A few days ago, chip giant NVIDIA made a "big move" - the company announced that it would provide custom AI model foundry services for games.
Affected by the news, the A-share game sector rose sharply for two consecutive days. On May 29 and May 30, the Games ETF (516010) rose more than 9%.
AIGC is the biggest outlet track of the year. Up to now, the three major game giants of Tencent, NetEase and Mihayou have competed to enter the AIGC.
In contrast, the previous concepts such as meta-universe, blockchain, and WEB 3.0 have not clearly stated their positions, and they are all low-key and hot spots.
This is enough to show the industry wind direction - AI+ games, not the next meta-universe concept, but a trend with higher certainty.
First, NVIDIA enlarged the move! What is the impact of AI custom models on the industry?
On May 29, NVIDIA announced that it will provide a game custom AI model foundry service, Avatar Cloud Engine (ACE) for Games, which can develop AI models running on the cloud and PC. Developers can use this foundry service to build and deploy customized voice, conversation, and animation AI models.
How much will the game custom AI model shake the industry?
Game Finance believes that
First, with the emergence of game customization AI models, open-world MMO games will be the first to benefit, and directly benefit products such as NetEase's "Against the Water and Cold" and CMGE "Sword World".
When introducing generative AI, NVIDIA highlighted the application of game NPCs. NPCs are indispensable for the development of world MMO products, and NVIDIA's game AI model can give NPCs dialogue skills, allowing them to answer player questions in a personalized way, greatly improving the immersion of the game.
Second, AIGC+UGC can quickly increase the quantity of content, but not the quality of content.
For marketing-side game video content (such as AI second creation), AIGC can (and already is) create some simple standing drawings and "dynamic PPTs". From DataEye's practical experience, these contents are more visual and provide intuitive feelings, but lack deep interest, sense of meaning, and lack of emotional value.
The marketing-side video content generated by AIGC is being used to increase the acquisition of private domain of games and reduce marketing costs. This has already been achieved, and it only needs to be popularized to allow listed gaming companies to use it to reduce costs and increase efficiency.
Second, the impact of AIGC on game companies
(1) R&D side
Game Finance believes that AIGC has three major impacts on game development:
First, significantly reduce the cost of game development. There is room for cost reduction in the fields of art, planning (copywriting, numerical values, system design, etc.), and code. According to public information, taking card games with a volume of more than 10 million items as an example, art accounts for 50-60%, and AI can save 60-70% of the art cost of 2D games.
Second, shorten the development cycle and improve the efficiency of research and development. At present, AIGC can only replace low-end positions in games, and the effect on shortening the game development cycle is not obvious, but it is expected to save 60-70% of manpower and 50-70% of time in the long term (10-20 years).
Third, significantly reduce the threshold for development. This will benefit small and medium-sized companies and independent game studios, and small and medium-sized companies are expected to stand on the same starting line with large manufacturers in some categories through AI tools.
Up to now, game manufacturers such as Tencent, Netease, Mihayou, Perfect World, 37 Interactive Entertainment, Kunlun Wanwei, CMGE, Chaoxi Lightyear, Lilith, Kaiying Network, Giant, Youzu, Xindong, and Palmfun have tried to apply AIGC technology to game products.
For example, based on Tencent's decision-making intelligence Al "Absolute Realization", the numerical balance deviation of "Honor of Kings" has dropped from 1.05% to 0.68%; Perfect World's end-game "Immortal World" uses AI calculation technology to achieve global weather control and detail changes.
(2) Issuance side
According to Game Finance Exchange, AIGC has four major influences on game publishing:
First, reduce the cost of material production and assist in the production of purchased materials. The data shows that AIGC expects to replace about 50% of labor costs and increase ROI by about 20% after 3-5 years.
Second, monitor market buying movements and analysis. For example, according to the value of recycling, the optimization of purchase volume is realized, and the company's investment volume and proportion on Facebook, YouTube, Douyin and other platforms are clarified.
Third, localized translation, assist game companies to provide multilingual versions, reduce manufacturers' distribution costs.
Fourth, help content marketing. Game companies can use AIGC tools to run content marketing campaigns, such as Mihayou "March 7", to increase player engagement.
(3) Operational side
Game Finance believes that AIGC has two major impacts on game operations:
First, greatly optimize the gaming experience. Intelligent NPC dialogue and interaction, anti-cheat, and AI hosting can all optimize the game experience.
Second, precise operation. The AI personalization solution can help players match teammates more accurately and recommend different products for different players, which can improve matching efficiency, paid conversion rate, and retention conversion rate.
