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The Video Game Industry Is Having Its Peter Pan Moment Now With AI

by Avi LanterJuly 4th, 2025
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While adoption if AI technology is soaring in software and most have a positive view about AI, in the video game industry the adoption is much lower and the sentiment is negative. Game developers are adopting an understandable defense mechanism, but it's counter productive.

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Contrasting AI adoption in the art community with the adoption in the coding community

Video game creators are incredible storytellers. I’ve spent countless hours escaping into the worlds they’ve built, from Breath of the Wild to dozens of others. But now, those same creators are telling a new kind of story: that AI has no place in game art. And the more they tell it, the more convinced they become.


As someone building in 3D-AI, I see this resistance firsthand. I recently submitted an article about AI in game development to a major industry publication. It was rejected, not because of the content, but out of fear of backlash. They were trying to protect themselves. And, generously, me.


Earlier this summer, I asked in a game-dev Discord if anyone was using AI for ideation, just to generate early visual references. One developer raised his hand. He was immediately hit with two waves of criticism: first, that using AI was unethical and infringed on IP; second, that it would limit his creativity and was just bad practice. He quickly backed off, almost apologizing for even trying.


The irony? His use case made total sense. He’s a solo developer who hires an artist for his game assets. He used AI to create visual references—mockups to help communicate his vision. That’s not IP infringement; that’s just good art direction.


It reminded me of that classic Cartman line from South Park: “It didn’t happen. And if it did, they deserved it!” The industry version seems to be: “You must not use AI, and besides, it’s not useful anyway.”


Carman meme

But the direction of change is already set. Resistance might slow down AI’s adoption in games, but it won’t stop it. Some studios will learn to work with these tools and even thrive. The others? They may wake up one day to find that the puck has moved.

It doesn’t have to be this way: look at the software industry.

At the same time that AI got good at creating images and 3D, it also got exceptionally good at writing code; first as an assistant to developers with Co-Pilot, and later, as a replacement to developers in some tasks in vibe-coding. Despite stirring some apprehension, developers were also able to see the opportunities this opened and, most importantly, understood that the trajectory is set.


Developers and managers started to think about how they can do much more with the same amount of resources, and AI in code is widely adopted. A Stackoverflow study in 2024 found that 76% of developers are using or planning to use AI that year in coding, testing, and code documentation. That was before the surge of video coding in 2025. 81% see its main benefit as increasing productivity, and only 6.5% have an unfavorable view of AI.


Meanwhile, 30% of game developers think game development will have a negative impact on the industry, while only 13% think it will have a positive impact, according to the annual Game Development Survey for 2025. The survey finds only 36% of game developers use AI, half the adoption rate of tech.

It’s absolutely okay and even healthy to criticize AI.

Of course, part of the reason adoption in game art is slower than in code may be because the tools simply aren’t good enough yet. That’s partly true. AI-generated 3D often doesn’t meet the bar for real-time game use, and video generation still struggles with consistency. But that’s not the whole story.


A critical viewpoint is important, but it should be paired with a spirit of exploration. We should ask: Where can we actually exploit AI to boost productivity? Dismissing the tech outright is just not wise.

The fear of job loss and paradoxical productivity

AI is arriving in the game industry just after a rough patch: studio closures, layoffs, and shrinking budgets. With job security shaken, it's no surprise that many developers view AI with skepticism.


But we’ve seen this before. Previous waves of automation didn’t kill jobs outright. Instead, they changed the nature of work. It’s called the productivity paradox: companies don’t always reduce headcount when they become more efficient—they increase output. More automation actually generated more consumer demand. Industry produced more, and it led to new kinds of experiences, products, and industries.


AI might follow that path. But some experts think this wave could be different, that AI might finally break the paradox and truly replace jobs at scale. If that’s the case, the impact won’t be limited to game development. It will be a global shift across industries. And if society finds a way to meet most needs with a smaller labor force, then we’ll need to start thinking about new economic frameworks, like universal basic income.


What’s clear is this: once a transformative technology reaches a certain threshold, resistance may slow it down, but it won’t stop it. Legislation can’t hold back a borderless service economy. And if one country restricts AI development, others will fill the gap.

IP infringement is a real concern.

There’s no denying it; training image models on artists’ work without consent is problematic. The same goes for LLMs trained on copyrighted writing. The New York Times is suing OpenAI for exactly that, and I hope they win.


But the landscape is evolving. In 2025, we have clearer rules than we did in 2022, when most foundational AI datasets were scraped. In the 3D space, which is newer, the models I've seen are trained on open-source or licensed data. Even image marketplaces now offer special licenses for AI use.


So, where does that leave game devs? If the AI-generated art is clearly derivative or mimicking specific copyrighted work, it’s a problem. But if it’s generic, or just used in the workflow and not as a final asset, it’s legit.

In Summary

The video game industry is in its Peter Pan phase with AI: Clinging to the familiar, resisting the discomfort of change, and telling itself stories to justify standing still. Meanwhile, the rest of the creative tech world is growing up fast.


Growing up means accepting complexity: that AI can be both problematic and powerful, and that creativity and automation don’t contradict. The studios and creators who embrace that mindset will be the ones shaping what’s next. The rest may find themselves stuck in Neverland.

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