Dec 16, 2023 · 23m · a16z
2024 Big Ideas: AI-First Games That Never End with Jonathan Lai
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of the a16z 2024 Big Ideas series, host and General Partner Jonathan Lai explore how generative AI is driving a transition toward endless, AI-native gaming experiences, intelligent dynamic companions, and novel business models for emerging startups.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The host as informed peer 2.4 Guest teaching 3.4 Guest disagreement 1.1 The host pushing back 1.9
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 19:41 Guest reframes host's objection regarding inference cost barriers
The guest gently rejects the host's premise that usage-linked inference costs will deter players, reframing the dynamic by pointing to how early Facebook games successfully gated playtime with energy meters.
Hardest push from the host ▶ 19:00 Host questions inference cost feedback loopsThe host refuses to simply accept the subscription model premise and actively presses whether tying gameplay time directly to inference costs creates an adverse feedback loop that limits deep player immersion.
Biggest teaching moment ▶ 8:11 Guest explains decades of consumer behavior around AI companionsThe guest educates the host on how player demand for AI companions is already proven, walking through detailed historical examples such as Cortana in Halo and Ellie in The Last of Us.
The host holds their own ▶ 15:55 Host identifies economic hurdles of real-time AI renderingThe host demonstrates strong industry domain knowledge by pointing out that real-time AI world generation fundamentally changes backend cost structures compared to traditional fixed game distribution.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| a16z 2024 Big Ideas Series Overview & Highlights | 0 | 0 | 0 | 0 | This segment consists of a promotional voiceover intro followed by a monologue pitch from guest Jonathan Lai introducing his big idea. Because the host does not engage, host-side metrics are zero. | |
| The Two Waves of AI in Gaming Development | 2 | 4 | 1 | 1 | The host asks a polite prompt about current gaming upgrades. The guest educates the host by breaking down the AI revolution into two waves and citing survey statistics showing 87% of gaming studios already use generative AI. | |
| Unpacking the 'Good Alone, Great with AI, Best with Friends' Philosophy | 2 | 3 | 1 | 1 | The host compliments and echoes the guest's mantra regarding multi-player AI dynamics. The guest explains how current major games treat AI merely as warmup bots whereas generative agents move into core gameplay. | |
| Consumer Demand Precedents: Companions, Personalization, and D&D | 4 | 5 | 2 | 4 | The host offers thoughtful pushback by asking how hyper-personalization can coexist with shared community gaming experiences. The guest counters and educates by detailing precedents like Cortana in Halo, Ellie in The Last of Us, and D&D. | |
| Market Dynamics: AAA Incumbents vs. Nimble AI Startups | 3 | 5 | 1 | 2 | The host prompts a question about AAA incumbents versus new startups. The guest provides detailed market analysis, explaining why traditional publishers protect existing IP while new entrants replicate historical shifts like mobile gaming. | |
| Evolving Business Models and Managing Cloud Inference Costs | 5 | 5 | 3 | 5 | The host demonstrates domain expertise by highlighting cloud inference costs and then pressing whether usage-linked costs create a negative feedback loop for player engagement. The guest counters by drawing parallels to historical energy meters in Facebook games. | |
| Call to Action for Gaming Founders and Builders | 1 | 2 | 0 | 0 | The host asks a standard call-to-action question for founders. The guest provides advice on reimagining classic game genres with AI, citing modding history before the host concludes the podcast. |
Statements from this episode (15)
Lai: 2024 will bring the first cohort of AI-first games
“So in 2024, I believe we'll see the first cohort of AI-first games from creators that leverage large language models to enable novel game systems and mechanics.”
Lai: AI's biggest gaming opportunity is reinventing gameplay, not efficiency
“And while much of the early discourse on generative AI in games is focused on how AI can make game creators more efficient, I actually believe the largest opportunity long-term is on leveraging AI to reinvent the nature of the games themselves.”
Lai: Future game worlds will be generated at runtime by neural networks
“And in the game worlds themselves can no longer, will no longer be rendered, but actually generated at runtime using neural networks.”
Lai: 87% of surveyed game studios use generative AI tools
“So we surveyed 230 game studios earlier this year. And it turns out that 87% of them are already using generative AI tools. And so some of the products that they named include ChatGPT, Midjourney, 11 Labs, KDEM, Adobe Firefly, GitHub Copilot, et cetera. And th…”
Lai: Major games currently use AI mostly for onboarding and practice
“So many of the biggest games in the world today, you think about Fortnite, Call of Duty, League of Legends, They utilize AI primarily for onboarding and practice.”
Lai: Generative AI will move game agents into core gameplay
“I think one of the promises of generative agents is in elevating agents like the AI agents from a warmup into the core game itself.”
Lai: Video game players will readily accept LLM-powered AI companions
“The idea of just turbocharging disks of large language models to make them more lifelike and enable them to have a wider range of expression and behavior, I think is going to be Very well accepted by players.”
Lai: Generative AI in gaming enables existing player desires, not new behaviors
“We're not in, we're not inventing entirely new consumer behavior. We're just making it easier for players to do what they already want.”
Lai: Mobile gaming was won by new startups, not legacy publishers
“The winners in mobile games were largely new companies Supercell, King, Zynga, and not the PC console and companies, right? It wasn't Electronic Arts or Activision or Microsoft.”
Lai: Startups, not AAA incumbents, will build the most innovative AI games
“So I think in, in that same vein, I think the most innovative AI native experiences are more likely to be created by startups and teams that are just getting going and are bringing that fresh perspective, I suppose to coming at it with a lot of history and bag…”
Lai: Free-to-play games average only 5% to 10% monetizing users
“So one is free to play, where the majority of users actually around 90 to 95% on average play a game for free, and then the minority five to 10% actually monetize.”
Lai: Cloud inference costs break traditional gaming monetization models
“The challenge is that with an AI game, if you have a game that's running a large language model in the cloud, the influence costs of serving users dynamically generated worlds or texts would probably make either of these models unprofitable right off the bat, …”
Lai: Subscriptions will become default business model for AI games
“My guess is that companies like mid journey or care, like character AI have been able to address this with a subscription model. And so basically every power user pays for their own sort of like inference costs, so to speak. And we could see that subscription …”