You may not have heard about Keywords before, but it has become a big player behind the scenes in external game development. Headed by CEO Andrew Day, the company acquired 11 game development services companies in 2017. It has amassed more than 5,000 employees
Keywords was founded as a game localization company in 1998 in London, and it went public in 2013. It now has facilities in 42 locations in 20 countries and four continents. The company provides just about any services for games, including art, engineering, audio, localization, player support, and game testing.
The biggest game companies use Keywords to launch their games in multiple languages on the same day across the globe. It tests those games to make sure that they work properly across platforms and regions. In November 2017, it acquired Seattle-based VMC Consulting, which was the biggest North American company testing video games.
I caught up with Day at the recent Game Developers Conference to talk about the global market for game development. Here’s an edited transcript of our interview.
Above: Keywords Studios CEO Andrew Day.
GamesBeat: Tell us about Keywords.
Andrew Day: What Keywords is today isn’t what Keywords was. We started as a localization company, actually, localizing business software. Then, as games started to be localized, we found a niche for our services where we could marry the highly creative, immersive localization of storytelling in games with a more tool-based localization that’s used in business software. We created a bit of a niche of ourselves.
We became specialized in language services for video games, both the translation and testing of video games. Video games are made simultaneously in multiple languages, unlike film and TV, where it’s sequentially produced. Games are particularly complex, and often very story-driven, very rich in content. Cultural adaptation for games is complex. It’s a very specialized skill set. That’s where we started.
We saw that the games market as a whole was very imbalanced and a little bit fragile. You have very large global publishers, and they’re relying on hundreds of small companies for outsource services, just like Keywords in the 2000s. It seemed very imbalanced. You don’t see that in other industries. Hundreds of small companies, country by country, service line by service line. We thought this couldn’t continue. There would have to be some consolidation. If you’re a large company and you want to act more strategically with outsource providers, there’s nobody to engage with, nobody of any scale or sophistication, with the business acumen and transparency and financial strength and so on.
We set ourselves up to lead the consolidation in the industry, bringing together all these capabilities, all this expertise, and making it available to our clients. None of what we do can we use ourselves. Everything we do is for our clients. When we’re buying another company, adding it to the Keywords family, we’re not taking that talent for ourselves. We make that talent available to all the video game companies out there.
We’re providing a framework, a financial backbone. We’re using our management tools to control what we’re doing so we can be efficient. High utilization rates. Decent levels of profitability. Good investment.
Above: Keywords develops across all platforms.
GamesBeat: How big are you now?
Day: We’re now 5,000 people around the world in 42 locations. We’re about a third in Asia, a third in North America, and a third in Europe. We have, for instance, about 700-800 people in China, 250 in Tokyo, 350 in Manila, and 500 in India. Here in North America we have about 900 people in the U.S., and then about 1,500 in Canada. The U.S. people are in Seattle, Los Angeles, and Raleigh, North Carolina.
GamesBeat: So even in some high-cost areas?
Day: Yes. What we do—we’re not an offshore outsourcing company. The skill sets are very specific to video games and to interactive content generally. It’s more about the skill than it is about finding low cost centers. You can’t find the talent. You can’t find people that can translate games into 30 languages in India. You have to be where the talent is. Also, where we can, we want to be near our clients.
We’re able to do a two-footed approach. We have one foot on the west coast and one foot in India or China, which helps manage communications, manage cultural expectations on things like art creation, and still get some benefit of lower costs. But it’s really not about cost so much. That’s important, but more important is the efficiency, getting it right the first time, and the overall service. If, through delivery of what we do, we put a lot of burden on the client side to manage it, it doesn’t add up.
GamesBeat: The platforms that are your most popular, are there any in the lead there?
Day: We’re agnostic to platform. About 30 percent of our business is on mobile and the rest is on PC and console. VR/AR is also an important component of what we do. But it’s really across the board. We don’t differentiate internally in terms of how we manage the business by hardware type. Obviously we’re investing in all the new hardware as it comes out so we can test and develop on it. We’re authorized by all the major platform holders to get development kits and test kits and so on.
Above: Keywords acquired 11 companies in 2017.
