The gaming industry is the largest global entertainment category. There are more than 3 billion gamers on the planet. PWC estimate the total market size to be $227 billion in 2023 – ca. 10% of the entire entertainment and media market worldwide – and expect it to exceed $310 billion by 2027. Gaming today is economically already five times the size of the cinema industry.
Gaming is an increasingly dominant form of media. People spend more time watching gaming content (e.g. on YouTube) than they do watching Netflix. Games like Fortnite serve as community platforms for millions of users. In-game advertising, primarily in mobile games, is one of the largest revenue drivers in this >$220 billion market. Some of the most successful recent movies and TV series are based on Gaming IP, such as Super Mario Bros. and The Last of Us.
Unsurprisingly the gaming industry has always been at the forefront of digital technology advancements. The expansion of mobile gaming, the rise of online gaming platforms and cloud gaming services made games more accessible to a larger audience. AR/VR are expected to further expand the category. However, the rise of generative AI might be the most impactful technology trend in recent gaming history.
Understanding Generative AI in Gaming
Generative AI is a subset of machine learning technologies capable of generating new synthetic content, including text, images, videos, code, or 3D assets, that is on par with human-generated output. In the context of gaming, these creative capabilities can span (1) the creation of in-game assets, such as textures, landscapes, or items; (2) the design of new characters, including personalities and backstories; (3) the generation of narratives, including dynamic character dialogues or evolving storylines; (4) the production of sound and music.
On a fundamental level, generative AI will impact the games industry in two ways: On the more evolutionary side, game designers and artists can now within minutes create high-quality creative assets, that would otherwise take days or even weeks to produce, strongly increasing efficiency of games production. According to Bain, video game industry executives believe that within 5 to 10 years, AI could manage more than half of the game development process. On the more revolutionary side, integrating generative AI capabilities into games directly and in real time – for example to create more realistic NPC (non-player-character) behavior in response to player input – will unlock a plethora of novel mechanics that go beyond our current imagination.
Overall, generative AI is lowering barriers of entry to create high quality gaming content. Creative boundaries will continuously be expanded, and Gamers can expect increasingly personalized experiences.
AI startups in the space are driving both aforementioned waves, targeting both established game developers as well as gamers directly: For example, while Leonardo.AI is a generative AI platform designed to revolutionize content production for game developers, Character.AI is a consumer platform with ~ 180 million monthly visits that offers customizable AI companions – including characters from existing games or movies – with distinct personalities and tools for users to create their own experiences. Another AI platform that leans into the user generated content (UGC) side of gaming is Hidden Door, a Netflix-like platform for interactive fan experiences in the worlds of the users’ favorite books, movies and tv shows. With the technology of Hidden Door, it only takes a few hours to bring new world to life. Players can have infinite adventures, but those adventures are controllable by the original creator of the world, he is playing in. As a creator, you can define rules, behaviour and characters, but it is social, you are doing this with your friends. It’s a completely new social roleplaying experience with an ever-increasing engagement. Games no longer need to be fully pre-created, but will be created the moment players see them. And this will make games better as they will have parts the original gaming studio might not have thought of.
Shift Towards Creative Gaming
UGC is not a new phenomenon in the gaming industry. Games have evolved from simple, linear gameplay to complex, open-world environments that encourage exploration and creativity. The rise of UGC in games has marked a shift from passive consumption to active creation within gaming communities. Early examples include modding communities and custom level designs, where players used tools provided by developers to create new content for games.
Platforms like Minecraft and Roblox took UGC to new heights, offering players not just tools to create, but entire ecosystems where their creations could live, be shared, and even monetized. These games highlighted the potential for player-driven innovation and established a model where players are also creators. This not only extended the lifespan of games but also fostered a deep sense of community among players.
The advent of generative AI has the potential to revolutionize UGC in gaming by providing players with more powerful and accessible tools for creation. AI can automate complex processes, reduce the skill barrier, and inspire new forms of creativity, making it easier than ever for gamers to bring their visions to life. Most importantly, generative AI will enable UGC to go beyond pre-defined limitations of a gaming environment or platform, including creative assets, gameplay mechanics, characters, or storylines, that were not pre-defined.
In this new paradigm, games are not just entertainment but platforms for expression, innovation, and community. Generative AI is set to play a crucial role in this transition, empowering gamers to explore the limits of their creativity and redefine what it means to be a creator in the digital age.
Impact on the Gaming Industry
The decrease in production costs, coupled with reduced skill requirements for game development, will inevitably lower the barriers to entry into the gaming industry. This democratization of game creation is expected to spur a surge in the establishment of new game studios and an increase in the volume of games released.
Furthermore, because of the lower barriers of entry, it is likely that borders between gaming and other media types and creators increasingly blur. For instance, to keep readers engaged with their works, book authors may create accompanying gameplay experiences that take place in the world created in their works of fiction, without licensing their IP to a major game studio.
Generative AI is set to usher in a new era of gaming by enabling the creation of entirely new game genres that were previously unthinkable. We can anticipate the emergence of games that offer unprecedented levels of interactivity, personalization, and narrative depth. Imagine genres that blend seamless storytelling with evolving gameplay mechanics, creating experiences that adapt uniquely to each player.
Despite the exciting prospects, it is important to recognize that we are still in the nascent stages of integrating generative AI into gaming. Two significant hurdles—computing power and legal issues—pose challenges to the widespread adoption of these technologies. First, the computational demands of running generative AI models are substantial, requiring robust hardware that can process and generate complex content in real time. Second, the legal landscape surrounding the use of generative AI in media production is still unclear. Issues such as copyright infringement, especially when AI models are trained on copyrighted content, present complex challenges that need to be navigated carefully. As the industry continues to evolve, addressing these limitations will be crucial in unlocking the full potential of generative AI in gaming. As Hidden Door’s co-founder Hilary Mason put it at the DLD conference 2024: “It is the most exciting time in the gaming industry!”