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What Is Causing the Collapse of the Game Development Industry?

Photo by Diego Marín on Unsplash

What Is Causing the Collapse of the Game Development Industry?

By Movieguide® Contributor

A new report from the Game Development Conference revealed that many developers in the industry fear the uptake of AI within companies and blame 2024’s mass wave of layoffs on unrealistic expectations.

While AI seems to be the future of video games, solving the problem of rote NPC dialog while streamlining the development process, many in the industry now see it as a significant threat to their roles. The 2025 industry report found that 30% of developers believe “generative AI is having a negative impact on the games industry,”  a 12% increase over the year. These feelings are largely fueled by the economic impact they have seen, as one in 10 developers was laid off last year.

READ MORE: HOW GENERATIVE AI COULD SHAPE THE FUTURE OF VIDEO GAMES

The negative impact of AI within game studios is undeniable. However, many within the industry are also reaping the benefits of the technology. One in three developers use AI to streamline their development, using the technology to accomplish tasks outside of their expertise, cutting down costs. This is especially important as 56% of developers are now self-funding a game. While this may seem risky — and it is — many indie games saw success last year, returning millions of dollars to developer teams sometimes as small as one person.

These indie games developed with almost no budget can compete with games from studios that invest hundreds of millions of dollars into them because they focus on a player’s experience rather than pure profit. Similar to Hollywood’s big-budget movies, when major game studios spend millions of dollars on a project, they expect major returns. However, it is not so easy to find success.

For this reason, some companies are pivoting their strategy to simply partner with games that have already found success, rather than trying to develop a hit game from the ground up. Disney, for example, purchased a majority stake in Fortnite last February, looking to cash in on the game’s already-proven success.

Though it has since refocused itself, Netflix took a similar approach when it first began its games service, acquiring IP with a significant following to drum up interest in its new platform. The company has also found out the hard way that you cannot buy your way to success in the games industry. In October, it shut down its major game initiative, Project Blue, instead opting to focus on simpler games built around its popular IP.

In many ways, the video game industry is in a similar position to the entertainment industry as a whole. Many fear that AI is coming to take their jobs, and while low-level work can be streamlined through the technology, those with true skills will continue to outshine anything produced by AI.

READ MORE: HOW AI WILL MAKE VIDEO GAMES MORE REAL


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