leopard. 

Bolman describes the relationship as unusually hands-off.

"The vertical slice we had back then gave them enough confidence to say, 'OK, just make this into a full game.'"

Input was limited to guidance on sensitive subject matter and support with story editing: "Little to complain about in how they approached the whole thing and let us do our thing."

The relationship has worked: Little Chicken announced on July 27 that Moonlight Peaks had sold more than 200,000 units since releasing just 20 days earlier.

Holding the game in your hand 

International publishing and marketing wasn't the only positive the Marvelous deal brought to Moonlight Peaks: it also allowed for a Digital Deluxe edition with an artbook and soundtrack (but no disc).

Physical media as a topic has been hard to avoid this year. Sony's announcement that it will stop producing PlayStation discs for new games from January 2028 landed days after the backlash over GTAVI's own physical edition turned out to be a download code in a box. 

A US physical release remains possible depending on how the digital version performs, but will not arrive at launch. Physical retail "always helps with putting eyeballs on the game," Bolman says, but producing and shipping a disc means locking the build two to three months early, time Little Chicken was reluctant to relinquish. Marvelous Europe wanted a physical edition regardless, and Asia, he says, is "still a bit more used to having physical editions." 

Despite the greatly reduced profit margins in physical editions, Bolman remained undeterred.

"As a gamer, and also as a developer, it's really cool to actually be able to hold your game in your hand and have a box," he says. Staff keep asking when their copies will arrive. He ties that directly to the strength of the reaction to Sony's announcement: "You can't really touch [digital], and you can't sell the game, or give it to your friends to try out. I hope physical still stays around." 

Life after the afterlife 

Twenty people now work at Little Chicken, kept within what Bolman calls the studio's "sweet spot" of 20 to 30, avoiding the management layers that come with scale.

Surviving 25 years and multiple industry cycles, he says, has come down to adaptability rather than a defining hit: "Little Chicken is a new company every three to four years." That has meant staying open to work-for-hire when a project is interesting, while building the capability to do owned games too. It's this part of the business that Bolman wants to grow. 

But whether that happens depends on how Moonlight Peaks performs.

"If it resonates with players, there's enough room to grow that into more games, maybe even more types of games within that universe," he says, adding that commercial proof also buys creative freedom for future pitches: "Once you have a certain name, you can more easily get there." 

His advice to developers weighing the same move is to test demand before the game is finished.

"It's good if you start on a project to have that proof in your back pocket, to know that it has a certain potential," he says, mirroring advice given by Prideful Sloth's Cheryl Vance in an interview with Knowledge last week.

"Game developers are hopelessly romantic and in love with their own ideas. The hardest thing is having what you think is a great idea and finding no one cares. But it's valuable to know that early." Putting a project in front of an audience early, he says, "sounds maybe a bit cliché, but I think it really works like that."

SOCIAL COMMENTARY

Highlights from industry chat channels

When 24 Entertainment set out to explore Tang-dynasty-era China through the medium of a particularly violent action game, the Hangzhou-based studio wanted to set it apart from the great many examples of the form that involve people smacking other people in the face.  

In the studio's forthcoming Blood Message, "you don’t go into ten soldiers and just kick their asses," creative director Xingyan Gu tells us. "We want players to take every fight as a life-or-death fight. You don't do those fancy movie moves. It's dirty. You have to struggle, and a surprise can happen in every blow." 

If you caught the demo video from Blood Message's Summer Game Fest showing, you will have seen some of this play out. In Edge 427, out now, we take a closer look at the project, discussing its representation of Chinese history, how it incorporates influences from western productions, its use of continuous shots, and lots more.     

Elsewhere, we investigate the unstoppable rise of the detective game, consider the secret lives of NPCs, and talk to Hangar 13 to discover how it created Mafia: The Old Country. We also meet with French developer DigiXart for this issue's Studio Profile, and revisit Tenchu: Stealth Assassins for Time Extend.  

The Blood Of Dawnwalker, Out Of Words and Hunger are among the forthcoming releases previewed in Hype, while Big Walk, Assassin's Creed Black Flag Resynced and Splatoon Raiders open this issue's review section. Also, naturally, Steven Poole has a run at leading the Reform Party in Trigger Happy.  

Edge 427 is available from UK retailers now and online here. 

We'll be back next week. In the meantime, don't forget to share your feedback with us by email ([email protected]), and follow us via Bluesky and LinkedIn.