I stumbled upon a really insightful tweet chain talking about the connection between games and AI. I felt the need to react to each of the tweet because I have so much thoughts and feelings that I felt that I need to get off my chest.

Here is the original tweet. I'm going to quote each section to save it here (in case it gets deleted or twitter dies) and react to them.

Fifteen years ago I used to work on the translation of our Annual Reports at Square Enix into English.

One area that often required editing was the word "content." It was a commonly used word in all our IR materials.

The Japanese write コンテンツ (Kontentsu) which is plural ("contents") and I would have to re-edit non-native speaker's edits of "contents" back to the correct "content" because otherwise the report would go out saying Engrish like, "Square Enix provides high quality contents.”

Lol. Yes. It's funny because when I worked at a Japanese company, they DO use コンテンツ A LOT, which is plural.

We used the word “content” a lot because we were in the content business.

We made myriad content: games, manga, anime. Starting in 2004 my boss, CEO Yoichi Wada, began writing in his annual letter to shareholders about the “Network” being the future rather than content. People assumed at the time it was about MMOs.

Of course, that future was years off. In the meantime, we just made content.

I wonder what the young impressionable me would link of the word "Network" back then. I remember that in 2000s, games like Warcraft 3 and Neverwinter Nights had really robust "games within games" community. Parallel in the web space, people were making websites within websites with myspace, blogspot, etc.

A strong memory I had was to teach a group of high school students how to make a game in Warcraft 3. The group was from a girl's school actually, which kind of relevant because back then girls don't play let along make games as much. They made a game they set out to do, which was non-violent, lighthearted and fun. I remember being so proud of them.

I'm not sure how I would react if someone vaguely told me that they are moving from "Content" to "Network" though. Maybe not in the 2004s, where I barely know any programming. But in 2010? Maybe I could see it as making plugins and mini-games for others to share. I do remember being excited over potential of making stuff Warcraft 3, NWN or even Second Life. I just didn't do it because I was more interested learning fundamental programming skills in C/C++.

Focusing on fundamental programming skills was the right choice still, I think. Or maybe I'm just biased.

In 2004, the word “content” appeared in the Annual Report 90 times. Over time, this went down. In 2024, the word content appeared in the Annual Report a mere 28 times.

Square Enix has spent two decades slowly moving away from being a content business. Not just Square Enix, but every publisher.

Wada-san was right.

The future of games was the Network (here is page 2 of his 2004 Annual Report!).

But the Network business he imagined isn’t about games being online, it’s about the social network of games (Metcalfe’s law) replacing the content business.

Metlclfe's Law states that the value of a network is proportional to the square of the number of users connected to it.

It feels true to me.

It does get me thinking about whether this is how eastern game companies justifies shifting towards f2p gacha models.

I remember feeling this shift in early 2010s when I first entered the games industry. I was really excited about the f2p gacha idea, mobile gaming, etc and saw a lot of potential to build some kind of community and hence the gaining value.

Looking back, I think a mistake I had in my career was assuming that people know their shit, but turns out...people don't, on average. Not even friggin' close. I probably couldn't fit into the designer mindset and my team back then sort of started my path towards being more of a programmer than a designer.

Anyway, Wada-san is right. And by 2010, people should've known better. But I know, they don't. I still hear people talking about implications of gacha and f2p in 2025. C'mon, we are way past that already. Waaaaay past that. Games are just not self-contained anymore and you can't really judge a game just by the application itself these days.

...Man it's crazy that just a few days ago, when talking about what content to teach designers, "Games As A Service" is brought up. In 2025. It's mad.

The game industry is facing a fundamental realignment. This is not a passing storm. It is a change in the forces that stitched the industry together.

The industry was once defined by scarcity of content. You would consume a game (finish "Super Mario Bros") and move onto the next (start "Legend of Zelda").

Even as the industry transitioned toward richer mediums and even MMOs, it was taken as a basic tenet that games were content: consumers would purchase new games thus building good content and marketing that content would lead to a profitable outcome.

It has been through maybe realignments actually, depends on how closely you look, but he's correct in this. That was the industry I think until the late 2000s or early 2010s. 2010 is when there was a huge shift, I feel.