GamesBeat: I wrote a story about the people who made Cuphead out of Canada. They’re a small company, two dozen people at peak, and in the last six months they got into a deal with a company called Illogika and doubled the size of their team. It sounded like an emergency move, but not the usual way something like that would happen in your business.
Day: There’s all sorts of business in our business. There is the situation where a client’s got a problem and they need help and we can dig them out. But more of it is planned. We have reasonable visibility. Our clients share with us their slate of work for the coming year. They let us know what they want us to help them with so we can plan ahead a bit. That’s important for everyone.
The repeat business is very high. There’s a lot of trust in this. Games are very complex. Not many organizations out there have worked on these big games before. When you get into that highly agile process, which game development is, it doesn’t suit a lot of more structured companies. I can imagine, if you come from software services generally and you find yourself in the game space, you’d think, “My God, what is this about? I’ve never seen something quite so chaotic.”
GamesBeat: I’m reading Jason Schreier’s book right now.
Day: Yes, yes.
GamesBeat: He found a bunch of stories from game development, whether it’s Naughty Dog at 500 people or one guy making Stardew Valley for five years.
Day: Lots of different ways of cracking the same nut, potentially.
GamesBeat: A lot of crunch.
Day: Well, this is the other thing about the industry. The way I look at it, the industry has only been around for 30-odd years. When people started to make games they had to do everything themselves, internally, because there was no other way of doing it. A lot of our clients have built their business in that same mode. They haven’t had time to stop and think. “If I were starting this business today, would this be the way I’d build it?”
They describe themselves as publishers, but they actually have all the means for production as well. They’ve become very large organizations. There must be a lot of overhead in managing a large testing department, or a translation workflow where you’re dealing with 10 or 20 or 30 different vendors to make 20 different language versions of a game. People perpetuate those behaviors. You can understand, in part, why they do that.
But our whole idea is we’ve now created the scale and geographic reach such that, for those clients that want to, they can offload some of those activities on us and focus on what is strategically important to them, which is always about the IP, commercializing the IP and being able to tweak the player experience to make that better, more engaging, keep the player for longer. If you keep the player longer you have the chance of getting more revenue. The trend toward games as a service has been very fast, very demanding, adding a lot of complexity to our clients. One way they can manage some of this complexity is to offload some of the services side, which might now look like a distraction.
GamesBeat: Have you developed any technology on that front in the way that PlayFab or GameSparks did?
Day: We have some of our own tech. We’re always developing tools and stuff internally that enable us to handle assets better, to produce art audio pipelines that are more efficient, and automated testing.
GamesBeat: Is your focus more on the development side than running a game once it’s launched?
Day: Yeah, the live ops stuff—I would love to be more involved in data analytics and predictive analytics. What we do is player support. We have a large team of customer support people that are passionate gamers themselves, that can resolve a lot of issues on first-time contact with players on behalf of our customers. We have chat bots and stuff available to us as well where that makes sense. We can use a bit of AI and tech, but a lot of what we do is people-oriented. The technology that we adopt, such as machine translation and so on, that has a role to play, but ultimately, to make a really beautiful, compelling game, I don’t think you can get away from humans.
GamesBeat: Would Streamline Studios be another comparison, then?
Day: Yes, I know Streamline. They’re a competitor of ours in a single area. They would compete with us in art creation. We have more than a thousand artists working for most of the large game companies, creating art assets for their games. Some of that we go right into the fully integrated pipeline. We have access to the game engine and we can do all the animation and art delivery right into the engine. Some is it still more along the lines of, “Can you produce 300 characters?” And then the client integrates them. But increasingly we’re becoming more integrated in the production pipeline.
GamesBeat: It seems like there are some specialists out there in the space, like Scalefast. They handle that e-commerce section. And then there are the other live operations companies. It’s all a form of outsourcing, but in bits and pieces.
Day: Yeah, that’s the whole point. It’s all in bits and pieces. You get lots of small companies that are probably good at what they do, but it’s still quite hard for our clients, the big game companies, to partner with these small companies. For us, the ability to do—we have seven service lines, for art, engineering co-development, audio, functional testing, localization testing, translation, customer support.
Being able to do all of that scale to support triple-A games, the world’s leading mobile games—a lot of it is this relentless cadence of games as a service. That becomes really hard for people to do. But we’ve been living with that for a while now in the mobile side of the business.
