The speed at which artificial intelligence is being used and the quality of the results pose major challenges for users, writes Brice Prunas in his article on finews.first.
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On October 13, 2023, after months of legal disputes with three of the world's most powerful regulatory authorities (the US, UK, and Europe), the US technology group Microsoft finally completed its takeover of the American games manufacturer Activision.
Microsoft had already bought into Open AI and the acquisition of the world's largest publisher of video games helped reinforce its position as the global market leader and pioneer in the field of generative AI (artificial intelligence that generates content).
It was also a welcome opportunity for it to revisit the challenges of AI, particularly generative AI, in the video games industry.
«Generative AI should contribute significantly to the success of this industry»
The global market for video games is gigantic and is expected to be worth $300 billion this year, according to US-based Morgan Stanley. By comparison, the global music market (CDs, downloads, streaming) was worth just $26 billion in 2022, twelve times less! Moreover, the video game industry is expected to keep growing at a steady 4 percent a year until 2026.
That entirely justifies the high investments in the sector to date. Moreover, according to Morgan Stanley, a total of more than $100 billion will flow into the development of new products between this year and 2026. Generative AI is likely to contribute significantly to the industry's success in the following ways:
- Reducing costs and simplifying the development processes for video games (in particular, we believe that the programming and testing phases can be largely automated with the help of AI)
- Developing more customized and sophisticated games. A better quality offering can strengthen player loyalty (more players playing together and willing to pay more are likely to play longer sessions over longer periods of time)
- Better monetization of games, with obvious benefits. Using such tools, the top-ranked industry publishers (Take-Two, EA, Ubisoft, and Activision Microsoft) will extend their supremacy with ever-better games and intellectual property and be accompanied by ever-greater capital intensity.
«Could generative AI cost the major game publishers their intellectual property supremacy?»
According to Morgan Stanley, the combination of these two effects is likely to reduce the costs of developing video games and the associated operating expenses (for example, in the operation of gaming platforms) by 15 percent.
In addition to its advantages, generative AI also has the potential to change the video game industry from the ground up. With the ease and speed with which AI can be used and the quality of the results achieved, generative AI raises a number of questions that pose major challenges for the players in this sector:
- Will this lower the barriers to entry for the development of new games, or will it enable small or new market players to challenge the supremacy of the large (so-called AAA) publishers?
- Will we see a certain «commoditization» of this sector, or could generative AI cost the major game publishers their intellectual property supremacy?
- Will there be a shift in value creation in this industry, to the detriment of video publishers (e.g. EA, Take-Two) and in favor of distribution companies (such as Google, Apple, and Epic)? What would this mean for the future of IT tools such as the «engines» (development environments) for video games (for example Unity, the most important listed player in this sector)?
- In the wake of Microsoft's takeover of Activision, could other game publishers (such as Take-Two or EA) also arouse the interest of tech and media giants? (in the case of French publisher Ubisoft, this does not look likely in the short term after Tencent's recent investment).
Brice Prunas is a portfolio manager for global thematic funds at ODDO BHF Asset Management.
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