AI can’t save gaming
And why it might
Look, the reality is that the gaming market is still very healthy. Major titles continue to see growth and all-time-highs in concurrent users and other metrics. Overall industry revenue is strong. Publishers like EA and ATVI scored high 11-figure M&A deals, well over market rate. At the same time there are mass industry layoffs, exploding developer and UA costs, and highly depressed content funding. A vortex of increasing competition, “black hole” top performers, and burdensome costs combined with stagnating consumer spending creates a bleak sentiment over an industry that’s otherwise doing fine at the marco level.
I believe that the future of gaming will be increasingly transmedia and leverage a mix of UGC, AI, and blockchain technologies (often all three) to create powerfully engaging interactive media flywheels. The savior du jour across all verticals (not just gaming), however, is the AI narrative. The sudden investor, startup, and enterprise frenzy around AI is as powerful in gaming as it is in other sectors. AI and gaming are historically intertwined: the first use case of AI was for a game; nearly every game has leveraged AI in multiple forms. The latest focus on generative AI is driving the meta.
As a technology, gen AI has major implications for gaming. And with Google’s recent Genie announcement, there’s even more noise around how AI will either destroy all gaming, or save it.
Here’s the reality as I see it.
Gen AI will very likely (and is):
Speed concept art and overall development cycles
Reduce development costs
Make it easier for more people to participate in gaming content (i.e. UGC)
Open new styles of gameplay (this is the actually cool stuff)
It will also:
Make it faster and easier to make terrible games
Fragment and explode the long-tail market (more games coming to market than ever)
Concentrate value in gaming ecosystems
Those latter points are the things that are currently making the game market as challenging as it is: lots of trash that can’t survive and splits attention and budgets, and big ecosystems owning 80% of the market.
The last bullet is the most crucial risk to the games market. Ecosystems like UEFN, Roblox, Minecraft, GTA, and even casual game aggregation platforms, benefit from a ton of content getting made really quickly. It doesn’t matter how long an individual experience lasts, it only matters how long players remain engaged in the umbrella ecosystem.
Gen AI tooling is going to make it easier for UGC creators to make more content to feed this attention machine, but it’s also going to make it probable that agents within the ecosystem just start making slash-and-burn content themselves, no humans involved. This would upend the current paradigm, where UGC creators are incentivized to make good content themselves so they can benefit from a revenue share with the gaming platform. But if AI agents acting on behalf of Epic just make Fortnite islands themselves, Epic owns all of it.
As I wrote about before, having infinite games, especially infinite, hyper-specific games, is not great for gaming sustainability overall, but it is going to be very powerful for these universes that can shuffle players around easily—as easily as scrolling through Instagram. The individual content doesn’t matter, but the macro attention does. In the end, it’s not influencers who reap the value, it’s Instagram.
From here, a couple things can happen:
The top 1% of games eat even more of the market, crowding out and essentially imploding the long-tail industry
A “slow-gaming” cottage industry carves out a sizable market and offers a successful refuge from the deluge of agent-made nonsense
I don’t think #1 is likely to happen because that would create an imbalance in the force that wouldn’t jive with the fact that user experiences and discovery are increasingly fragmented. The influence of streamers alone here would make it near impossible for only a couple ecosystems spreading short-lived content to take it all. Streamers are major conduits for game discovery and influence, and streamers can’t maintain an audience by switching daily between what are essentially random gaming memes.
There are also other global trends that indicate that the participants in reality #2 have big opportunities. Millennial (to some degree), Gen Z, and younger audiences are driving an analog shift where smaller, physical, artisanal, and more meaningful experiences are seeing huge upticks:
The global tabletop gaming market grew from $12-13B in the early 2020s, with projections suggesting it could reach $30+ billion by 2028-2030
US vinyl sales grew for 16+ consecutive years through 2023
By 2023, vinyl outsold CDs in the US for the first time since the 1980s
Film photography saw Kodak and Fujifilm restart or expand film production lines due to demand
Even though all those things are physical goods compared to digital gaming, my read is that the appetite for entertainment and interaction that exists outside of the big tech cacophony is growing. We also know that indie games are taking larger shares of the revenue pie, despite how challenging that market is.
Ultimately, I think the cards remain stacked against the incumbents and little guys, but this isn’t game over. [Of course, there’s always option #3, as Anthropic reminds us daily, of the very-high-chance that humanity and civilization end thanks to AI. We’re definitely partway there already.]
I don’t anticipate a shrinking appetite for long-form and engaging standalone gaming. It is already plausible for a player to spend 100% of his time in Roblox, given the nimbleness of that engine and ecosystem and what can be created on top. And yet, in practice, many players don’t. They seek games across platforms, various genres, single vs multiplayer. In fact, the biggest risk for these incumbent ecosystems is letting so much gen AI noise flow through, regressing to the mean, that players get bored, burned out, and seek alternatives. Could a shift in digital choices echo Gen Z’s yearning for meaningfully different and tangible physical experiences? On the other side of the fence, gen AI can have a very material impact on creative, innovative, smaller teams, who can now leverage their storytelling or artisanal flair with faster and more robust tools.
I could also be wildly wrong about all of this, but I think the chaos if this technology’s influence on a massive and quickly moving market has as many risks and potential pitfalls for the big players as it does opportunities for the smaller guys.