TLDR:
The gaming industry is undergoing a radical systemic transformation.
My hypothesis: Individual game creators armed with AI tools, open-source software, and access to decentralized networks will compete effectively with large traditional game studios.
Contents:
Introduction
1. The Traditional Game Business Model
2. The Impact of Networks
3. The Rise of User Generated Content
4. Three Disruptive Forces
5. Artificial Intelligence
6. Advice for New Developers
Conclusion
Introduction
I believe the video game industry is undergoing a profound transformation, reshaping how games are created, distributed, and experienced. This isn’t just a matter of layoffs and restructuring.
Computing is being upended by not just AI, but also the reimagining of networks and fractional ownership.
To my students - as aspiring game developers and enthusiasts, understanding these changes is crucial for navigating the future landscape of interactive entertainment. Those who adapt and predict where the industry goes will be at a distinct advantage while legacy players will need to adapt to catch up.
1. The Traditional Game Business Model
The video game industry has historically operated on a straightforward model:
Large companies invest substantial capital to produce games, which consumers purchase. This generates revenue that funds future projects.
Crucially, even after purchase, intellectual property rights remain with the game company—consumers buy a license to play, not ownership of the game's content or characters.
This model has enabled the growth of gaming giants and the creation of iconic franchises. The long-term value lies in the intellectual property itself, not just individual game sales.
However, technological advances and evolving consumer expectations are increasingly challenging this foundation.
2. The Impact of Networks
Internet connectivity has fundamentally altered the gaming landscape.
Network game systems have matured into new dynamics to both game development and player interaction. These networks, ranging from social platforms to interconnected gaming ecosystems, have enabled the rise of massive multiplayer online games and live service models.(1) Networked companies operate more like a SaaS.
Companies not only develop games but also maintain extensive server infrastructures to support online play. A game purchase often includes access to evolving multiplayer experiences, regular updates, and ongoing support.
However, this networked model has also increased the complexity and cost of game development and maintenance, requiring companies to factor in long-term server costs, continuous content creation, and community management.(2)
3. The Rise of User-Generated Content
User-generated content (UGC) represents one of the most significant shifts in recent years. Games like Minecraft and Roblox have demonstrated the immense potential of empowering players to become creators within game ecosystems. This trend has blurred the lines between developer and player, creating vibrant communities and extending the lifespan of games far beyond what was previously possible.(3)
The UGC model has proven particularly effective to drive growth for companies that have successfully implemented it. However, UGC has not demonstrated that it is an effective monetization strategy. (4)
Roblox, for instance, has built a significant portion of its business model around user-created content and experiences. By allowing “developers” (often no older that 13!) to create and monetize games within their ecosystem, Roblox has fostered a self-sustaining content creation engine while taking a percentage of the revenue generated through their Robux virtual currency system.
Despite Roblox's massive scale with over 380 million monthly users and nearly $4 billion in annual revenue, the platform struggles with profitability due to its high cost structure. The company faces a fundamental challenge where growth often leads to higher costs - As game industry expert Matthew Ball has succinctly put in his writing - Roblox generates significant cash flow due to stock-based compensation practices, its core business model currently spends about $138 for every $100 in revenue.(5)
These challenges are also evident in Fortnite, (6) and other massive live service models. Essentially this means, the game industry is without a capitalist-centric business model. Most large technology firms are looking to similar revenue shares, as opposed to charging for monthly SaaS based models.
The meteoric rise of gaming during the COVID Pandemic era may have shown fantastical revenue, but returning to normal consumption has revealed structural issues with the business models in general. (7)
Couple this with three major technical trends, and the democratization of the development pipeline, we are on the cusp of something incredibly huge.
4. Three Disruptive Forces
Before we get to Artificial Intelligence specifically, I wish to cover three emerging trends that promise radical disruption to the gaming landscape:
Disruption 1 - Open Source
The rise of high-quality, free, and open-source tools like Blender for 3D modeling and the Godot game engine is democratizing game development by reducing barriers to entry for aspiring developers. (8) But open source is effecting elements of the gaming industry beyond software.
