How Xsolla provides developers with a game business engine

Xsolla is a video game powerhouse, but chances are you haven’t heard of it. That’s because the company stays behind the scenes as it provides what it calls a “business engine” for game developers, and it has done so for 15 years.

Xsolla handles more than 700 different payment systems around the world. And it works with more than 1,500 game companies and 2,000 games. While other payment companies focus on larger industries, Xsolla has thrived by focusing mainly on games. That has helped it figure out what developers need to run their businesses and provide the payment and backend services that can make the difference. To date, the company has helped its game partners generate more than $3 billion in revenue across 3,400 games.

Chris Hewish is a veteran in the game industry (most recently with Skydance Interactive), and he joined Xsolla four months ago as president. Aleksandr Agapitov started the company in 2005 to provide resources and tools for smaller developers who needed to access the same kind of services that big game publishers could provide. That includes anti-fraud efforts and user acquisition.

Hewish said the idea is to democratize the business side of games. The company is hiring, and it continues to come up with new services every quarter during the pandemic. I spoke with Hewish about the business. As a developer, he has designed and produced over 50 games generating more than $1 billion in sales. Now he says he enjoys being on the other side of the business, making lives easier for developers.

Here’s an edited transcript of our interview. (I’m going to moderate a webinar with Berkley Egenes of Xsolla on August 13 on the topic of subscriptions and lifelong relationships with gamers.)

Above: Chris Hewish is president of Xsolla.

Image Credit: Xsolla

GamesBeat: What’s a good way to explain Xsolla for people who don’t know about it?

Hewish: We like to call ourselves the “video game business engine.” You already, if you’re making games, have game creation engines, like Unreal or Unity or any number of others. But nobody out there is providing a business engine. The engine that provides all the tools to run your own games business. We do that. We provide a set of tools and services that help our customers operate and sell games globally.

One of the cool things about us, there’s an analogy that some people use internally. We’re the Shopify of games. We provide all these tools and services, but we’re focused only on the games industry. That’s the key differentiator for us. There are other options for some of what we do. Nobody does everything that we do. But with our competitors, none of them are focused just on games. We know the games space. We know gamers and game makers. We cater our tools to their needs.

GamesBeat: How long have you been at Xsolla now?

Chris Hewish: We’re going on my fourth month. Fifth since I started talking with them, but fourth actually working here. It was crazy. It all came together the week that all the voluntary lockdowns were starting. I was in the office for four days before everything got locked down, the mandatory lockdowns. It’s an interesting way to start.

GamesBeat: What was interesting to you about the job itself?

Hewish: I’ve always been on the content creation side. I’ve been doing that for 20-plus years in a variety of roles. This was the first time I jumped over to the B-to-B side, more of a tools and business focus. What was interesting about that is it opened up a whole new section of the industry to me. I’m not going to say I know everything, because nobody does, but I know a lot about developing content, working with dev teams, publishing, all of that, on the individual projects side of things. But the opportunity to work on a much larger scale with all the backend tools and the things that help you run your business is pretty cool. This is the stuff that, in the past, I had worked with vendors on. Now I’m going over to the other side and doing that at scale.

We work with more than 2,000 games and more than 1,000 different companies. That’s a kind of scale and exposure that I never had access to before, when I was on the content side. Maybe I had a slate of a dozen games back at Dreamworks, at any given time. This is a much different insight into the industry.

Above: Xsolla provides a game business engine for developers.

Image Credit: Xsolla

GamesBeat: What kind of tasks and responsibilities do you have?

Hewish: One of the big things, and one of the reasons I was brought in, was coming in to help with internal communication. The company is a multinational with three different offices at the moment, in three different countries. All those offices have grown. The company has seen quite a bit of growth over the past few years. They were getting to a point where the management team, the executive team, needed someone to come in and help them bridge all the communication gaps between the offices, whether it was cultural, or even departmental.

You have a lot of people that have been doing great work, but they’ve been doing it on their own. Now that there are departments building up around them, there’s a natural change in the type of communication, a light touch of structure and process as you go from operating as more of a small, entrepreneurial environment to more of a mid-size company. There is some structure that needs to come into place.

That was a big part of bringing me in. Face-to-face communication has changed. I was initially brought in to do a lot of going to conferences and helping to talk about Xsolla. Not the products, not a sales pitch guy, but how are we positioned as a thought leader in the space? How can we start sharing a lot of insights and learnings that we’ve gained?

Part of the company’s goal is to democratize gaming, meaning we’re providing all these tools and resources that often are only available to the biggest publishers. We’re providing them to all game developers.

