Original Release on November, 7th 2023: AI could help video game companies boost engagement and consumer spending, but could also introduce competition by making it easier for new companies to enter the industry.
----- Transcript -----
Welcome to Thoughts on the Market. I'm Matt Cost from the Morgan Stanley US Internet Team. Along with my colleagues, bringing you a variety of perspectives, today I'll discuss how A.I could change the video game industry. It's Tuesday, November 7th at 10 a.m. in New York.
New A.I tools are starting to transform multiple industries, and it's hardly a surprise that the game industry could see a major impact as well. As manual tasks become more automated and the user experience becomes increasingly personalized, A.I. tools are starting to change the way that games are made and operated. Building video games involves many different disciplines, including software development, art and writing, among others. Many of these processes could become more automated over time, reducing the cost and complexity of making games and likely reducing barriers to entry. And since we expect the industry to spend over $100 billion this year building and operating games, there's a significant profit opportunity for the industry to become more efficient.
Automated content creation could also offer more tailored experiences and purchase options to consumers in real time, potentially boosting engagement and consumer spending. Consider, for example, a game that not only makes offers when a consumer is most likely to spend money, but also generates in-game items designed to appeal to that specific person's preferences in real time.
Beyond A.I generated content, we also need to consider the impact of user generated content. Some popular titles already depend on the users to shape the game around them, and this is another core area that could be transformed by A.I.. Faster and easier to use content creation tools could make it easier for games to tap into the creativity of their users. And as we've seen with major social platforms, relying on users to create content can be a big opportunity.
With all that said, these transformational opportunities create downside risk as well. Today's large game publishers rely on their scale and domain expertise to differentiate their products from competitors. But while new A.I. tools could make game development more efficient, they could also lower barriers to entry for new competitors to jump into the fray and put pressure on the incumbents.
Another risk is that A.I. tools could fail to drive the hope for efficiencies and cost savings in the first place. Not all technology breakthroughs in the past have helped the industry become more profitable. In some cases, industry leaders have decided to reinvest cost savings back into their products to make sure that they deliver bigger and better games to stay ahead of the competition. With that in mind, the biggest challenge for today's industry leaders could be making sure that they find ways to differentiate their products as A.I. tools make it easier for new firms to compete.
Where does all of that leave us? Although a number of A.I. tools are already being used in the game industry today, adoption is just beginning to tick up and there's a lot of room for the tools to improve. With that in mind, we think we're just on the cusp of this A.I. driven revolution, and we may have to get through a few more castles to find the princess.
Thanks for listening. If you enjoyed the show, please leave us a review on Apple Podcasts and share Thoughts on the Market with a friend or colleague today.
What Global Elections Mean for Markets
Inside Japan’s Economic Transformation
Special Encore: The Curious Connection Between Airlines and Fashion
Spirited Debates Around Our Midyear Outlooks
Why an ‘Everything Rally’ Is Still Possible
Why TMT Bonds Are Underperforming
European Economic Outlook: Decidedly More Optimistic
Global Questions About the US Elections
Midyear European Equities Outlook: In the Sweet Spot
Midyear Credit Outlook Favors Moderation
Midyear Housing Outlook: Is Home Sale Activity Picking Up?
Midyear US Economic Outlook: Continued Resilience
Midyear Cross-Asset Outlook: Bullish Possibilities
Midyear Economic Outlook: Reasons for Optimism
Seeking Better Value in Emerging Market Debt
Get Ready for a Summer Travel Boom
The Narrow Scope of US Tariffs on China
Lessons from Retail Success Stories
Spring IMF Meetings Spark Cautious Optimism
How Mexico’s Elections Could Change Global Markets
Create your
podcast in
minutes
It is Free
The emPOWERed Half Hour
Now, What’s Next?
Access and Opportunity
At Scale: A Sustainability Podcast