Industry innovator Valve exemplifies this trend with the Steam Deck, which demonstrates the potential of open-source technology in gaming hardware. Unlike traditional gaming consoles that rely heavily on proprietary systems, Steam Deck is built on Linux and a variety of open source technologies. (9)
This success could signal a significant shift in gaming's future, as Valve has shown that investing in open-source infrastructure can create experiences rivaling proprietary systems. The model is particularly powerful because the integration of Proton solved one of Linux gaming's biggest challenges—Windows game compatibility.(10)
While this approach could inspire other companies to embrace open-source solutions and lead to a more diverse and innovative gaming ecosystem, challenges remain. Open-source projects often struggle with monetization (11) and make it difficult for companies to maintain exclusive intellectual property rights.
Disruption 2 - Blockchain (Decentralized Networks)
While blockchain technology and cryptocurrencies have faced legitimate concerns about misuse and operate in sometimes “ambiguous regulatory territory,” (read: crime) they show tremendous potential for introducing new economic models to gaming. (12)
The future of gaming content creation mirrors the evolution of bedtime stories—a shift from rigid, controlled narratives to fluid, interoperable experiences. Just as a parent can mix Spider-Man with Darth Maul in a bedtime tale, blockchain technology could enable gamers to freely combine and trade user-generated content across different gaming environments, breaking down the traditional barriers of copyright and corporate control that have restricted creative freedom in gaming.
The convergence of accessible game development tools with blockchain-based ownership systems could democratize content creation in unprecedented ways. While platforms like Roblox have begun this transformation, decentralization takes it further by enabling true ownership and interoperability of digital assets. (13)
Consider the months spent leveling up a character, collecting weapons, and customizing your experience in a game. Players invest significant time and energy into these digital assets—investments that deserve real ownership rights rather than temporary licenses that can be revoked at any time.
Disruption 3 - Affordable Hardware
The decreasing cost of powerful computing hardware, coupled with innovations like 3D printing and affordable microcontrollers (Arduino, Raspberry Pi), is enabling unprecedented access to hardware-based projects. This democratization extends beyond gaming into robotics and automation, creating an emerging ecosystem of accessible technology.(14)
I parallel this to the 1970s Homebrew Computer Club. Just as that group helped spark the personal computing revolution through accessible technology, today's hardware democratization allows enthusiasts to build sophisticated systems at home for the price of a gaming PC. These distributed computing networks enable complex automation systems that were previously available only to well-funded organizations.
This accessibility, combined with low-code platforms, is creating a new class of "everyday roboticist." There will be many non-technical individuals who gain access to powerful AI capabilities through affordable hardware. Nvidia’s Jetson Orin Nano, for example, retails for $249 dollars! (15)
The skills developed in this space naturally complement game development—3D modeling, real-time simulation, and engine development apply equally to virtual worlds and physical ones. This convergence suggests that as we democratize virtual world creation, we simultaneously enable innovation in practical, real-world applications. (16)
However, like open-source software, hardware democratization faces challenges with traditional business models. While innovation flourishes, sustainable monetization remains difficult, pushing creators to explore new distribution and revenue models.
These disruptive forces—open source software, decentralized technology, and affordable hardware—are challenging the traditional centralized model of game development and distribution.
But there's an even more transformative force on the horizon, one that promises to accelerate and amplify all of these changes…
5. Artificial Intelligence
Beyond the now-familiar AI tools for generating images, audio, and video, development itself is being transformed by AI coding assistants like Codium and Microsoft's Copilot. (I did a prototype here.) With major game engines like Unreal and Unity inevitably incorporating these systems, we're approaching a future where developers will primarily communicate their creative vision to AI agents that handle the technical implementation.(17)
But the explosive innovation will be the decentralization of AI. AI capabilities will become more localized—running efficiently on personal devices rather than requiring cloud infrastructure.