For example, NetEase's "Against the Water and Cold" uses an intelligent NPC system, which can freely generate dialogues with players and give logical behavioral feedback based on the content of the dialogue.
CMGE "Immortal Sword World" cooperates with Baidu "Wen Xin Yiyan" to apply the capabilities of AI in fields including intelligent NPCs and UGC creation ecology, with the help of AI algorithms, NPCs in the game can make action reactions such as collecting clothes in case of rain and complaining when hit according to the environment.
Third, the game industry AIGC landing case
(1) Mihayou Content Marketing "Endless March 7"
At the end of April, in order to market his new game "Honkai: Star Dome Railway", Mihayou released an AI biograph tool in the game, which can change all images into "March Seven", one of the protagonists of "Star Dome Railway".
(Pictures produced by netizens using AI biographing tools)
The event was only open for 5 days, but it gained a lot of popularity.
On Weibo, the endless March 7-related topic "Everything is Okay March 7" received 100 million views, 24,000 discussions, and 6,855 original users.
(2) Tencent released an automatic generation solution for 3D virtual scenes
Recently, Tencent AI Lab released an automatic 3D scene generation solution.
According to Tencent's official data, the "construction" of a large-scale city (25 km², including 130 km of road network, 4,416 buildings, and more than 380,000 indoor mappings) used to take multiple artists to complete in years, while combined with AI only took a few weeks and generated a single building in just 17.5 minutes.
(3) DataEye practical operation cases
In March, DataEye closed beta a new feature: the addition of AI creative scripting capabilities to ADX.
At present, AI script assistant has covered functions such as "single-population broadcast script", "multiplayer sitcom script", "animation storyboard script", "multilingual conversion" and "script optimization".
The following is an example of a script created by DataEyeAI Script Assistant:
(Animation storyboard script)
(Multiplayer sitcom script)
4. Industry research and judgment
(1) The impact of AIGC on the game industry
Judgment 1: In the short term (the next 1-2 years), AIGC can only replace low-end positions (game outsourcing posts bear the brunt), and the effect on shortening the game development cycle is not obvious. In the long run (maybe 10-20 years), AIGC is expected to save 60-70% of manpower and about 50-70% of time, and AIGC will disrupt the entire game industry in the future.
Research and judgment two: AIGC technology narrows the gap between game manufacturers at the technical level, the future competition in the game industry will be the competition of gameplay, creativity, storyline, world view, good gameplay, good creativity is AI can not replace, with the above core capabilities of game manufacturers will occupy a favorable position in the competition.
Tencent, Netease, Byte and other giants are actively exploring the underlying technology of AI algorithm models, and the above manufacturers have both technology, products and user advantages, and it is difficult to be replaced in the short term.
Judgment 4: AIGC helps the game industry reduce costs and increase efficiency, and the profitability of game companies will be improved in the future.
Study and judgment 5: The market may emerge a new generation of excellent companies (such as small paper, small celadon), AIGC is good for small and medium-sized companies and independent game studios, small and medium-sized companies are expected to stand on the same starting line with large manufacturers in some categories through AI tools.
(ii) Which gaming stocks will benefit?
The first category: some individual stocks may enhance their strength and corporate value by investing in and acquiring AIGC-related companies.
It is worth noting that game stocks that have invested in the AIGC field (such as Tencent, Netease, Kunlun Wanwei, etc.), or game stocks that have recently made frequent investments in the capital market (such as 37 Interactive Entertainment, Gigabit, etc.).
Figure: Investment layout of Sanqi and Gigabit in the field of AIGC since 2022; Game Finance Chart
The second category: game stocks with a high R&D expense ratio in recent years, and the above companies are expected to save R&D labor and time costs with AIGC. Representing companies Tencent, Netease, Perfect World, Xindong Company, Zulong Entertainment, etc.
Source: wind; Game Finance Chart
Source: wind; Game Finance Chart
The third category: game stocks with rising marketing expenses in recent years & high marketing expense ratios, the above companies will use AI to produce materials to reduce marketing costs. On behalf of the company, Sanqi Interactive Entertainment, Glacier Network, Dream World, etc.
Source: wind; Game Finance Chart
Source: wind; Game Finance Chart
The fourth category: game companies with a high proportion of content marketing. Representing the companies Tencent, NetEase, Gigabit, etc.
For example, when IP games such as NetEase's "Harry Potter: Magical Awakening" and Gigabit "Moore Manor" were launched, they all launched topic activities on social platforms such as Weibo, B station, Xiaohongshu, and TapTap, and achieved good results.
At present, AI drawing, AI dubbing, etc. in AIGC technology are relatively mature, and game companies can use the above tools to assist game content marketing.