In our July update, we share our insight on how the future of media is becoming interactive (and AI).
🔎 Portfolio Company Updates
Technology innovation comes in waves, and gaming has ridden each one. In “Size Matters,” former Nexon CEO Owen Mahoney makes a compelling case for a world in which gaming benefits from the AI wave more than all other forms of entertainment. He traces previous technology shifts and notes that in each of the three previous waves, the video game industry has tripled in size, arguing that the same is primed to happen again.
While we agree that the gaming industry is ripe to enter a growth cycle, we believe the underlying drivers will be very different this time.
Growth in the prior mobile wave was straightforward - a 5x increase in the number of gamers from the ubiquity of game-capable smartphones, coupled with the accessible free-to-play business model underlying most mobile games today. For the first time, consumers had access to video games without paying $200-500+ upfront for gaming-specific hardware (or software!).
In the AI wave, distribution is largely solved. The real unlock is what gets created and how players engage. Generative tools are already commonly used in game development (20% of PC games released in 2025 to-date used generative AI (in development), while “vibe-coding” game platforms such as Rosebud enable anyone to become a developer. As our advisor Doug Shapiro writes, we are moving to a world of “infinite content.” In the coming year, we expect to see an explosion in game variety and personalization, while AI-native products such as AI companions are broadening the aperture of “gaming”. All this serves to deepen immersion and engagement (time spent). At the bleeding edge, world model startups such as Decart are blurring the lines between video and gaming, pioneering an entirely new form of interactive media.
The 2018 video game Detroit: Become Human provides a glimpse into the future of interactive storytelling, with thousands of branching storylines that took a massive studio years to build. Generative AI is poised to deliver that level of narrative personalization - and beyond - not through brute-force scripting, but dynamically and at scale.
Monetization has just as much room to run. By our math, Roblox earns just $0.07 per user-hour globally versus ~$0.25 for leading social video apps such as YouTube and Instagram. Core PC/console games reach ~$0.40 on Steam, but that still trails other “premium” media (movie tickets monetize 10-20x higher). Gaming has long over-delivered on value, but increasing quality, relevance, and breadth create room to close that gap.
While no investor can time the market, our expertise lies in identifying the foundational technological shifts that create new categories and leaders - and the signals of disruption we see today are clearer and more powerful than ever before.