This is the reason why release dates for the biggest titles were set in the fall (best time to sell content into Christmas), and why there was a constant hustle for getting a unique date that didn’t have something like a Call of Duty or Assassin’s Creed also launching that week.

It was similar to the movie business: the movie is named, the date is set (ideally summer), then the content (movie) is made. And studios are constantly jostling to ensure that they didn’t schedule a movie at the same time as direct quadrant competition because the audience’s time was finite.

Correct.

A portion of the game business still remains this way, but it is crumbling. As I argued last year, the issue with the Final Fantasy series was not that its costs were too high, but that it could not generate the revenue needed.

The audiences expected to play did not come, or were not willing to pay to spend their time.

Correct. It's a time issue nowadays.

I think only indies can afford to do self-contained one-off games. AAA one-off games looks unimaginably bad to make money on paper, especially with shifting demographics.

To understand why, we have to take a short detour.

Concurrent to the growth of this business was another new market that opened an expanded games: it began with the casuals who first picked up a Wii controller, who then moved onto F2P mobile titles.

Meanwhile, younger consumers (who in their teens or 20s should be aging into traditional gamers) began engaging with content very differently than the generation of players who grew up with $50 packaged cartridges and then discs.

They began with always on titles like Minecraft, and then grew even further with Roblox. The generation of Roblox players have no sense of games as individual pieces of content. Roblox is a platform, and on that platform is an infinite number of experiences. There is no need to leave the platform.

The younger generation has stayed with platform titles, graduating in some cases from Roblox to Fortnite, but still staying within ecosystems. Meanwhile the casual business that had shifted to mobile started to stick with dominant forever games (Candy Crush, Clash Royale) that were now acting closer to platforms themselves than pieces of content. (Fortnite is content. It's also a platform. It's also a social network. It's also a tool.)

On top of this came TikTok, nipping at the heels of times spent on console and mobile titles alike.

There is finite time in the day. If TikTok and gambling are growing, something needs to be reduced.

The TikTok feed scratches the same itch as many hyper casual games. Watch, swipe, watch swipe. And the algorithm feeds you a thing that either stimulates you, or doesn’t, and then gets even better at serving you stimulus the more you feed it input.

Absolutely correct. This is what I meant shifting demographics. Can't put it better myself!

With competition on time looming and the biggest games becoming platforms, we are left with only the traditional packaged business continuing to function as content. But the number of hours in a day has not changed, and the amount of freely available distraction has. Scarcity is gone; experiences are abundant.

The more platforms (whether Fortnite, CoD, Roblox, Candy Crush, GTA Online, etc.) dominate time spent, the less time there is for traditional, fixed-time content like an Assassin’s Creed: Shadows.

In 2019 the a16z team wrote a piece about trends revolutionizing games, highlighting how games had network effects similar to the best social networking platforms. They were spot on, but these effects benefited the incumbents, not new entrants. (And a16z placed a smart bet on pre-IPO Roblox.)

Man, Roblox is insane actually, considering the context. It's not even that risky bet. It's a really smart and calculated bet.

Games had indeed reached their Network era; but there are very few successful new social networks. In the last decade, the only one that has grown to any prominence to rival Facebook’s blue app and Instagram has been TikTok, with Snapchat having remained relatively small. This means that if games became social networks, there would be few winners.

Basic economics explains this well. Earlier this year, Zynga's "Star Wars: Hunters" shut down.

Let’s say they had 1m players and generated $1m in revenue. (These are nonsense numbers, I’m just making a simple example.)

Let’s say they intended to invest their revenue back into content and thus had a plan to deliver $1m worth of content more in live operations.

Meanwhile, let’s say Fortnite has 100m players and generates $100m in revenue. They can deliver $100m worth of content more in live operations.

I always thought this was common sense. This was always something I brought up when comparing traditional games with things like gacha games, or games with DLCs, or cash shops.

Not only is it not common sense, there are people who just straight up REFUSE to listen, branding the entire practice as EVIL.

It's the same with adopting AI.

And these people are now seniors in their positions. It's nuts.

My friend who had been playing Star Wars: Hunters said that he ran out of content quickly and thus gave up after a few weeks. He has not stopped playing Fortnite.

With a larger player base and thus revenue base, Fortnite can outspend 99% of developers in the market.

