GG’s 2023 Story of the Year: AI Rocks Gaming Industry

Nearly every video game studio (Web2 or otherwise) has felt the impact of both the rise of generative AI tools and broader industry layoffs that have shaken the gaming industry to its core. And just as many gamers have vocally rebelled against the rise of crypto gaming and NFTs, they’re doing much the same with AI.

McKinsey called 2023 generative AI’s “breakout year” at the same time as the game industry recorded roughly 9,000 layoffs. While it’s impossible to determine exactly how many of these layoffs are due (even in part) to AI’s growing adoption in game development, the correlation has left some industry talent concerned for the future. 

“We expect continued improvement in AI and machine learning to be a long-term, structural tailwind to the gaming industry,” Pitchbook analyst Eric Bellomo told Decrypt.

Staggering layoffs

Game developer Farhan Noor has been tracking this year’s game industry layoffs, and created a chart that shows the largest reductions by firm, as well as a list of over 50 impacted game studios.

Virtually no one in the industry was safe this year, as Epic Games, Unity, Riot Games, Nexon, Gameloft, Electronic Arts, Amazon Games, Ubisoft, Activision Blizzard, and countless others made cuts in 2023.

The five firms with the most layoffs by headcount were Unity (1,165); TikTok parent company ByteDance, which shuttered its gaming division (1,000); Embracer Group (954), which owns a number of studios including Borderlands publisher Gearbox; Fortnite creator Epic Games (830); and Amazon’s gaming division (715), according to Noor’s data. 

After a long year of layoffs, Microsoft’s AI toolkit announcement in November angered many in the gaming industry, some of whom called the tech giant’s latest push into AI “disrespectful and dangerous” to writers, actors, and game developers.

“Even with the best technology in the world, you get to a certain point,” Apex Legends and God of War: Ragnarok voice actor Ben Prendergast previously told Decrypt on generative AI’s drawbacks. “But the receiver of the information, the audience—even if they just know that it’s AI, it’s completely divorced from connecting with another human being.”

Unsurprisingly, most of the voices doubtful of or prominently against generative AI in gaming are the ones who could potentially lose out on jobs in the future because of it.

And such fears aren’t unfounded. This year, game studio Mindark laid off employees, terminating 40% of the company while announcing its generative AI plans in the same breath. Rest of World reported that in China, generative AI models are already taking game illustrators’ jobs—and new opportunities for human game illustrators have all but vanished.

But most studios cited other reasons for laying off staff this year. Many called their reduced headcounts a “restructuring,” while others admitted that overspending or “market headwinds” made it difficult to keep staff around.

“The spike in layoffs witnessed in 2023 is closely coupled with the over-hiring during COVID-19 and subsequent pullback in consumer spending rather than near-term AI adoption,” Bellomo told Decrypt.

Generative AI’s meteoric rise

A September Bain & Company report predicted that generative AI in game development will go from being used less than 5% of the time to over 50% of the time within the next five to 10 years.

While many creative game industry workers are understandably concerned about this possibility, tech giants, blockchain gaming studios, and game industry executives that could stand to profit from generative AI are continuing to advocate for its use. 

In October, a Google Cloud gaming executive Jack Buser called generative AI “a path to boundless creativity” and urged game studios to use it. Like Microsoft, Google is positioning generative AI in game development as a tool that can help developers—not take their jobs.

“With generative AI, those that create games—designers, developers, artists, marketers, and more—can revolutionize how they work, and expand the range of experiences they can deliver,” Buser argued.

Epic Games CEO Tim Sweeney has also taken a more supportive stance toward AI, affirming that Epic won’t ban games from its game launcher and store just for using the tech. That’s a break from rival Steam’s approach, echoing the way the two stores have also approached the use of blockchain tech and NFTs.

“We shouldn’t assume all generative AI is terrible or infringing,” Sweeney said.

The Bain report found that the majority of game industry executives surveyed don’t view generative AI primarily as a cost-cutting—or headcount-reducing—tool. Instead, executives see this new strain of AI as a way to speed up the development process and potentially increase studio output.

“2023 was a mixed bag for gaming,” Horizon’s Head of Strategy and Partnerships Sam Barberie wrote on Linkedin. 

Barberie—who works for the crypto firm that published the NFT trading card game Skyweaver and also develops infrastructure under its Sequence banner—sees AI as the gaming industry’s silver lining this year.

“It’s not all doom and gloom. AI proved that it has a place in gaming,” Barberie said, adding that innovations have continued to emerge this year despite what he calls a “dour” investment landscape.

Gamer backlash grows

While some tech executives and game studios praise the use of generative AI, others—especially outspoken gamers—have condemned it. 

In December, Magic: The Gathering devs at Wizards of the Coast announced that they’re banning the use of generative AI for the longstanding fantasy franchise. Despite being accused of using generative AI, the studio has repeatedly placed an emphasis on wanting work created by humans—as opposed to machines or algorithms.

But there’s many other cases of gamers and voice actors decrying the rise of generative AI in gaming. One voice actor urged The Finals game to “reconsider” its use of text-to-speech AI voices. Gamers were also mad about the Firmament game’s use of generative AI, calling it “plagiarism,” a “betrayal,” and “extremely disappointing.”

And the company behind the game marketplace DriveThruRPG released a statement this year saying it would not be accepting any content “primarily” written by a generative AI tool because it wants to prioritize “human creativity” instead.

Who’s using AI—and why

This year, Activision Blizzard, Square Enix, Roblox, Ubisoft, Xbox, NCSoft, and Nvidia are among the largest gaming-focused firms that are implementing generative AI. Smaller blockchain games, like AI Arena and Land Labor Capital, are using it too. 

“AI can create personalized gaming experiences,” Josh Jones, co-founder and co-CEO of blockchain game Cornucopias, told Decrypt. “In-game assets [can] essentially offer more utility to users—that is, they’ll be more interactive and engaging rather than static and boring.”

“We are using AI daily,” Wyeth Ridgway, CTO at Unioverse studio Random Games, told Decrypt. “Once you start, it’s hard not to see all problems through the lens of, ‘How will AI make this better?’”

Ridgway—who’s worked in design and engineering on over 100 games for properties like “Pirates of the Caribbean” and “The Lord of the Rings”—called generative AI “a huge net-win for human productivity.”

The CTO explained that AI tools like ChatGPT are better at translating for games than options like Google Translate because AI language learning models (LLMs) are far better at understanding context.

“For decades I’ve worked with translation companies where we have to submit Excel sheets for translation, and turnaround takes days. That whole industry is suddenly gone, as far as I’m concerned,” Ridgway said.

Random Games is also using generative AI tools to iterate the look of game assets alongside a human concept artist. The studio is also deploying AI to check for user profanity in chat boxes and shorten longer text summaries, among other tasks.

While Ridgway is optimistic about generative AI’s role in shaping the future of gaming, he also fears that “unethical uses” could arise, suggesting a theoretical example of his child establishing “a deep relationship” with an AI-powered persona.

“It’s both depressing in how effective it is, yet liberating and rewarding,” the CTO said of AI. “I think in most cases, AI will simply make us better at making games.”

Edited by Andrew Hayward