Chris Bateman will also be speaking at XP Game Summit 2026, where his session The Innovation Paradox will dive deeper into how studios can respond to industry disruption and continue building successful games.
“What’s happening isn’t the end of games. It’s the end of a chapter. The industry is changing, not collapsing.”
– Chris Bateman, Founder and Chief Consultant, International Hobo Ltd
So you may have heard that the sky is falling. The new generation of Artificial Intelligence is so amazing that it’s going to be able to make games in just a few days, rather than years, and this is going to destroy the videogames industry as we know it. The robot apocalypse has arrived, run for the hills!
Not so fast.
It’s true that the games industry is at an inflection point, but it reached this point before the new AI agents appeared. The ground shifted quietly beneath our feet and the industry changed, just as it did for the arcade when the home consoles arrived and changed what an arcade had to be. But the arcades didn’t die, they adapted, and that’s also the situation this time around. The global market for videogames has never been stronger. What’s happening is a shift in how we make games, and just as the arrival of the PlayStation marked the end of a certain chapter for arcade games, so what’s happening now marks the end of a chapter.
The chapter that ended is the AAA videogame business model.
When the industry was being driven by periodic releases of new hardware, it was possible for companies to ‘ride the wave’ of the new technology, and make games that were bigger, stronger, faster than the previous generation. But – newsflash! – nobody is in that game anymore. All the hardware manufacturers are running service models now, whether its Xbox Game Pass, PlayStation Plus, or Nintendo Online. The recently released Switch 2 isn’t a step change, it’s just a stepwise upgrade, and Microsoft and Sony are in the same boat. New hardware isn’t opening up opportunities for ‘bigger, stronger, faster’ any more. New hardware releases are just refining the way games are played, not redefining it.
We’ll always have flagship releases, but for over a decade now the core revenue for videogames wasn’t coming from these. In 2006, AAA games accounted for two thirds of revenue. In 2016 it was half. Today, it’s one third. Games-as-a-service have gone the opposite direction – from about a sixth of revenue, to about a third, to half of global games revenue. AA games have held steady at 10-15%, while indie games – made on a fraction of the budget of AAA! – have risen from 5% to 20% of the market… and the successful titles show ROI figures of ten to a hundred! This is a very different industry to twenty years ago. But it’s still thriving.
Right now, we’re feeling the pinch, and partly that’s because AI companies are busy promising the stars for software that is impressive but nowhere near as capable as they want investors to believe. That dries up investment, and every industry needs to be fed money to grow. Suffering two consecutive layoff years smarts… but AAA are feeling the brunt of it, because their business model isn’t working. Sadly, they knew it wasn’t working, but refused to change. I know many people who pitched free-to-play to Sony and Microsoft but were shot down because they didn’t want to give up premium pricing. Yet they went ahead and undercut themselves by adding microtransactions anyway… and that’s precisely what indie games didn’t do, and what allowed them to fill the gap.
If you want to survive the robot apocalypse, here’s a suggestion: just wait. Tighten up your workflow and audit your design concepts early (and ideally externally to your own dev culture) to make sure you’re not setting off on a bad path. The AI bubble will burst, and afterwards investment will flood back into videogames – especially if smart developers and publishers work out what the new generation of AI is useful for, and apply it to shorten development times without ceding creative capital to a stupid robot.
A new games industry is coming – bigger, stronger, faster! It’ll be helped by AI tools that won’t (and can’t) replace humans, but that can shave time out of dev cycles with faster prototyping and a new generation of ‘in-betweening’. Over the next ten years, canny developers and publishers are going to remake the games industry, and afterwards we’ll wonder why we ever thought that giant AAA titles were the business model to copy.
Award-winning game designer and narrative designer Chris Bateman has thirty years of games industry experience, and has worked on over a hundred published games with his ground-breaking game design and narrative consultancy International Hobo Ltd. He achieved international acclaim as designer and writer for Discworld Noir and Ghost Master, and now helps major global publishers and developers to achieve maximum success for their game projects.
Thank you for sharing your perspective Chris. And thank you all for taking the time to read, reflect, and be part of the conversation.
We’ll share more insights from speakers and industry leaders in the lead-up to XP Game Summit. In the meantime, stay tuned for our Indie Pitch finalist announcement!
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See you in Toronto!
Ryan Sno-Wood and the XP Team