You cannot beat the basic economics that their cost of development is covered by much higher demand, enabling them to build more content. This is the transition point: we have moved from a content based business to a social media business based on platforms that can constantly improve thanks to scale.

You used to consume content and move on to the next. Now, content is platform based. This is the difference between a movie (e.g. this week’s upcoming Superman) and YouTube (e.g. this week’s latest Mr. Beast video.) When it comes to digital video platforms, there are only a handful of winners (YouTube, TikTok)- everyone else is simply a creator.

See "Grow a Garden." This Roblox game, in a matter of months, has far surpassed the concurrents of any western game in history, even Fortnite. It may not sustain this, it doesn’t need to. It grew Roblox as a platform tremendously. It made Roblox sticker, enabled more creators to build on Roblox, and brought more users to play Roblox games. Here is Roblox's CCU growth this year. (he shows an chart that shows insane growth)

East Asian market realized this long ago. They already kind of solved it, to the point where they are now creating platforms to support their games. miHoyo, for example, has Hoyolabs, a website where you can create builds and discuss about the game offline, outside of reddit. Japan big game companies are starting to leverage movies (Sonic movie being the big one this 5 years), animes and merch.

Community is important. Culture is important. Retention is important. Letting people access your content outside of the game itself is important.

This does not mean games go away, in the same way that movies or television did not go away with the advent of YouTube.

But we are fighting for time; time does not increase. Tiktok increasingly taking up time that once belonged to more casual play. Hardcore players are aging out, and young players are drawn to Roblox.

I wrote a long ass essay about this to a company, to say that making 'hypercasual' games means we are directly competiting with Reddit, Tiktok, etc.

It's wierdly difficult to convince some of my peers that times have changed. They are somehow more inclined to think that 'the new generation is doomed' or 'young people are strawberry' ... which is appalling because that's what the previous generation said about mine.

This is the problem Microsoft faced in 2025. Phil Spencer is staring down the barrel of an industry that’s changed drastically since he greenlit Perfect Dark’s reboot.

It’s changed drastically even in the few years since they made the case to acquire Activision-Blizzard for $68bn.

The symptoms are becoming clearer.

Prior to 2024, a situation like Concord had never occurred. $400m and eight years of people’s lives gone permanently in two weeks. Zero revenue generated, every sale was refunded.

This is astonishing.

We’d had Duke Nukem Forever incidents before (and Duke Nukem Forever wasn't refunded!), but never something at the scale of Concord.

We have still, as an industry, not truly processed what Concord’s utter collapse meant. We were quick to sweep it under the rug, thinking it was endemic to the quirks of a Hero Shooter.

We cannot ignore what happened to Concord, because it’s about to become the norm.

Ok, I don't really see how Concord's failure is that relavent to the current point.

I didn't know it took 8 years though. That's insane. That's almost Skulls and Bones level and insanity. I attribute the failure more towards the developers not knowing what they want, then at the last minute they needed to push something out because budget is drying up.

June 2025 was in fact a critical month for the game industry, though few have written about it.

Nearly $1bn in game investment went into the following games: $400m for Mindseye, $100m for Splitgate 2, hundreds of millions more for Marathon, and tens of millions more for FBC: Firebreak.

These are just four titles that in June announced that their launches or betas had not gone as planned.

All of them plan to make fixes, but how many of us really believe that the market can sustain or expand for these four titles? Again, that’s nearly $1bn in investment between them.

Lol ya it's not possible. It's crazy though. Even if these games are developed 10 years ago, that means they started in 2015.

At 2015, gacha games were starting to see movements from being surface-level mechanics with EXTREMELY predatory gacha mechanics to something more reasonable for players.

GBF started spiking around that time. FGO just released. Dokkan too. And more that are not localized. These games started paving the way, trying, failing and succeeding different gacha mechanics, figuring out what's the balance between monetization, providing fun to the players, and tying everything together with the world and core game mechanics. And merch. And movies. And anime. And music.

It's just insane to me that at 2015, people thought that it's a good idea start making a one-shot no DLC no gacha no demo AAA game.

But maybe that's because I kind of worked and grew up around Japanese culture more, so I'm biased.

Many have argued that this is a cost problem, saying that we can resolve industry problems by fixing the cost base. Fewer assets, smaller worlds, etc.!

