The Future Growth of the Gaming Industry May Truly Depend on AI
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Amidst challenges lies new hope, perhaps the most accurate portrayal of the current gaming industry. Entering 2024, major gaming companies like Sony Interactive Entertainment and Microsoft Xbox have begun layoffs, with around 8,000 job cuts confirmed in just three months. The lack of growth across the industry was cited by Phil Spencer, head of Microsoft's gaming division, as the reason for cutting 1,900 employees at the start of the year.
"When an industry's projected player numbers and revenue are expected to decline next year, publicly traded gaming companies need to demonstrate growth to investors. Because if there's no growth, who would hold these companies' stocks? Therefore, costs are often the first area scrutinized. If revenue doesn't increase, costs become a challenge," Spencer stated bluntly in an interview with foreign media. After all, the growth of gaming operations is key to maintaining investor confidence, and when business cannot sustain positive growth, cost-cutting becomes an inevitable option. Since the world emerged from the pandemic, the golden days for the gaming industry seem to have come to an end. According to Newzoo's 2023 market report released at the end of last year, global gaming revenue is projected to reach $184 billion in 2023, a slight increase of 0.6% year-on-year, yet still below the 2021 levels. Newzoo attributes this to a noticeable decline in mobile gaming usage and frequency as more people return to work, while the console and PC markets are gradually reaching saturation, with players' demand for high-quality games remaining unmet.
This marks the gaming industry's first significant downturn since the Atari crash, ushering in a long-awaited winter. Over the past three decades, the internet has provided the gaming industry with boundless development opportunities and instant interactive platforms, significantly expanding its user base and fostering a series of innovative gaming formats. Leveraging the internet's unparalleled connectivity, online games, social games, and mobile games emerged, catering to users' needs for entertainment, social interaction, and competition, thereby achieving sustained and robust growth. Unfortunately, the internet's own expansion has nearly reached its limits. The gaming industry has effectively tapped into its potential user base, which is undoubtedly the core reason for its sluggish growth. However, game developers also bear undeniable responsibility. In fact, players are willing to pay for high-quality games. For example, 'Baldur's Gate 3', which won the TGA Game of the Year last year, sold over 12 million copies in less than a year after its release. Yet, mainstream game development has fallen into a rut, with the relentless pursuit of graphical fidelity seemingly leading the industry astray.
AAA games were a concept introduced by Western game developers two decades ago to compete with the then-dominant Japanese studios, successfully dragging the latter into an arms race. The essence of AAA games is "brute force for miracles," relying on massive scale and visual impact brought by high development costs—a strength of financially robust Western developers. However, the result of this approach is the skyrocketing production costs of AAA games. Under this system, Japanese studios were the first to fall behind, resorting to rehashing old titles in recent years. Meanwhile, under the pressure of high costs, major Western studios have also entered a phase of formulaic updates leveraging established IPs.
The gaming industry has followed Hollywood's path of repackaging old content, precisely because the hallmark of AAA games is high cost for low risk. Yet, this is a double-edged sword: while it avoids failure, it also stifles innovation. Why does GTA5, released 11 years ago, still frequently top Steam's sales charts? Simply because its gameplay remains unparalleled. Amid increasingly stunning graphics, many games offer repetitive mechanics, and the "annualization" of titles has dulled players' enthusiasm for so-called AAA games. With the rise of AAA mobile games, this trend is now infiltrating the mobile sector, once known for its innovation.
So, how can the gaming industry reignite growth? Producing more high-quality games like Baldur’s Gate 3 is the obvious answer, but it’s easier said than done. Many developers believe that the current industry downturn also harbors new opportunities—2024 might mark a transitional phase where old and new development dynamics shift. Why has the open-world concept devolved into formulaic designs? Because it strikes a balance between corporate ROI and playability.
In reality, the gaming industry’s core challenge lies in its inability to leverage network effects. Most internet products grow by first attracting a seed user base, then scaling up to millions, and eventually billions—think TikTok or WeChat’s team expansions. Gaming, however, struggles to replicate this model. However, internet products can snowball, but games cannot. It's not uncommon to see one game become a huge hit while the next one flops spectacularly. Therefore, maintaining a dynamic balance between the size of the development team and production capacity is a mandatory lesson for all game companies.
Ultimately, the current state of the game industry is still rooted in a 'handicraft workshop' model. But the emergence of AI offers the possibility of industrialization for this industry. For example, at GDC 2024 (Game Developers Conference), Tencent released its self-developed game AI engine GiiNEX. In the past, conceptualizing and creating a city spanning 25 square kilometers would take developers at least 5 days. With GiiNEX's city layout tool, this process now takes just 25 minutes, and even generating a single building requires less than 20 minutes.
Ubisoft also showcased its 'NEO NPCs' at the event, which aims to change how players interact with NPCs in games. Traditionally, NPC dialogues and actions in games were preset by developers based on 'behavior trees.' NEO NPCs, however, enable NPCs to provide unique feedback by considering multiple dimensions such as personality, background, and emotions. This not only gives NPCs 'souls' but also shortens the design cycle for developers. If the game AIs developed by major tech companies don't benefit the entire industry, then NVIDIA's Avatar Cloud Engine will undoubtedly make future game character design much easier. An increasing number of developers are now experimenting with AI in the game development process to boost productivity. As the supply of future games becomes more abundant than it is today, the natural selection process will ensure players have access to more high-quality games, potentially reigniting their passion for gaming.