By Rashika Singh April 22 (Reuters) - Advanced artificial intelligence tools could help cut down video game developing costs by nearly half, potentially unlocking about $22 billion in annual profits
AI-Driven Cost Cuts May Unlock $22 Billion in Gaming Profits, Morgan Stanley Says
By Rashika Singh
The Impact of AI on Gaming Industry Profits and Development
April 22 (Reuters) - Advanced artificial intelligence tools could help cut down video game developing costs by nearly half, potentially unlocking about $22 billion in annual profits for game makers worldwide, Morgan Stanley analysts said.
AI Adoption in Game Development
The adoption of AI tools to automate tasks such as creating gaming environments, generating dialogue and testing software could help shorten production timelines and reduce costs, helping lift margins over time, the brokerage said in a note dated Tuesday.
Uneven Distribution of Gains
However, it added, gains are unlikely to be distributed evenly across the gaming ecosystem.
Current Market and Investment Landscape
The Wall Street brokerage estimates global consumer spending on video games will total $275 billion this year, with roughly 20%, or about $55 billion, set to be reinvested in game development and operations.
Cost and Labor in Game Development
Typically expensive and labor intensive, game development could become leaner as AI enables smaller teams and faster post-launch improvements, Morgan Stanley added.
Case Study: Grand Theft Auto VI
The scale of modern game development is illustrated by Take-Two Interactive's Grand Theft Auto VI, one of the industry's most anticipated titles, that is being developed since around 2018 - five years after the release of GTA V. It is currently slated for a November 2026 launch after multiple delays.
Beneficiaries and Challenges in the AI-Driven Gaming Ecosystem
"We see value concentrating in scaled platforms and discovery, particularly among companies with proprietary data, IP, and live operations," the brokerage said.
"Biggest beneficiaries may be those who control distribution, data, and engagement."
Key Beneficiaries
Morgan Stanley added that gaming platform and operators including Tencent, Sony and Roblox could be key beneficiaries, while large publishers such as Take-Two, Electronic Arts and Ubisoft, which have the scale to deploy AI across multiple titles, could also benefit.
Potential Losers
In contrast, companies with weaker franchises, such as Playtika and Netmarble may face greater pressure as AI lowers the cost to make mid-scale games, inviting more competition.
Challenges for Game Engines
"Game engines such as Unity and Unreal Engine face a more binary outcome: adapt or be disrupted," the brokerage said.
Beyond Cost Savings: AI’s Role in Revenue Growth
Beyond cost savings, AI could lift revenues by keeping games engaging for longer, boosting spending on add-on content, in-game purchases and subscriptions.
Shifting Focus to Existing Franchises
Rather than relying mainly on new releases, publishers could shift focus to upgrading existing franchises through AI-driven content, cushioning the financial impact, the brokerage said.
(Reporting by Rashika Singh and Siddarth S in Bengaluru; Editing by Diti Pujara)