GamesBeat: What do some of those tools include? You started with payments, but what have you grown into?

Hewish: We started in payments, and we’re now integrated with more than 700 payment methods from around the world, including cashless payments, credit cards, all that stuff. There’s a whole anti-fraud component that goes with that. We’ve also expanded with a partner network, which is a way for you to partner up with influencers, distribution sites, all kinds of stuff, and run different campaigns.

Developers can generate performance-based campaigns with influencers and distribution outlets, so they get paid based on how they’re performing with you. We have a network of around 11,000 influencers integrated, and we’re plugged into some other networks. We’re currently focused on Twitch, but we’re expanding to other platforms as well.

We have a site builder, which is what it sounds like. It allows games to quickly throw up a website and pull from their Steam page or other platforms that they may already be active on to get all the assets into the website quickly, so that you can start managing your own game site. Then you can sell directly to your players.

We have the Xsolla store. There’s the store on the website, but there’s also the in-game store. You can use us to plug in and stand up your own in-game store, where you can sell whatever you want. Recently, just in the past two weeks, we released an update that allows you to sell virtual items and virtual currency from your store and your website for your game.

Above: Xsolla offloads business matters from developers.

Image Credit: Xsolla

We have a secure login system, so that players can create their own accounts. You can develop that one-to-one direct relationship with your players. Then we also have a launcher, just what it sounds like. You can build your own game launcher with all the cool bells and whistles integrated, such as access to your store, videos, and other games. If you have multiple games you can do a game launcher or a company launcher.

That’s it in a nutshell. We have a lot of subdivisions within there, how these different products turn into solutions for you. We did just release, on the Unreal store and the Unity store, the SDKs for our in-game solution, as well as a plug-in for subscriptions and preorders.

Preorders is a great one. We worked with PUBG back in the day on their preorder campaign. We work with a lot of big partners as well as a lot of small ones. They were able to set up their preorder campaign in less than a day using our plug-in.

Market focus

GamesBeat: All of this is still pretty complicated for small game companies to do. It sounds like there’s still enough complexity in the business that you really do want to offload this from the people who are just making games.

Hewish: Definitely. There are two parts to it. It takes time and resources, and developers are usually strapped for both of those just getting the game itself done. And then there’s the factor of, even if you could do it yourself, keeping it updated post-launch as things change, which they always do, whether it’s new payment systems coming online, or anything that could be changing on the backend in regards to managing your login with your customers, the database side of it — we handle not just that up-front piece, but also the maintenance. That becomes a big cost and time savings for developers. Our goal is to help developers and publishers focus on making great games and providing great experiences to their players. We’ll handle the rest of it.

GamesBeat: Are you limited by territories still, or have you gotten to the point where it’s global?

Hewish: Yeah, we’re worldwide. We can operate in China.

GamesBeat: The 2,000 developers, how does that break down? Are there a lot of companies with just one person that can tap into you, or do you have to be bigger than that to make use of Xsolla?

Hewish: No, anybody can work with us. We do a fair amount of custom work as well for some of our partners, and when you get to that level, that’s more driven by the opportunities. If you’re a solo developer, you can grab our SDKs from Unity or Unreal to get started. You can create a publisher account with us and start integrating a lot of our products off the shelf. When it comes to a lot of the custom work, we have a large team in Russia, where the company was founded. We have engineers over there that do a fair amount of not just new development, but also custom development with some of our big partners.

GamesBeat: As some of these companies grow up, like Unity, are they moving into competition with you?

Hewish: Not yet, knock on wood. Who knows what will happen in the future with those companies? But there so far has been a fairly clean divide where they’re focused on just the tools to make the games, and we’re focused on the tools to do the business side, to sell the games, get them into players’ hands. We’re not exclusionary. Even things like our login system, the launcher, selling your own games, those all happen alongside whatever other business you’re doing. We encourage partners to be as agnostic as they want to be when it comes to their channels. We just give them the ability to create their own direct channels.

GamesBeat: How do you spread across mobile, PC, and console?

Hewish: We’ve been primarily PC-based. We also work with some console partners now. Maybe if they have games that are cross-platform. That’s been a big push recently. Our tools allow you to go cross-platform with all three consoles. We’ve been doing some work with mobile, working with Epic on the mobile front. That’s been good. We have a number of other partners. We haven’t announced it yet, but we’re doing some work with other mobile companies. That has been an area of recent growth for us. We’re primarily PC, then console, and then mobile has been the recent growth after that.

Above: Xsolla handles payments in more than 200 countries.

