The unnerving future of AI-fueled video games

It sounds like a thought experiment conjured by René Descartes for the 21st century.

The citizens of a simulated city inside a video game based on "The Matrix" franchise were being awakened to a grim reality. Everything was fake, a player told them through a microphone, and they were simply lines of code meant to embellish a virtual world. Empowered by generative artificial intelligence like ChatGPT, the characters responded in panicked disbelief.

"What does that mean," said one woman in a grey sweater. "Am I real or not?"


The unnerving demo, released two years ago by an Australian tech company named Replica Studios, showed both the potential power and the consequences of enhancing gameplay with artificial intelligence. The risk goes far beyond unsettling scenes inside a virtual world. As video game studios become more comfortable with outsourcing the jobs of voice actors, writers and others to artificial intelligence, what will become of the industry?

At the pace the technology is improving, large tech companies such as Google, Microsoft and Amazon are counting on their AI programs to revolutionise how games are made within the next few years.

"Everybody is trying to race toward AGI," said tech founder Kylan Gibbs, using an acronym for artificial generalised intelligence, which describes the turning point at which computers have the same cognitive abilities as humans. "There's this belief that once you do, you'll basically monopolise all other industries."

In the earliest months after the rollout of ChatGPT in 2022, the conversation about artificial intelligence's role in gaming was largely about how it could help studios quickly generate concept art or write basic dialogue.

Its applications have accelerated quickly. This spring at the Game Developers Conference in San Francisco, thousands of eager professionals looking for employment opportunities were greeted with an eerie glimpse into the future of video games.

Engineers from Google DeepMind, an artificial intelligence laboratory, lectured on a new program that might eventually replace human play testers with "autonomous agents" that can run through early builds of a game and discover glitches.

Microsoft developers hosted a demonstration of adaptive gameplay with an example of how artificial intelligence could study a short video and immediately generate level design and animations that would otherwise have taken hundreds of hours to produce.

And executives behind the online gaming platform Roblox introduced Cube 3D, a generative AI model that could produce functional objects and environments from text descriptions in a matter of seconds.

These were not the solutions that developers were hoping to see after several years of extensive layoffs; another round of cuts in Microsoft's gaming division this month was a signal to some analysts that the company was shifting resources to artificial intelligence.

Studios have suffered as expectations for hyperrealistic graphics turned even their bestselling games into financial losses. And some observers are worried that investing in AI programs with hopes of cutting overhead costs might actually be an expensive distraction from the industry's efficiency problems.

Most experts acknowledge that a takeover by artificial intelligence is coming for the video game industry within the next five years, and executives have already started preparing to restructure their companies in anticipation. After all, it was one of the first sectors to deploy AI programming in the 1980s, with the four ghosts who chase Pac-Man, each responding differently to the player's real-time movements.

Sony did not respond to questions about the AI technology it is using for game development.

Yafine Lee, a spokesperson for Microsoft, said, "Game creators will always be the centre of our overall AI efforts, and we empower our teams to decide on the use of generative AI that best supports their unique goals and vision."

A spokesperson for Nintendo said the company did not have further comment beyond what one of its leaders, Shigeru Miyamoto, told The New York Times last year: "There is a lot of talk about AI, for example. When that happens, everyone starts to go in the same direction, but that is where Nintendo would rather go in a different direction."

Over the past year, generative AI has shifted from a concept into a common tool within the industry, according to a survey released by organisers of the Game Developers Conference. A majority of respondents said their companies were using artificial intelligence, while an increasing number of developers expressed concern that it was contributing to job instability and layoffs.

Not all responses were negative. Some developers praised the ability to use AI programs to complete repetitive tasks like placing barrels throughout a virtual village.

Despite the impressive tech demos at the conference in late March, many developers admitted that their programs were still several years away from widespread use.

"There is a very big gap between prototypes and production," said Gibbs, who runs Inworld AI, a tech company that builds artificial intelligence programs for consumer applications in sectors such as gaming, health and learning. He appeared on a conference panel for Microsoft, where the company showed off its adaptive gameplay model.

Gibbs said large studios could face costs in the millions of dollars to upgrade their technology. Google, Microsoft and Amazon each hope to become the new backbone of the gaming sector by offering AI tools that would require studios to join their servers under expensive contracts.

Artificial intelligence technology has developed so fast that it has surpassed Replica Studios, the team behind the tech demo based on the "Matrix" franchise. Replica went out of business this year because of the pace of competition from larger companies like OpenAI.

Replica's chief technology officer, Eoin McCarthy, said that at the height of the demo's popularity, users were generating more than 100,000 lines of dialogue from nonplayer characters, or NPCs, which cost the startup about $1,000 per day to maintain.

The cost has fallen in recent years as the AI programs have improved, but he said that most developers were unaccustomed to these unbounded costs. There were also fears about how expensive it would be if NPCs started talking to one another.

When Replica announced it was ending the demo, McCarthy said, some players grew concerned about the fate of the NPCs. "'Were they going to continue to live or would they die?'" McCarthy recalled players asking. He would reply: "It is a technology demo. These people aren't real.