A particularly promising development in this space is the emergence of open-source projects like EXO, one of GitHub's most popular recent repositories. EXO is democratizing access to AI computing power by allowing everyday devices to work together as AI processing clusters.(18)
This approach parallels how the Steam Deck demonstrated the potential of open-source gaming hardware. EXO and similar projects show how ordinary devices—phones, tablets, and laptops—can be unified into powerful AI processing clusters without requiring expensive specialized hardware. With these tools freely available on GitHub, we could be approaching a cambrian explosion of decentralized development.
This technology could revolutionize game development by enabling individual creators and small studios to run sophisticated AI models locally. Teams could handle content generation, character behavior, and dynamic storytelling using their existing devices, without relying on expensive GPUs or cloud services. (20)
The implications are profound: independent developers may soon create experiences that previously required the resources of large studios.
6. Advice for Aspiring Developers
Ultimately, this is just a hypothesis. As of January 2025, blockchain gaming has yet to find a real working title, and AI is still finding it’s footing as a viable development tool.
However, the gaming industry's future workplace will likely look radically different from today's landscape. We're moving from a model dominated by large, centralized companies toward a more decentralized, network-based sharing economy.
For those looking to build a career in this rapidly evolving industry, several key strategies emerge:
Embrace emerging technologies: Stay informed about developments in AI, blockchain networks, AR/XR and other cutting-edge technologies. Understanding these tools will be crucial for innovation in game development.
Master IP and licensing: As the industry moves towards more decentralized models, understanding how to protect and monetize your intellectual property will be essential.
Engage with network economies: Participate in online marketplaces, open-source projects, and community-driven platforms. These will be the new centers of opportunity in the content and gaming world. DYOR - many blockchain projects are still experimental and not something you should invest significant amounts into.
Develop a diverse skill set: The lines between different roles in game development are blurring. Being able to work across disciplines – from coding to art to community management – will be increasingly valuable.
Prioritize data protection: As more value moves into digital realms, protecting your personal data and digital assets will become increasingly important.
Stay adaptable! Cultivate a mindset of continuous learning and adaptation. The only certainty in this new landscape is constant change.
Conclusion
The video game industry is changing rapidly - today. Layoffs, AI Tooling, and the emergence of experimental networks are just the start.
The traditional models that have dominated for decades are giving way to more open, decentralized, and community-driven sharing approaches. While this shift brings challenges – particularly for established players in the industry – it also opens up unprecedented opportunities for innovation and creativity.
For those willing to embrace these changes, the future of gaming promises to be an exciting frontier. It's a future where the lines between player and creator blur, where small teams can create experiences that rival those of major studios, and where new forms of value creation and distribution become possible.
Keep in mind, this is just a guess. Do your own research!
But one thing for sure:
The future of gaming is not just about playing – it's about creating, sharing, and reimagining what's possible in a networked, generative future.
If you wish to support my work, please consider subscribing and sharing. This essay has also been minted as a limited collectible. Thanks for reading.
Nye Warburton is a creative technologist and educator who runs generative experiments in the 9th Dimension. This essay hypothesis was adapted from a number of conversations, interactions, and lectures he has had over the last year.
It was edited and co-written with Claude Sonnet 3.5, researched with Perplexity, and finalized with a RAG enhanced version of Llama 3, running locally with the markdown software Obsidian.
For more information visit https://nyewarburton.com
Notes and Links:
1.Networked game systems
2.Expense of game servers
An Important Update about Riot's Future
The following is a copy of the internal message from our CEO.
What's the problem with cloud gaming?
We explore the problems with launching cloud gaming services through an examination of the failure of three specific cloud gaming platforms.
3.User Generated Content
4.Roblox Robux
5.Roblox Analysis by Matthew Ball
Roblox is Already the Biggest Game In The World. Why Can't It Make a Profit (And How Can It)? - MatthewBall.co
With 380MM MAUs, Roblox probably counts more players than the entire AAA gaming ecosystem, is more played than Disney+ is watched, and is starting to rival smaller social networks in scale. But Roblox has yet to profit. How can it become a business comparable to its operating scale?
