In an industry defined by shifting sands and fluctuating budgets, the line between "service provider" and "original developer" is becoming increasingly porous. Earlier this year, the release of Witchspire by Envar Studio—a firm historically recognized for its robust external development (ExDev) capabilities—reignited a long-standing debate within the games industry: Is it beneficial for an outsourcing studio to build its own original intellectual property (IP), or is it a perilous distraction from their core mission?
For many, projects like Witchspire serve as a high-fidelity business card, showcasing a studio’s creative vision and technical prowess to potential partners. Yet, for others, the pursuit of original IP represents a fundamental shift in business model that risks alienating the very clients that provide their bread and butter. GamesIndustry.biz surveyed a wide cross-section of the ExDev landscape—including Airship, CodeDev, Code Wizards, Huey Games, Lab42, Pipeworks, Redcatpig, Sumo Digital, Tanglewood Games, and Third Kind Games—to determine where the industry stands on the "Service vs. IP" divide.
The Case for Co-existence: Creative Vitality and Skill Sharpening
For studios like Redcatpig, the Azores-based porting and co-development powerhouse behind titles such as Keo and Hovershock, the argument for internal development is rooted in the human element of game creation.
"It’s incredibly important to work on your own projects," says Bryan Freitas, tech director at Redcatpig. "There’s only so much you can do to make an external project feel like your own. Work on enough of them without your ideas moving forward, and you’ll drift toward demotivation fast. The best work tends to come from people building something they actually believe in."
Building Empathy Through Experience
Beyond morale, there is a technical and logistical argument for internal development. João Toste, art director at Redcatpig, notes that building a game from the ground up provides a "full-cycle" perspective that work-for-hire contracts rarely offer. "When you eventually find yourself in a project with tighter constraints and no margin for error, you already know what those mistakes look like before you make them," Toste explains.
This sentiment is echoed by Mike Sherak, managing director of the art division at Virtuos. For Virtuos, internal experimentation is a mechanism for growth. "It gives us firsthand experience of the complex nature of game development that our partners know all too well," says Sherak. "These projects give us the opportunity to apply learnings and grow our skills."
Lab42, the studio behind A Storied Life: Tabitha, mirrors this perspective. Studio co-director Terry Goodwin emphasizes that the "end-to-end" experience is a vital service offering. "In external development, you rarely see out a single project from concept ideation through to launch and beyond," Goodwin says. "So, naturally, it becomes important to create those opportunities yourself to gain or retain that experience." However, Goodwin candidly acknowledges the financial volatility: "You’re reliant more on post-release success, as opposed to being paid purely by milestones in a work-for-hire arrangement."
Strategic Siloing: The Huey Games Approach
Not every studio views internal IP as an organic extension of their business. Some treat it as a carefully managed, secondary operation. Rob Hewson of Huey Games, which has ported notable titles like Outbound and Deliver At All Costs, adheres to a philosophy of "surviving long enough to get lucky."
"We put our clients and our external development work first," Hewson explains. "That means we have to carefully silo off any internal prototypes to ensure they won’t impact our external services. When we do commit to an internal project, we resource it properly—it gets a dedicated team with a protected budget."
For Huey Games, the internal project is less about brand-building and more about staying grounded in the realities of the client experience. "It’s only when you are making games yourself that you can continue to understand and appreciate the challenges that your clients are tackling," Hewson notes.
The Philosophical Middle Ground: Ownership and Autonomy
James Oates, vice president of Sumo Digital, reframes the debate entirely. He suggests that the distinction between "internal" and "external" is secondary to the feeling of ownership within the development team.
"I’ve seen some of our teams at their most fulfilled working alongside external partners," Oates says. "The key is building a level of trust that gives teams genuine autonomy. When people are trusted to make decisions and influence the outcome, they develop real ownership and accountability regardless of the project’s origin."
Oates further advocates for "creative palate cleansers"—game jams or cross-project knowledge sharing—to prevent the burnout often associated with long-term, high-pressure contract work. By allowing staff to pivot between roles, studios can spark fresh perspectives that benefit their primary client projects.
The Case for Specialization: Why Some Say "No"
Conversely, a vocal contingent of the industry argues that the pursuit of IP is a dangerous distraction that can undermine the trust of partners.
The Pure Service Provider
Stuart Muckley, CEO of the Code Wizards Group, describes his firm as a "100% purebred service provider." Their focus is laser-targeted: backend engineering, data pipelines, and IT infrastructure. "We believe that we need to focus on what we do best," Muckley asserts. "We want to be easy to understand and simple to work with. Being a service provider to game studios is our mission, and central to what we do."
For Muckley, the risk of "mission creep" is too high. If a company attempts to be both a product house and a service provider, it risks losing the clarity that clients look for when choosing an outsourcing partner.
The "Trap" of Intellectual Property
Joe Harford, CEO of Airship, offers a stark warning about the "romance" of owning IP. Having worked on AAA titans like Forza Horizon 6 and State of Decay 3, Harford believes that product and service models are fundamentally incompatible.
"I’d be cautious of the romance of owning IP," Harford says. "For a service studio, it can quietly become a trap. It eats resources, time, and money; it pulls your focus off the service that actually pays everyone. Taken too far, it puts you in competition with the very clients you’re meant to be supporting."
Tanglewood Games’ CEO, Chris Wood, echoes this, citing "divided loyalties" as a critical point of failure. "Once a studio has its own title on the go, its time and loyalties become divided," Wood says. "Your best people are likely pulled onto your own project right when a client needs them. When you bring us in, you get our full attention, and there is nothing else quietly competing for it."
Implications for the Future of External Development
The industry is currently in a state of evolution. While some studios prioritize the "pure service" model to ensure maximum client reliability, others are moving toward a hybrid model. The shift is often driven by the increasing complexity of game development, which demands that service providers understand the entire lifecycle of a title—from prototype to live-service operations.
As Myke Parrott of CodeDev notes, even those currently focused on external work are seeing market pressures push them toward a "full-spectrum" approach. "We’re seeing increasing demand for more self-contained, full-spectrum development teams who can take on entire projects," Parrott says. "Part of that ambition will be to develop veteran-led new IP from scratch."
The Verdict: A Matter of Scale and Culture
Ultimately, the choice to pursue internal IP is not a binary decision between success and failure. It is a strategic pivot that requires:
- Strict Resource Isolation: Ensuring that internal projects do not cannibalize the headcount or budget allocated to paying clients.
- Cultural Alignment: Determining whether the studio’s talent is motivated by the "service" mindset or the "creative" ownership mindset.
- Market Positioning: Clearly communicating to clients whether the studio is a specialized service provider or a creative partner capable of full-scale production.
As the industry continues to grow, the "ExDev" sector will likely bifurcate further. We will see "pure service" providers offering uncompromising focus, and "creative partners" who leverage their own IP as a laboratory for innovation. Both models offer significant value, provided the studio is honest about its limitations and clear about its priorities. In the end, as James Oates poignantly observes, it is not just about who owns the project—it is about whether the team feels empowered to contribute to its success.
