#002 BIG PICTURE

INTRO

Things are moving so fast, it can be a bit overwhelming to stay on top of all the AI change impacting our industry. Here at Shogun, we spend a huge amount of time testing and validating new tools, LLMs and diffusion models so you don’t have to.

AI adaption in our industry is not just a trend; it's a transformative force reshaping how games are developed, played, and marketed.

Interestingly, we have some recent survey results that show widely different data. Bryant Francis covers this HERE quite well. TLDR, the a16z report shows a lot more optimism than the GDC survey. The GDC Survey seems to indicate excitement for these tools has actually diminished since 2024 while adaption is up. (full disclosure, i was involved in designing one of these surveys, but cannot say which one)

In this post, we'll touch on some high-level concepts and think about the opportunities presented by these technologies.

MAIN

Broadly, we propose two root categories: AI Tools and Gaming Experience. ‘AI Tools’ are used by your team and ‘Gaming Experiences’ are part of your player’s engagement with your product. You’ve probably seen similar charts to this. Every few months we get new ones and the logos get smaller as the competition heats up. Partial state-of-play in Q4 2024 here.

Source: Hartmann Capital

AI TOOLS:

We like to further delineate this category into three sub-categories: Game Dev Tools, Productivity Tools & Marketing Tools

Game Dev Tools:

TYPE 1: OPTIMIZE - This suite of tools is defined as those designed to speed up existing workflows. They do not fundamentally change the Gaming Experience (see below), but make your teams more efficient. These can be new AI-powered IDEs (like Replit’s AI Agent, Cursor Composer, Bolt.new and my favorite Lovable.dev) to image generators like Midjourney to cutting-edge AI integration into Unreal/Unity (like Promethian AI). This is an extremely active area of investment and deserves it’s own focus into yet further sub-categories.

Some of you know I’m a bit of a zealot when it comes to the importance of pre-production. In 2025 these tools still cannot compete with the quality of world-class artists/engineers & musicians which makes AI Tools great for rapid-prototyping. I currently believe this is one of the best use-cases. Get to first playable ASAP, and kill your babies.

TYPE 2: INNOVATE - These tools are allowing developers to create entirely novel kinds of games, or new features inside their games. This area is even more blue-waters as it’s still early for studios to embrace the more exotic capabilities of AI (for a variety of reasons we’ll discuss in future). These tools make new Gaming Experiences (see below) possible.

Simple Taxonomy to help contextualize new technology in the AIxGames space

This chart is continuously evolving and serves as just one approach to understanding this fast-changing space, rather than a definitive guide. We’ll publish updates as this blog evolves.

Productivity Tools:

These are the ‘office tools’ that keep the gears turning in a functional software company. Perhaps not as sexy as the Game Dev Tools, they are the unsung heroes of an organization's efficiency. The AI note-taker (like ClickUp) is likely first through-the-door in this category with the majority of my meetings attended by an invisible (and increasingly accurate) stenographer. We are seeing AI infiltrate virtually every aspect of tools like Meetings, Schedulers, HR, Accounting and legal departments. Every business unit that supports the core game team can benefit and each department head should be actively looking for wins in their domains. For generic productivity, Google is quite active here, as are companies like Glean and many others.

Marketing Tools:

Of course, AI has been helping marketing departments for a long time. The current round of GenAI tools can be sorted as:

Hyper-personalization: AI analyzes player data to deliver tailored ads, offers, and even unique in-game experiences. AI-driven chatbots will engage players with personalized recommendations, answer questions, help players who get stuck/frustrated and even offer unique rewards. In-game advertising could see a comeback with micro-targeting.

Creative Enhancement: AI generates art, music, and dynamic narratives, enriching marketing campaigns. This will drive down the cost of generating creative and multivariate testing will become more impactful.

Improved Efficiency: Not unique to games, most major ad platforms are using AI to optimize campaigns, automates tasks, and provides valuable predictive analytics. Increasingly they are making more sophisticated tools available to to campaign managers. Expect even better insight from even modest data warehouse / BI infrastructure.

GAMING EXPERIENCE:

On the Gaming Experience front, AI is beginning to transform how players interact with games. The criteria here is user experiences that would not be possible without the current generation of AI. Here we consider two sub-categories again:

In-game: Gamers love novelty, but only when delivered in a familiar package. Ideas/technologies here run from new features inside traditional genres, to entirely new KINDS of games previously impossible. There are a ton of great ideas out there for really amazing new KINDS of games.

A few ideas out there: endless & customized stories, really compelling AI NPCs/companions (possibly with ‘out-of-game’ social media presence), UGC 2.0 (next-generation User Generated Content tools), highly dynamic gameplay/environments, etc. One exciting subset is PEM (Player-Experience Modeling) and (you guessed it) we’ll explore all this in the future.

Out-of-game: Imagine a personalized recommendation AI Agent that knew your taste in gaming, knew your mood and recommended the perfect game to relax in the evening. Or AI managed Discord servers seamlessly connecting your community by running 'game night' and keeping users entertained 24/7. Or AI ‘ambassadors’ wandering the internet and evangelizing how awesome your game is to targeted communities. These are just a few of the 'meta' applications of AI in games that are outside the core game experience.

It's important to note that not all of these innovations have equal impact on players as this chart shows:

from VC Cafe

Notice some of these Use Cases are here already, and some are just beginning to make their way into shipped software. Many of these examples are nascent versions of a feature that will evolve into something much more expansive and robust in the near future.

This is a lot and yet we’ve barely scratched the surface. As always ‘the devil is in the details’ so if this analysis is too superficial for you... stick around! We’ll be diving deeper next time!