It will resolve the game's problem, but not the industry. Tbh it doesn't even make sense. What is AAA with fewer assets and smaller worlds? AAA means BIG usually.

However, thats for AAA and fixing the cost base does not resolve for lack of players. A shorter FF17 is not going to make more demand. We have a serious demand problem, which I argued a few days ago. https://x.com/JNavok/status/1940883792493007092

Yeah, if you view it as a supply/demand problem, there is for sure no demand in AAA space. No specific demand anyway. It's hard to market an experience, unless it is REALLY good and it spread by word of mouth. Kind of like "omg you should watch this movie!" kind of marketing. Story is hard to sell too, in this sense. I think it's because it doesn't really trigger is stupid in our brain.

It's easier to go like "LOOK THIS GAME HAS HOT BOYS HEHE" and attract people, then if the gameplay or service good, that's what will make them stay.

It's not that we need to 'attract stupid people'. We simply just need to give people what they want, or make people realize what they want.

I’m going to take a detour here. I’ve seen people shocked at the cost of games. GTAVI will likely cost $2.5bn to develop by the time it is released. Salaries have gone up, crunch has gone down, and team sizes are huge. You have one shot to get an audience- see the June 2025 titles. You need an exceptional title at launch to not be Cyberpunk’d. And so the money is spent.

It can only be this way- the middle is gone. You are either an indie (and I include Clair Obscur as an indie) or you are nine figures.

Disagree. There is a middle. It's a spectrum. There IS a difference between a 2 man studio (like the guys that did Slay the Spire back then) a 10-20 man studio and a 50 man studio. The definition of indie is too loose and vague anyway. I won't go into that.

Again, this is what the audience wants. It’s silly to blame “suits” at publishers when any flaw in a title is magnified by a thousand YouTubers and Gaming websites saying “Look at this snarky reddit post” https://gamingbible.com/news/batman-arkham-knight-dlc-roasted-by-fans-529538-20250625

Management cannot infinitely invest, and the chickens either come home to roost, or the title gets cancelled. (Foreshadowing the MS cancellations last week.)

To that end, we cannot both argue that developers need to be trusted to make games but also realize that it is not management making day to day content decisions in games where there are 100+ people working.

Management did not design a giant yellow trashcan as a main character in Concord. When you spend years to make a game, mistakes get made, and then get compounded.

Management are then asked for more money and time. Eventually the threshold gets passed and this becomes a fool’s errand because demand will never come. Battlefield has this problem too. https://arstechnica.com/gaming/2025/07

Yeah audience do like blaming suits.

Like Square Enix investing in NFTs.

But the average audience and even most developers have no idea how a big game company (big enough to have suits, at least) runs in terms of money.

I once had an eye-opening experience when I see designers pitch an idea to a CEO of a company, and the CEO asked "how do we market merch for your game?"

Audience and developers don't think much past the game. Merch, movies, anime are all afterthoughts to them, but having the whole ecosystem is really important. Capcom does this quite well. Sega too with the recent Sonic resurgances. Cygames and mihoyo are REALLY good at this currently. Konami too, but they took the sports route.

Btw, this is why Cyberpunk's disaster of a launch might be a good thing for the company. It would be that they delay and miss the train, whatever the train is. Games have the advantaged to be fixed later with good marketing. Just launch the game in a shitty buggy state, light the devs' ass on fire, fix it over a year and, oh look guys, Edgerunner! BOOM! Disaster was forgotten.

And it's not that they are the only ones that did this. No Man's Sky was a disaster too. Now it's loved.

Concord, Skulls and Bones and all these 10 years in development games should've followed the same through. Devs will be mad though, but lol it didn't take long for me as a dev to realize that I'm truely at the bottom of the food chain.

Additionally, if you think that $400m for Battlefield is too high, or $2.5bn for GTA6 is insane, by definition you are saying those people working on it should not have had jobs.

We cannot expect that everyone should be employed, games can be developed perfectly, and no flaws will be accepted.

That is a completely inconsistent set of arguments yet appears frequently.

Yeah. Surprised this is still a topic in 2025. Again.

Enter AI.

There are many misunderstandings here. But we should not misconstrue the Microsoft layoffs with them replacing studios with AI.