6.Epic and The Metaverse by Matthew Ball
The Metaverse: And How It Will Revolutionize Everything
The Metaverse: And How It Will Revolutionize Everything [Ball, Matthew] on Amazon.com. *FREE* shipping on qualifying offers. The Metaverse: And How It Will Revolutionize Everything
7.Covid and the Game Industry
Cheap money and bad bets: How the games industry turned pandemic success into disaster
By all estimations, the video game market was expected to contract once the COVID-19 lockdowns ended but even the worst...
8.Open Source Game Development
Godot Engine - Free and open source 2D and 3D game engine
Godot provides a huge set of common tools, so you can just focus on making your game without reinventing the wheel.
What is open gaming?
"Open gaming" describes a set of beliefs about the way people should make and play games.
9.Valve Steam Deck
Steam Deck™
Steam Deck™ is the most powerful, full-featured gaming handheld in the world.
10.Open-Source Technologies That Made the Steam Deck Possible
11.Open Source Monetization Problems
Working in Public: The Making and Maintenance of Open Source Software
Open source software, in which developers publish code that anyone can use, has long served as a bellwether for other online behavior. In the late 1990s, it provided an optimistic model for public collaboration, but in the last 20 years it's shifted to solo operators who write and publish cod...
12. Blockchain Gaming - Unreal Infrastructure for Web3 Gaming
GitHub - G7DAO/web3.unreal: Unreal Engine plugin for integrating with EVM compatible blockchains
Unreal Engine plugin for integrating with EVM compatible blockchains - G7DAO/web3.unreal
(Read: Crime)
Going Infinite: The Rise and Fall of a New Tycoon
Amazon.com: Going Infinite: The Rise and Fall of a New Tycoon: 9781324074335: Lewis, Michael: Books
13.Interoperable Assets and Intellectual Property
14.Accessible Hardware
Buy the Latest Jetson Products
For your development work, get the latest Jetson family of products including Jetson AGX Orin Development Kit, Jetson TX2, Jetson Nano, and more.
Hiwonder PuppyPi Pro Quadruped Robot with AI Vision Powered by Raspberry Pi 5 ROS Open Source Robot Dog (Ultimate kit with Raspberry Pi 5 4GB)
Description Driven by Raspberry Pi 5 and ROS, with 8 coreless servos for high-precision, fast rotation, and strong torque. Real-time posture detection and self-balancing with IMU sensor 100W-pixel HD wide-angle camera with OpenCV for target recognition, line following, obstacle avoidance, face detection ball shooting,
15.Low Code Automation Platforms
n8n.io - a powerful workflow automation tool
n8n is a workflow automation platform that uniquely combines AI capabilities with business process automation, giving technical teams the flexibility of code with the speed of no-code.
Best Low-code App Creation Platform | Zoho Creator
Our low-code platform helps augment your digitization efforts end-to-end, and accelerate application creation and development by 10 times. Try for free.
16.Robotics and Simulations in Game Engines
ROBOTICS AND SIMULATIONS - O3DE
Power your robotics and simulations with O3DE's direct integration with ROS through the ROS2 gem.
17.Agent Driven Development
18. Localized AI Clusters - Exo
GitHub - exo-explore/exo: Run your own AI cluster at home with everyday devices 📱💻 🖥️⌚
Run your own AI cluster at home with everyday devices 📱💻 🖥️⌚ - exo-explore/exo
20.The Generative AI Revolution in Games
The Generative AI Revolution in Games | Andreessen Horowitz
To understand how radically gaming is about to be transformed by generative AI, look no further than this recent Twitter post by @emmanuel_2m. In this post he explores using Stable Diffusion + Dreambooth, popular 2D generative AI models, to generate images of potions for a hypothetical game.