GamesBeat: I remember that MZ had their real time translation process. They built a real time infrastructure for mobile games. I wonder how well that could work. Their goal was to have a worldwide game, with people talking to each other in real time across cultural lines.
Day: We work with MZ and do that translation for them and so on. I wouldn’t—it’s daily and weekly.
GamesBeat: It’s not that easy.
Day: No, it’s not something for machines. It depends what you’re doing. You can use machine translation for certain types of content, where it’s not about how enjoyable is so much as just being able to make it understood. If you have a really good machine translation engine, of which there are not many, you can make a lot of content understandable. But actually making it enjoyable is a completely different challenge. I think it’ll be a while before that sort of vision can become a reality, where you can take all content in real time and make it consumable in 20, 30, 40, 50 languages.
Above: Keywords has offices in the U.S. as well for external development.
GamesBeat: With localization you’d hope you could get there are some point. Kate Edwards always talks about the “culturalization” work she has to do, though.
Day: Yes, I know Kate. We live with that every single day. That’s exactly what our guys do. The colors that you choose, or the symbols you have on walls in the background, all of that. Our guys are experts at that. That’s part of our role, to try and prevent our clients from making gaffes.
GamesBeat: What kind of specialists do you have in that area?
Day: We have subject matter experts. Depending on what type of game it is, we’ll have people that understand the history of the game, the backdrop to the game, the specific nature of things like tanks or battleships or whatever is part of the game. If it’s a children’s game we’ll have different people working on that type of content compared to working on a shooter. It’s very adapted to the content itself. You can’t treat all content the same. It’s all very different.
Increasingly now, we’re able to develop—we can do full game development. We can do co-development projects, where somebody like Ubisoft has five of their own internal studios working on Assassin’s Creed Origins, and a Keywords studio working on that game as well. We can work alongside them doing one specific aspect of the game.
GamesBeat: I’ve talked to a few iOS developers here about the difficult of developing on both iOS and Android. They’re choosing to go first on iOS and then have someone else handle the Android version, because of the fragmentation of the Android hardware.
Day: We do quite a lot of that. It’s not just iOS and Android. It’s also PC to console or console to PC, or back catalog stuff that’s going to be remastered for current generations.
GamesBeat: Do you do a lot of work for Switch?
Day: Yeah, we do Switch ports as well. Obviously there’s a lot of interest in Switch, a lot of Switch porting going on. It’s a very large, very vibrant, very demanding environment out there. I think we’re going to continue to grow. We’re growing very strongly and organically, just from repeat business with our clients, getting a bit more share all the time as we prove ourselves.
Acquisitions are also a big part of the Keywords story. We acquired 11 companies last year. The year before that it was eight and the year before that it was another eight. This fragmentation is enormous. Companies like to be part of the Keywords family, where we can relieve some of the financial pressure of running your own business and bring a lot more work to their door. At the same time, our clients like it because we’re able to put some financial footing underneath these companies worldwide, making them more solid and more easy for our clients to trust and partner work in more engaging work.
Above: Keywords
GamesBeat: How are financial results?
Day: Our revenues for this year are expected to be round about $308 million (250 million euros). I have to be careful here. I think the consensus from the analysts is around $43 million (35 million euros) in profit margin. We’re publicly traded in London. But of course those numbers are before any acquisitions. Any acquisitions we make this year will affect those.
It’s interesting, when you try to look at Keywords and the trajectory. It’s quite hard to follow. When you’re making as many acquisitions as we make, you have to try to get to the underlying revenues and profits of the business, rather than just the publicly quoted figures. At least on a historic basis. Looking forward, the numbers that you see exclude the effect of acquisitions. You have to add however many, six to 10 acquisitions that we might make during the year.
The good thing about it is that everyone who’s sold their business to Keywords has made some money, but they’ve stayed at Keywords, and they’re probably working harder than they’ve ever worked before. It’s not because we’ve got any handcuffs on them. They’re enjoying it. It’s a very exciting place to be.
We’ve gotten to this point from just being one of these small service providers in a single geography. We employed 50 people and had revenues of 3.5 million euros. Now we have a market capitalization of more than a billion euros. It’s growing fast.
Keywords acquired 11 game services firms in 2017 as external development grows