What happened with Microsoft was clear: AI is a one-in-a-generation change in the entire digital order. MS must either get on board, or perish.

Microsoft lost mobile. Microsoft thrived in cloud because it threw the kitchen sink at Azure. Microsoft cannot lose at AI. I don't mean making game art. I mean in that it will replace many methods of communication and impact all facets of human life.

Based on Xbox profitability over the last 20 years, it is guaranteed that a dollar spent by Satya on Xbox would either be burned or gained a few cents.

A dollar spent on AI will either net 100x back in the future, or all is lost. Satya made his choice, and it was the rational one.

This part was an eye opener for me.

I did understand how Microsoft is trying to make money. I knew they have advantage in Cloud, but that space is actually kind of competitive with Amazon and Google in the field. I knew they tries to force bundles that companies cannot refuse, like the combination of Azure, Sharepoint, Office that works on web, and MS Teams, and Outlook. That's why I have to tolerate the ecosystem, because it's just easier for everyone else to work with 1 ecosystem that's supposed to have apps that support each other.

What I did not realize is what a big deal losing mobile is to them. It HAS to be big especially with the spending power moving towards people on mobile devices.

Them moving towards AI is not a surprise. I'm just surprised to hear that it's out of neccessity and desperation.

There's a difference. If you are not desperate, you would be inclined to build something nice maybe from ground up. Apple is kind of doing it. Facebook is doing it. I don't know if Google is doing it but I assume they are. Microsoft just straight up collaborated with OpenAI.

I did think about Xbox moving to mobile though. This might be their last ditch effort to revive Xbox and finally enter some kind of mobile space.

I'm not sure how well it will fight with SteamDeck though. The biggest issue for Windows based handhelds was Windows itself, and the OS has been declining for a long time. Hibernating in the middle of a game session sounds like a terrible idea and it already affected some of my friends. If they can resolve it, then it's all good but I don't have high hopes.

What choice does Phil Spencer have when Satya’s decided it for him? MS isn’t a games-only company that needs to live or die by Xbox.

Meanwhile, Phil is a smart guy- he can see that alternatives like the smartphone or PC market is shut out. Mobile is a UA game- Scopely spends billions to buy its customers.

And no one wants to switch from Steam- it has a complete lock on the industry and it is nearly impossible to compete with. (The only opportunity is for Chinese companies, if the Chinese government breaks the greyzone and bans it.)

Phil's market, AAA, is increasingly dominated by an unchanging amount of time spent in the top 5 titles, and GTA6 will only exacerbate this. He had to ask himself, "Would Perfect Dark's Reboot take any measurable amount of time away from Fortnite, GTA6 or CoD? Will it grow the market? If not, should I still spend on it?"

Correct. I think that's the only move Phil can make.

The ultimate ticking time bomb is Roblox and UEFN as the generations that grow up with it continue to stay. I return to the Grow a Garden growth.

This is not coincidence. Gamers who are happy with Roblox and UEFN will stay with it, just as the YouTube generation of kids continues to watch YouTube. This platform effect, Metcalfe’s law, is the future of games, and will continue to grow.

Death Stranding 2 sales, meanwhile, barely passed Clair Obscur in its first three days, and that’s if you generously discount the fact that Clair was free on Gamepass on D1 and grew massively faster shortly after due to good word of mouth (hitting 3.3M copies in its first month, whereas it would normally taper.)

A dollar spent on Death Stranding 2 in this industry is better spent on trying to make a Fortnite (see Phil's dilemma above), which is why Sony will keep trying to make something out of its Bungie acquisition. Marathon will release, but won't solve the problem.

Bringing up Death Stranding 2 seems a little strange to me but I get the point. The thing is, Kojima is Kojima and Kojima delivers. Marathon has no Kojima.

Roblox and Epic already have forever platforms. Sony needs its own, or it will still be in the Content business in a Network business era.

Discord too. Mihoyo.

Nintendo may be happy to stay forever as a content business, but I suspect Sony isn't able to say the same.

Yeah, Nintendo is Nintendo. It's like Kojima is Kojima. And in a sense, Gabe is Gabe (in Valve)

I'm trained with a bit of Nintendo's game design sense. They know what makes a game fun, and probably the only company of people who truly knows that. It's probably a very protected company culture they have that's quite unshakable.