Image Credit: Xsolla

GamesBeat: What kind of trends do you see? What insights do you get from being in this position?

Hewish: It’s interesting. This something we’ve talked about a lot. We do have a lot of data that flows through the company, but one of the — it’s good for the company, but it makes it hard to directly answer the question. I’m a context guy, so I’ll give you a context.

Some of the trends that we’re starting to see from a macro sense, through our network, it’s much more of a shift to going cross-platform. That’s been the PC domain for a while. You develop a PC game, and then PC developers have been more likely to push cross-platform into console and mobile. Console developers have been in the middle. But the new thing we’re seeing is mobile companies starting to make that shift.

Whether they’re maxing out the market, the market’s maturing, whatever it might be, or they have games that are getting more mature in their life cycle, we’ve seen much more interest from mobile-first companies on, how can they get their games onto PC? How can they migrate over? That’s something where we’re working with some pretty good partners. That’s been a big recent trend.

This has already been talked about in the industry, but we’re certainly seeing another trend in the feature requests we’re getting. Games are expanding to become more of a social network. That’s obviously an already documented trend, but what we see from our partners also supports that. They’re looking at how to get that direct relationship with their players, not just so they can upsell them from a business standpoint, but keep them in their ecosystem and treat it much more like a social network. Keeping players more engaged.

The Netflix of gaming?

GamesBeat: On the subscription side, I’ve heard interesting theories there about the discovery that happens as a result of having the marginal cost of playing a new game at zero. The player behavior changes. They start playing a lot more games, trying out things they would never have otherwise spent money on. That discovery and improved usage then turns into a big benefit of subscription for companies like Microsoft, with Game Pass. Do you see benefits accruing for the game companies that are using subscriptions?

Hewish: We do. The big takeaway, the big data point on that is we’re seeing that people who are subscribers, if you get someone to purchase a subscription with your game, they buy twice as much other content as non-subscribers. That’s interesting to me, because I had initially been thinking — I was with a lot of people in the mindset that subscriptions are a nice ancillary revenue stream, a way to reach part of your player base that isn’t spending, and maybe it’s a part of your player base that doesn’t have the $20 or $30 at any point in time to buy discretionary items. Maybe they have $5 a month they can commit to a subscription. We’re seeing that if you do get somebody to subscribe, and it’s not just your VIPs, but if any player can get in, then they’re much more likely to turn into spenders down the road.

That was the big thing I learned back in the mobile space, when I was doing games there. Once you cross that initial piece of friction, getting somebody to spend in your game, it unlocks the ability for them to spend much more on an ongoing basis. It’s a convoluted way of saying it, but to loop back, subscriptions are another way that developers or publishers can cross that divide from non-spender to spender. However you get someone to be a spender, whether it’s through a low initial purchase or a special offer or a subscription, once they cross over, they’re much more likely to keep spending.

GamesBeat: On cross-platform, I remember the Dauntless people saying that it’s still pretty complicated to pull it off. Sony will let someone buy credits on their platform, but they can’t be spent in the same game on another platform. They don’t want you buying something on their platform and consuming it somewhere else. The rules are still difficult for them to implement.

Hewish: The platforms still have some control over some of these things, but it is coming down. One of the cool things we have is you can offload those purchases outside of the platform. That potentially helps. For the platform holders, you’re right. If you purchase credits, Microsoft doesn’t want to redeem them if the revenue is going to Sony. If it’s items or assets the players already have in their accounts, those are able to travel.

Above: Some of Xsolla’s vital stats.

Image Credit: Xsolla

GamesBeat: Are you still doing investments in indie games through your capital fund?

Hewish: We have what we call Funding Club now. The capital fund went away. It’s a free matchmaking service. We work with a number of different investors, whether they’re individuals or companies or funds or whatever it might be, publishers even, that are looking for games. We work with a lot of developers. We can prescreen stuff for investors and developers. We can give developers advice on how to put a pitch together, what kind of things investors would want to see. Anything we then put into the Funding Club, the partners, our friends in there, they know we’re only going to surface stuff that’s worth taking a look at. It’s a service we don’t charge for.

GamesBeat: I wonder if we’ll get to some kind of next level of payments when things like cryptocurrency and blockchain hit maturity. Do you foresee that happening and changing the business in some way?

Hewish: We already work with cryptocurrency. That’s part of our payments integration. We could easily roll that blockchain support to integrate into things like our stores and the site builder and the launcher. If there are new blockchain products it would make sense to create, and I can think of a few off the bat, in regards to how you handle assets and things like that, we’re positioned to do that. We haven’t at the moment, though, just because there’s no real demand from the market. What demand there is has been satisfied by existing blockchain companies themselves.

