The disruptive impact of AI on the middle market video game industry

Oct 02, 2023
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Generative AI Media & entertainment

The gaming industry has recently undergone a major transformation. The North American gaming market has revenues of $100 billion, up from $40 billion only five years ago. Advancements in accessibility, which have widened the audience for gaming, have led to market growth through three channels.

First, mobile gaming has emerged as the dominant force in the gaming industry, accounting for more than half of global gaming revenue. Second, the rise of cloud gaming, which eliminates the need for expensive hardware, has facilitated game streaming. Lastly, cross-platform gaming has also gained traction, enhancing the gaming experience across various devices. 

Surprisingly, the video game industry is more than 60 years old. While some earlier simple machines were created for single-person gameplay on a single computer, Spacewar!, invented in 1962 by MIT student Steve Russell, was the first game playable on more than one computer. Nearly half a decade later, Ralph Baer (aka the godfather of gaming) created The Brown Box, sold to consumers under the name Odyssey as the first home console to be played on a TV. The first decade of video games set the stage for an industry predicated on speed, leading to the development of a variety of consoles and games.

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Today, the video game industry is dynamic and ever-changing, driven by technological advancements, evolving consumer preferences and emerging trends. The most recent significant disruption is the integration and advancement of generative artificial intelligence (AI). This technology has sparked a revolution in the video game industry, propelling its dynamic evolution and fundamentally reshaping the landscape of game development and gameplay. 

Although only in the early stages, generative AI is playing a significant role in moving the video game industry forward, with benefits for developers and players alike.

Developers now can leverage AI to not only expedite the game and content development process, but also enhance creativity and content development while lowering costs.

An example is Roblox, the popular online game platform and game creation system. In February, just a few months after the release of tools such as ChatGPT, Roblox announced an AI-assisted content creation tool for game developers. More recently, John Riccitiello, CEO of Unity, a leading game creation platform where an estimated 70% of all mobile games are built, announced the upcoming integration of generative AI tools Muse and Sentis to assist game developers, slated for availability later this year. This will be another boost for the mobile gaming sector, which has enjoyed remarkable growth, accounting for almost $75 billion of U.S. gaming revenue in 2023, according to Statista.

Though generative AI hasn’t been used to produce full games on a mass scale yet, it is already supporting the development and enhancement of gameplay elements. For example, in No Man’s Sky, a space exploration game by Hello Games, generative AI is used to create unlimited unique environments and creatures.

Though AI will help with game development, the greatest opportunity lies not in the production of games, but rather in the transformation of the in-game experience itself. The integration of generative AI directly into games creates the potential for infinite creativity, boundless worlds and endless variations.

Generative AI offers wide-ranging benefits, allowing developers to do more with less. By leveraging this technology, they can enhance efficiency while creating more immersive experiences, which can increase customer engagement.

As the gaming industry continues to grow, middle market developers must embrace AI tools to stay competitive. By harnessing the power of AI, they can foster innovation and capture a broader audience, ensuring their continued success in the dynamic and expanding gaming landscape. 

RSM contributors

  • Justin Krieger
    Justin Krieger
    Technology, Media and Telecommunications Leader - Eastern Canada

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