Kojima probably has that in his company too, and I understand his vision for games, which only he truly understands.

And Valve, well, I'm not talking about their gamedev skills (which are pretty bad nowadays). I'm talking about their ability to add value to Steam.'

Sony, well. Yeah. They don't have any of that.

...Actually, Nintendo IS moving towards Network business era, but they are a little clumsy at it. I'm sure they'll figure it out how to do it THEIR way though, like what they always did.

This is where AI comes in -> Tiktok is already a game run by an AI.

The next step is Roblox-like platforms built with AI prompts where kids just enter the type of entertainment they want. They will be build a Matrix-like world in five to ten years. Epic will as well.

These companies have already won, for the same reason that Facebook still prints money 20 years later. People have been distracted by the surface stories about AI and jobs and are missing where the real intersection of games and AI are going.

Replacing an artist with Midjourney does not fix the demand problem. It exacerbates it through more garbage content vying for attention.

The layoffs in the industry are because demand either went away to TikTok, or sat with the platforms, or has an incredibly high bar to get people interested in purchasing. (With the exception of Indies, who are really closer to YouTubers that make it big on Steam as a platform.) What can convince me to play Splitgate 2 over Fortnite, doom scrolling, or Clair Obscur?

THIS is a really good connection to make. I totally did not see this, but yes it sounds true.

It's not that AI is replacing skilled artists. Is that there are just less demand for something a skilled artist can work on.

Bro I already have 3 gacha games to juggle because I love their gameplay, that I actually have almost no time to play what people call real games. I have to force myself to play them. It's hard.

You don’t see Strauss Zelnick, CEO of T2, talking about how he’s going to slash his costs on GTA6 by 75% replacing workers with AI, even though he would be handsomely rewarded by Wall Street, not because he doesn’t like being rewarded by Wall Street, but because cost isn’t what keeps him up at night.

It’s the sales of the upcoming title, to which cost is a function. He needs GTA6 to make its own gravity, and be one of those titles rewarded by Metcalfe’s law. He needs to be on the shortlist of winners, cost be damned.

I mean, GTA5 is already on it's way to becoming a Network-style game. GTA6 will hopefully solidify that.

This is what I think many have failed to grasp. T2, Epic, Roblox’s competition is going to be OpenAI, xAI, etc.

The big tech companies are already making interactive world models that will compete with game experiences.

True. It's intersecting, sure.

This is why Mark Zuckerberg moved his bets away from XR and into AI.

That is the battlefield where cutting edge tech and the network effect will merge.

Games, AI, and tech are really part of the same network effect. Metcalfe’s law states that the value of a network is proportional to the square of the number of its users. In other words, the platforms with the most creators and players generate the most value.

You know what's crazy? I think Valve knows that VERY well.

When Wada-san predicted in 2004 that Networks will transform the game industry, he meant it from a technical perspective. But he knew, and I know because I spent a decade with him, that ultimately it was about the Network of players.

And so we return to the start. Games are no longer a content business. Square Enix knows it too, but the sun set on their opportunity to transition to a Network business. There were a few million players of Final Fantasy 16.

It's so fucking sad for Square. And they can even see it happening in their fiscal reports. Single player games are just not selling. Their trash-tier mobile games ARE making them money and FF14 is becoming a bigger percentage of their revenue.

There have been 14.45bn lifetime plays of Grow a Garden so far, with 21m+ peak CONCURRENTS (meaning lifetime players substantially higher). Microsoft sees this too, which is why Everything (and thus Nothing) is an Xbox.

The future is unfolding before us, and given that we’re all free to spend our time as we wish (and are apparently spending it watching TikTok and playing Grow a Garden)

Metcalfe’s law is the future the majority of the audience have already decided with their wallets and time that they want for games. Apparently that's growing gardens on Roblox.

I don't think he addressed that Grow a Garden (from what I can tell) is mostly low-intensity game that you can open at one side and play a little once in a while. The game can be played in small chunks, unlike triple A games that must be played in large chunks lest you forget the game. The game also have things going on offline, so players can feel progress even when they are not playing the game.

As a game designer these days, you must think about how easy is it for players to pick up your game after some amount of absence. You must also think about how easy is it for players to put down the game.