Video game companies could unlock billions of dollars in profits by increasingly adopting AI tools to streamline production and create more immersive experiences.
The $22 Billion Profit Opportunity in AI + Gaming
Video game companies could unlock billions of dollars in profits by increasingly adopting AI tools to streamline production and create more immersive experiences.
Key Takeaways
AI could unlock $22 billion in additional profits for the video game companies through lower development costs, faster production timelines and improved productivity. Gaming companies are increasingly using AI for coding, 3D graphics generation and real-time personalization, helping create more immersive and engaging player experiences. Large publishers are well positioned because of their strengths in intellectual property, gameplay design and live operations. But AI could also lower barriers to entry for smaller developers. The rise of generative artificial intelligence marks a turning point for the video game companies, with billions of dollars in potential new profit. The new technology is behind applications ranging from automated coding and 3D graphics generation to personalized user engagement. In fact, Morgan Stanley Research estimates that AI tools could create a profit opportunity of $22 billion for video game companies by lowering production costs and shortening development timelines. “Real-time personalization and AI-driven content generation have the potential to deepen engagement and monetization, while lowering barriers to user-generated content creation,” says Matthew Cost, Morgan Stanley Research’s U.S. Internet Analyst. “Against a backdrop of stable industry growth, AI adoption could materially enhance both productivity and the scope of future game experiences.”
22 Minutes
The amount of time Americans aged 15 and older spend playing video games per day, according to data from the U.S. Bureau of Labor Statistics.
+3% Per Year
Despite growing competition with other forms of media and entertainment, time spent playing video games has continued to increase since 2021.
Innovation
One of the key drivers of the industry’s growth: Major publishers have been investing heavily in complex and sophisticated titles, while emerging technologies are creating new ways to produce and distribute game content.
$22 Billion in Additional Profits
These gains would come mainly from cost reductions. But AI will also help increase productivity and user engagement. As people spend more time playing video games, there will be additional opportunities for monetization, including advertising.
Who Is Best Positioned to Benefit?
Leading game publishers are likely to capture a significant share of the opportunity, given their established advantages in intellectual property, gameplay design and live-service operations. But they will need to successfully integrate AI into their workflows to create new kinds of experiences for users.
Competition With New Entrants
As content creation becomes faster and more cost-efficient, smaller developers and new entrants may find it easier to compete with larger companies. Over time, AI could reshape the competitive landscape by lowering barriers to entry and accelerating innovation. Sign up to get Morgan Stanley Ideas delivered to your inbox. Thank You for Subscribing! Would you like to help us improve our coverage of topics that might interest you? Tell us about yourself.