Company culture

Above: Xsolla helps developers fight fraud.

Image Credit: Xsolla

GamesBeat: Is there anything else you wanted to talk about today? It’s the 15th anniversary coming up here.

Hewish: It is. We just had it. July 15 was the actual date, 15 years ago. Our founder, Aleksandr, he set up the company in Russia to address what he personally had as a pain point, being able to pay for stuff in games, to buy games. It was painful to do that from where he was in Russia, so he created the first version of our payment system and it took off from there.

I could certainly go into some of the things that, as a company — the things that we’ve learned and applied to our business. Not from a product standpoint, but more like, here are some business values or lessons that guide us, that have helped us succeed. I will say, on the success side of it, since we were founded we’ve had close to — it’s a ridiculous number, something like 200,000 percent growth. It’s been a pretty massive scaling over the years.

GamesBeat: Tell us about it.

Hewish: There are five things that we base ourselves on when we work with our partners today, things that work for us and might be helpful to other companies. The first thing is, be one with your customer. What I mean by that is, as more and more companies move to a digital-first strategy, it’s more important than ever, and you have more opportunity than ever, to develop a direct relationship with your customers. Using data, behavioral analytics, all that stuff has been useful.

We have a real high-touch kind of relationship with our partners. Anybody that works with us, we have account managers. We stay in contact regularly. Be one with your industry. This goes in with that. Not only understanding our customers, but understanding the industry. You asked about why I came over to Xsolla. That was another one of the reasons that there was interest on the Xsolla side, to have me come over.

Invest in your employees. This is something I like about the company, that it takes an approach where — it’s the idea that not only are you benefiting from your employees, what they can provide to you, but what can you provide to your employees? Go with your gut. We also trust our team. If somebody is passionate about an idea, something that they want to do to drive the business forward, then we’ll support that.

These are all very supportive and intertwined with one another, but the fifth thing for us is having solid relationships with our partners. Not just providing value to them, but having good relationships with them. That’s where all of our new products come from.

GamesBeat: How many people are with the company now?

Hewish: We’re around 400 worldwide. We have about a dozen in our office in Seoul, in Korea. We’re close to 50 in Los Angeles. The rest, more than 300, are in Russia at the main office in Perm. We’re expanding. We haven’t announced specifics, but we’re expanding in other places as well.

Managing in the pandemic

Above: Xsolla helps customers generate more revenue through subscriptions.

Image Credit: Xsolla

GamesBeat: Has there been any change in how things get done because of the pandemic?

Hewish: Yeah, for sure. The shift to digital, first of all, went smoother than I expected it would, which is great. The company was supportive and jumped on it quickly.

We had a fair amount of online production and performance-related tools that were up and running. We were in a good place. The elements for us that have required a bit of adjustment are just the face-to-face communication, the brainstorming with the team — that part had to go over to digital. The whiteboarding, the ideation, sharing knowledge, mentoring, whether it was with business development teams or production teams, that stuff all has been impacted.

We’re starting to get into a good groove with it. We went through a bit of a pain point, like a lot of people did, finding that right balance of — initially there were just way too many video calls that took way too long.

GamesBeat: How do you manage it?

Hewish: One of the cool things we do is these asynchronous drive meetings, where we’ll designate different days of the month to focus on different business lines or different initiatives. We create a drive repository of the latest information and materials for that topic, and then people know on that day — they’re part of that project, and they asynchronously, throughout the day, leave comments, leave notes, shoot emails or messages to one another to try to work on whatever that topic is.

The hardest thing for us has just been the loss of real-life conferences. When it comes to the business development side of it, how do you — that’s been a hard thing to replace. We’ve tackled that in a few different ways. One of the things I’ve been working with our business development team on is getting involved in more online social experiences. There’s a lot of Zoom happy-hour things or Facebook groups or whatever it might be. We’re looking for more of these social engagements with people in the games industry, where you’re not even selling to them. You’re just making those connections, developing relationships, and that can lead to business down the road.

We have also been doing our own digital conference. We did Game Developer Carnival. We’re now doing something this week, Indie Craft, which is based in South Korea, where we have our own virtual conference. It’s actually a 3D world you go into. We built it on Unreal. It’s a theme park environment with booths from all the different exhibitors. You can watch video, chat with people, move your avatar around the environment. We’ve created our own solutions to hold conferences virtually, and we’re going to build on that as well.