For years, the gaming industry seemed to be an unstoppable juggernaut, with revenue rising as increasingly immersive games and mobile gaming exploded.
However, as we enter the mid-2020s, there are growing signs that the industry is entering a plateau.
After a pandemic-driven boom in 2020 and 2021, global gaming revenue declined in 2022. This contraction is replaced by modest growth of just 0.5% in 2023, taking the global gaming market to approximately $184 billion, according to the data Data comes from Newzoo.
While still an impressive number, it’s nowhere near the double-digit percentage growth expected by the industry.
The slowdown is more pronounced in mature markets such as North America and Europe, where key industries such as consoles and mobile games are approaching saturation.
Mobile gaming revenue, which once drove continued industry growth, actually declined in 2022 and is only now starting to stabilize.
However, stagnant earnings are only part of the story. Despite slowing growth, the cost of developing top-tier AAA games continues to soar.
Budgets for big franchises like “Call of Duty” and “Grand Theft Auto” now routinely exceed $300 million. Some games cost nearly $660 million to develop and market, a figure that would have been unimaginable just a decade ago.
These ballooning budgets force studios to play it safe, relying heavily on established franchises and proven formulas rather than taking risks. Innovation is giving way to iteration.
There’s also evidence that people don’t enjoy games as much as they once did, with enthusiasm for game releases falling from a 3.4/5 in 2014 to a 2.9/5 in 2021.
Even the popularity of the latest CoD and FIFA games seems to be waning. While we’ve recently witnessed historic releases like Elden Ring, it took about five years and over $200 million to make. This is a once-in-a-lifetime game, not the best of any year, as has been the case until the 2020s.
The human toll of this financial crunch is also becoming increasingly difficult to ignore. The pace of layoffs has accelerated, with more than 10,500 game developers In 2023 alone, more than 30 studios will lose their jobs.
Meanwhile, the industry is grappling with a growing wave of labor activism as workers resist the notorious “crunch culture” that has long plagued game development.
The invasion of independent musicians
Amid the tensions at AAA studios, independent developers are making a greater impact in the industry — in stark contrast to mainstream game development.
In 2024, independent games will Occupying five spots in the top ten Reached the highest grossing list on Steam. Games like Palworld (budget $6.75 million, sold 25 million copies) and Enshrouded resonated with gamers, demonstrating the potential for indie games to achieve the same commercial success as AAA titles.
The surge in indie games is part of a larger trend, with the market share of indie games on Steam growing from 25% in 2018 to 43% in 2024.
Even in a year when AAA movies are highly anticipated, such as 2023’s Baldur’s Gate 3 and Spider-Man 2, indie game revenue remains stable, indicating a strong and growing audience for these games.
The rise of indie games reflects a growing interest among some players in novel experiences and creative risks.
While AAA development typically focuses on established franchises and proven formulas, indie developers push boundaries and try out new ideas.
At the same time, tools like Unity and Unreal Engine make high-quality game development easier, and digital marketplaces like Steam provide a great platform to find an audience. Many indie games have found success through viral social media marketing, surpassing the traditional marketing strategies of major studios.
Building on this momentum, AI will further tip the balance of power in the games industry and redefine the nature of creativity in game development.
By automating and streamlining the design and creation process, AI will further level the playing field, allowing small teams or even individuals without technical expertise to create competitive gaming experiences.
Artificial Intelligence Paradigm Shift
The potential of artificial intelligence to disrupt games has been discussed for decades, but the prospects are no longer just theoretical.
recent breakthroughsuch as Google’s GameNGen and deep thinkingthe elf, Give us a glimpse into the future of AI-driven game design.
GameNGen can generate fully playable levels of classic games like DOOM in real time, while Genie can build interactive 2D environments from simple images or text prompts.
Although the industry is still young, these breakthroughs are part of a long-term trend of AI-driven gaming innovation.
The journey began with early milestones, such as IBM’s Deep Blue, which defeated world chess champion Garry Kasparov in 1997. Deep Blue’s victory is a landmark moment that demonstrates the potential of artificial intelligence to excel in rules-based strategic challenges.
Fast forward to 2016, and we saw another major leap forward with Google DeepMind’s AlphaGo. This artificial intelligence system mastered the ancient Chinese game of Go, known for its immense complexity and reliance on intuition. By defeating world champion Lee Sedol 4-1, AlphaGo showed that artificial intelligence can tackle areas once thought to be the exclusive domain of human intelligence.
Researchers David Ha and Jürgen Schmidhuber published in 2018 world modelshows how artificial intelligence can learn to play video games by building an internal model of the game world.
One year later, deep thinkingAlpha star Demonstrated the power of reinforcement learning by mastering the complex strategy game StarCraft II and even competing against top human players.
GameNGen represents the cutting edge of the field today, having been trained on actual DOOM gameplay footage, allowing them to internalize the game’s mechanics, level design, and aesthetics.
It then uses this knowledge to dynamically generate novel levels with coherent layout and gameplay flow.
Instead, Genie uses base models to generate interactive environments from freer inputs such as sketches or descriptions. With training in a variety of game genres and visual styles, Genie can adapt to create content across a wide range of aesthetics.
Behind the scenes, these AI systems are powered by deep neural networks, which themselves are becoming game engines, capable of generating complete, playable experiences from the ground up.
Essentially, the game world is created within the AI system itself, not through traditional programming techniques, but through Deep neural networks learn game design rules, patterns, and structures. SecondBecause the game world is generated by neural networks, it has the potential to be more dynamic and responsive than traditional gaming environments.
The same network that generates the world itself can also be used to simulate NPC behavior, dynamically adjust difficulty, and even reshape the environment in real time based on player actions.
With AI handling the heavy lifting of world building and level design, the optimism is that developers will be free to focus on higher-level creative decisions, such as creating art, concepts, and storylines.
While jobs will be at risk, artificial intelligence is certainly going to be a major boost that the gaming industry is looking for.
Empower players and disrupt business models
The real revolution will begin when these AI tools are put directly into the hands of players.
Imagine a world where gamers could imagine a game with a few simple prompts and start playing immediately.
Want to blend the neon-drenched cityscapes of Cyberpunk 2077 with the frenzied combat of DOOM Eternal? Just describe it to the AI and watch your idea come to life.
This is a vision for the next few decades, but in the near future, artificial intelligence will enable players to create and customize simpler games to their own unique preferences.
For example, players can use AI tools to create platform games in which they define the abilities of their protagonist, the types of enemies they face, and the style of environments they traverse. Or they could create a puzzle game where they set a difficulty curve, a visual theme, and even the types of puzzles encountered.
The industry is no longer limited to the creative direction of professional game designers, but can be shaped by the collective creative input of millions of gamers.
Additionally, as AI game creation tools become more sophisticated, they could enable a new generation of “prosumer” game creators – Players who blur the lines between consumers and creators.
This bottom-up, democratized approach to game creation could fundamentally change the power dynamics of the gaming industry. We could see the emergence of a more diverse, player-centric gaming ecosystem, rather than a top-down model where a few large studios decide what types of games to make.
Platforms that offer AI tools for creation and curation will boost the technology side, taking a cut from sales of user-generated content or charging for access to premium features.
Of course, realizing this industry vision is not without significant challenges. Issues such as content moderation, intellectual property rights, job substitution and revenue sharing all need to be faced.
However, the wheels are turning. As technology continues to evolve, we can expect to see more and more examples of artificial intelligence that not only aids game development, but fundamentally reshapes the face of gaming.
