Innovation Answered

Over the years, gaming has been a source of joy, social connection and skill development for people around the globe. Today, it has evolved to become so much more.

By one estimate, the global gaming market was worth $347 billion dollars in 2022. That’s more than the combined revenue of the film and music businesses.¹ And there’s no sign that growth will slow down anytime soon.

To help take advantage of this ongoing boom, investors and innovators are keeping a close eye on three important trends in gaming.

In the days before broadband and Wi-Fi, video games were purchased and played on cartridges, floppy disks, DVDs and other physical media.

Today, thanks to powerful cloud computing services, gaming software is no longer tethered to hardware. Anyone with internet access can stream games directly on their phone, PC, media player or smart TV. This segment of the industry is already worth $5 billion, and rapid growth is expected.²

In cloud gaming, as it’s known, incumbents are leading the way.

Several years ago, Netflix got into gaming with interactive shows: movies and TV episodes whose outcome is decided by the viewer. These efforts led to a proper gaming service, which streams on iOS and Android devices and PCs via web browser. At present, the available titles largely appeal to casual gamers, but Netflix has announced plans to develop a triple-A quality game with industry heavyweights.³

Similarly, Amazon’s Luna streams more than 100 games on a variety of devices, including Amazon’s own Fire TV and Fire tablets, as well as most smartphones, laptops and PCs, and even some smart TVs. To attract a more serious gaming crowd, Luna offers more name-brand titles than Netflix, and players can connect their favorite console controller for a more familiar experience.

With more than 21 million units sold, Microsoft’s Xbox Series X and Series S are the world’s second-most popular gaming consoles. But executives in Mountain View have clearly seen the future. Xbox Cloud Gaming (currently in beta) provides streaming access to hundreds of popular games on smartphones, tablets, web browsers and select smart TVs.

Then there’s NVIDIA. Some may not be aware that the AI giant is a long-time player in cloud gaming. Since its inception as an early streaming platform, NVIDIA’s GeForce Now has grown steadily in both capability and popularity. In recent years, it has become the choice for serious gamers who want to play console titles without the console.⁴

Finally, cloud games may be untethered from dedicated devices, but they still need to be delivered. Amazon’s GameLift is a global network of cloud servers designed to handle multiplayer games at scale; it features AWS’s battle-tested predictive scaling and enterprise-grade security.⁵ Additionally, Azure PlayFab (part of Microsoft) is a suite of managed services that help game developers build from scratch or coordinate seamlessly with other teams.⁶

Few would argue against artificial intelligence (AI) as being today’s most important technical innovation. This is particularly true in the gaming industry, where AI is helping to advance both development and gameplay.

At Electronic Arts, for example, engineers working on EA SPORTS College Football 25 used AI to rapidly render 150 stadiums and lifelike representations of more than 11,000 athletes. At this year’s SIGGRAPH 2024 conference, researchers from EA called for the gaming industry and academia to collaborate more on building high-quality datasets, which are crucial for AI’s growth.⁷‍

Game testing is also benefiting from AI. Once a time-consuming process of trial and error with human players, testing now involves testers using AI-powered bots to simulate gameplay at unprecedented speed and scale. At EA, an AI technique known as imitation learning (IL) helped testers reduce a five-hour training session to just 20 minutes.⁸

Beyond game testing, AI is making games themselves better.

At Rockstar Games, a subsidiary of Take-Two Interactive Software, developers are finishing the sixth installment of Grand Theft Auto, the wildly popular franchise that’s earned $8 billion worldwide. Already the gold standard in “open world” gaming, the next GTA will use advanced AI to create more lifelike non-playable characters, or NPCs.

This year, Take-Two filed patents for AI-enhanced motion capture⁹ and the use of machine learning to create more realistic environments.¹⁰ We can expect to see this technology used across Take-Two’s entire portfolio, which includes 2K, the developer of Borderlands, Civilization and other successful franchises.

Mobile gaming has come a long way since the humble Snake game of the late ’90s. It’s estimated that mobile game revenue topped $140 billion in 2022 and could hit $173 billion by 2026.¹¹

What’s fueling the mobile game craze? So-called “casual” gamers, who fire up their favorite games occasionally and without any intense pressure to compete (think commuters, tired parents, bored children).

It’s fitting that the Apple Arcade has become one of the most popular destinations for mobile gamers. After all, in 2008, it was Apple’s App Store that allowed smartphone users to download new apps without worrying about viruses and other threats.

Apple’s famous “walled garden” is doubly helpful when it comes to mobile gaming. Not only are Apple Arcade games screened for malicious code, but the content can be trusted. There’s little risk that, say, offensive material will be shown to a child playing in the Arcade, and it’s practically impossible for kids to make an accidental purchase.¹²‍

Belief in mobile gaming’s bright future is evident elsewhere. Take-Two Interactive Software acquired mobile game specialist Zynga for $12.7 billion just over two years ago. Since then, the company has held its ground as one of the world’s top mobile game developers;¹³ its titles are downloaded by millions of users every year.¹⁴‍

Just as cloud gaming drives demand for more cloud services, the ongoing growth of mobile games creates an insatiable appetite for faster chips and more powerful tools. This is great news for well-positioned firms.

The Immortalis-G925, for example, is the newest flagship GPU from esteemed chip designer Arm. Based on fifth-generation architecture, the G925 is optimized for gaming and AI on mobile devices. To leverage its latest designs, Arm has partnered with leading mobile game developers to create best practices, debugging kits and optimization tools. The company says its products reach 70% of the world’s population.¹⁵

These are some of the exciting innovations in the gaming industry that continue to reimagine the way people play, connect and learn. Although the gaming industry may have had humble beginnings, it has experienced a true digital evolution that should continue to have a transformative impact on a larger global scale. Advanced Micro Devices CEO Lisa Su summarized it best: “Gaming brings people together.”