AI has the power to make or break the video game industry.
In case you missed it, the dawn of the age of AI is upon us. For the most part, AI is heralded as a force for good. Yet, as we look toward the horizon painted for us by the “Broligarchy,” that bright blue sky reveals itself to be largely set dressing. Beneath the avalanche of news articles proclaiming the transformation of industries for the better lies a negative underbelly. One industry experiencing this keenly is video games, with approximately 25,000 people laid off in the past two years and 30 game development studios shuttered over the same period.
The timing of these layoffs coincided with AI hype and post-pandemic rightsizing in the tech sector. The gaming industry, closely tied to tech, followed suit. However, AI’s role in this phenomenon is more nuanced than a simple scapegoat. The industry is currently in crisis: older gamers are spending less, younger gamers are entrenched in "forever games" such as Fortnite and Roblox, and production costs are climbing even though game prices only increase once per decade. This confluence of challenges has left gaming in desperate need of reinvention. The question is: can AI help usher in this revival, or will it only deepen the industry’s troubles?
As someone who grew up playing video games, I initially thought AI would be a natural fit for the industry, both for creating innovative player experiences and streamlining development. To explore this, I spoke with industry insiders. What I heard was eye-opening and changed my initially hyper-optimistic view of the future of gaming.
Oscar Clark, a veteran with 27 years of industry experience, explained that enhancing the player experience with AI is not as straightforward as it seems. A significant barrier lies in access to player data. Digital platforms like the Apple Store, Google Play, and Steam dominate game discovery and distribution, but they do not share the data that developers need to understand player purchasing behavior. Without this data, the utility of machine learning models and marketing-oriented large language models (LLMs) is severely limited. Developers and marketers are left guessing at the factors influencing a gamer’s decision to buy. This, in turn, makes it difficult to determine how well a game will be received upon release.
On the development side, Nick Phipps, Lead Game Designer at Ubisoft Abu Dhabi, sees generative AI (GenAI) as a useful tool for ideation. In his experience, GenAI tools can spark creative ideas but fall short when it comes to execution, particularly in art and design. He notes that the primary flaw of GenAI is that it can create something that looks good, but it does not understand why it looks good.
This lack of foundational understanding means that AI can become repetitive, producing diminishing-quality outputs over time. Both Oscar and Nick pointed to the issue of copyright, with current AI tools being trained on the work of artists that were never credited for their work, leading to a strong anti-AI sentiment within the industry.
For developers, AI is a double-edged sword. Omar Ahmed, a game programmer at a German educational games company, shared his frustrations with AI-driven coding tools.
“Solving coding problems is a cathartic experience,” he explains. “If AI takes over that process, my role becomes little more than providing prompts.”
When his employer introduced AI coding tools, results were mixed. Half of the team used them to enhance productivity, while the other half avoided them altogether. Omar found the tools unreliable, as the AI repeatedly suggested incorrect user interface implementations within his development engine. The errors wasted valuable time during one crunch period, forcing him to work even longer hours to meet deadlines.
Despite these challenges, startups are banking on AI’s promise. Companies like InWorld.AI aim to enhance NPC interactions, while modl.ai develops AI tools for automated playtesting. These innovations show promise, but results are uneven. Starfield, for instance, uses AI to generate vast, procedurally created planets, but players criticized the game for being monotonous. The lesson here is clear: AI cannot replicate the artistry and intentionality that make games engaging. Perhaps the infinite worlds I had hoped to play in as a child are not as exciting as they seemed at the time.
ElHassan Makled, a game researcher, highlights a more insidious issue: AI is only as good as the data it is trained on.
“If we feed AI a steady diet of average, uninspired games, it will produce more of the same,” he argues. He likens this trend to the “Marvelization” of gaming, where studios churn out formulaic titles that prioritize profitability over creativity. Much like the glut of predictable blockbuster movies, many AAA games fail to take risks or innovate, leaving players disillusioned.
AI has the potential to reinforce this pattern. By analyzing and mimicking current trends, it risks amplifying the industry’s creative stagnation instead of reversing it. What the gaming world needs is not more of the same, but bold experimentation and originality — qualities that AI cannot yet provide.
The data paints a grim picture that supports Makled’s assertions. Global consumer spending on games has been flat since 2022, and the number of gamers in the U.S. has been declining. While AI offers tools to cut costs and streamline processes, it is not a panacea. The gaming industry must be cautious not to rely on AI as a shortcut to address its deeper issues. Large developers like Nintendo seem to recognize this, having announced in September 2024 that its self-developed games will never use AI to maintain the human element of them. They are, however, allowing AI-generated content on the Nintendo eShop.
I posit that AI should be seen as a supplement, not a replacement. It can accelerate repetitive tasks, assist in ideation, and enhance certain player experiences, but it cannot replace the human artistry that defines great games. AI is a powerful tool, but it is not the savior the gaming industry is hoping for. Its potential lies in its ability to enhance and support human creativity, not to replace it. As the industry grapples with economic pressures and shifting player expectations, the focus must remain on originality, risk-taking, and the artistry that makes gaming a uniquely human experience. Without these qualities, the games of tomorrow risk being as lifeless and predictable as the AI tools that helped create them. There will come a time when AI can generate games as good as the ones human development teams are able to make, and that AI-native generations will prefer to play games that they create themselves. For now, that’s still a way off, and with an industry that’s trying to find its purpose again, seems like a goal at the end of a long and rough road.
Youssef Abouelnour (MBA’ 26) is from Cairo, Egypt. Prior to HBS, he studied Electronics Engineering at the American University in Cairo. He spent the past 7 years as a Solution Architect for Emerging Technologies at SAP Dubai. He thinks he has acclimatized to the Boston Winter but hopes it will be over soon.
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