This article was originally published on August 7, 2026 - read the full issue

By James Batchelor

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."

This article was originally published on August 7, 2026 - read the full issue