Natasha Malpani Oswal – Kae Capital

Breaking Monopolies in Gaming: The Age of AI (Part 2 )

Posted on November 13, 2024 by Natasha Malpani Oswal

How AI is Democratizing and Revolutionizing Gaming

A New Frontier for Gaming

In Part 1, we saw how the current gaming industry is dominated by a few key players. However, advancements in AI—specifically Generative AI, Agentic AI, and the metaverse—are disrupting traditional structures and creating unprecedented opportunities for smaller studios, indie developers, and new entrants to break into this tightly controlled space.

1. Generative AI: Scaling Worlds, Assets, and Storylines

Generative AI is reshaping content creation by automating the design of worlds, assets, and storylines, allowing developers to craft dynamic, responsive game environments without requiring massive teams.

Examples:

InWorld AI: This startup is developing AI-driven characters and environments that adapt to player choices, making storylines more immersive and unique.
Scenario.gg: Specializing in automated asset creation, Scenario.gg reduces the time and cost of producing rich visual environments, enabling small studios to compete with larger counterparts.

Market Impact: Generative AI is democratizing game development by lowering barriers to entry, making it possible for smaller studios to produce expansive, visually compelling worlds.

2. Agentic AI: Building Intelligent, Autonomous NPCs

Agentic AI goes beyond simple NPC behavior, enabling characters that react in nuanced ways to player actions, adding layers of depth and unpredictability to gameplay.

Examples:

SEED (Electronic Arts): EA’s SEED division is developing agentic AI to create NPCs with context-sensitive behaviors, providing a new level of immersion in their games.
Fable Studio: Known for its work in VR, Fable Studio uses agentic AI to create evolving NPCs that grow and change based on player interactions, offering richer, unscripted experiences.

Market Impact: By shifting engagement from scripted events to adaptive, interactive worlds, agentic AI enables high replayability and player retention, opening the door for indie developers to create highly engaging, long-lasting games.

3. The Metaverse: Moving from Social Engagement to Fully Immersive Worlds

The metaverse concept envisions persistent virtual worlds where players can interact, transact, and experience activities that mirror real-world dynamics. AI plays a critical role here, enabling dynamic responses, economy management, and more.

Examples:

The Sandbox: By merging blockchain with virtual worlds, The Sandbox allows players to own, trade, and monetize assets, creating an economically viable gaming model.
Somnium Space: This platform uses AI to adjust virtual environments in real time, enhancing immersion by adapting to player actions.

Market Impact: The metaverse not only redefines social interactions within games but also creates new economic models where players can become stakeholders in virtual assets, making gaming a lifestyle and an economy.

The India Angle: Opportunities for Global Impact

AI-driven gaming holds unique promise for India, particularly in segments like real-time localization, vernacular AI for regional languages, and culturally nuanced storytelling. By capitalizing on India’s engineering talent and mobile-first audience, developers have a chance to create products that scale globally.

What’s Worked:

AI-Driven Real Money Games: Platforms like MPL have integrated dynamic game mechanics that adapt to player behavior, maintaining engagement and monetization.
Fantasy Sports with AI: Dream11’s algorithm-driven fantasy leagues have successfully tapped into India’s sports fervor, using AI to drive match recommendations and player interactions.

Challenges:

Limited Resources for Indie Developers: Although AI offers democratization, smaller Indian studios often lack access to the latest AI tools due to cost and computational limitations.
Fragmented Ecosystem: The Indian gaming market remains fragmented, with few resources and platforms to support cross-border distribution.

The Future of Gaming—Breaking the Monopoly

With AI-driven innovation, generative content, adaptive NPCs, and the metaverse, the gaming landscape is opening up in ways we haven’t seen before. These technologies allow new entrants to challenge established giants by offering more dynamic, personalized, and immersive experiences. As AI reduces the barriers to creating high-quality games, the potential for disruption is vast, not only for Indian companies looking to expand globally but for the entire gaming ecosystem.

This is an inflection point. As AI levels the playing field, the future of gaming will be written by those who innovate boldly—transforming not just how we play, but who gets to play in the industry’s sandbox.

If you’re building in this space, let’s connect. Reach out to me at: natasha@kae-capital.com

Breaking Monopolies in Gaming: The Age of AI (Part 1)

Posted on November 7, 2024 by Natasha Malpani Oswal

The Current State of Gaming—Monopolies, Money, and the Power Players

On the surface, the gaming industry appears vibrant and expansive, filled with innovative genres, a vast array of studios, and millions of dedicated players across the globe. But, dig a little deeper, and you find that a few industry giants control an overwhelming share of the revenue, IP, and even the technological platforms that underpin the majority of games. This has created a centralized, almost monopolistic ecosystem where a few players control not only the money but also the future of gaming innovation. In this blog, we’ll explore how these companies maintain their dominance and what that means for innovation and disruption in the industry.

Who Actually Makes Money in Gaming?

The global gaming industry, valued at around $200 billion in 2023 with projections to reach $268 billion by 2025, is far from egalitarian. Only a handful of companies control the lion’s share of profits and have the clout to shape the industry’s trajectory.

1. Game Studios and Publishers: The Titans of Content

The content in gaming is largely governed by major studios and publishers, often with proprietary franchises that guarantee recurring revenues. Here’s a closer look at these titans:

Activision Blizzard: Known for powerhouse franchises like Call of Duty and World of Warcraft, Activision Blizzard (market cap: ~$62 billion) continues to drive revenue through a mix of in-game purchases, seasonal updates, and annual franchise refreshes. In FY2023, they reported over $8 billion in revenue, fueled by battle passes, microtransactions, and live-service models.
Tencent: With control or stakes in over 600 gaming companies, Tencent is the world’s largest gaming company by revenue (over $32 billion in 2022). Their investment portfolio includes full ownership of Riot Games (League of Legends) and significant stakes in Epic Games (Fortnite). Tencent’s ecosystem spans publishing, game development, and distribution, giving it an unparalleled reach, especially in Asia.
Electronic Arts (EA): With iconic franchises like FIFA and The Sims, EA (market cap: ~$34 billion) is another powerhouse that relies on recurring revenue through annual releases and microtransactions. EA generated around $7.3 billion in FY2022, driven primarily by in-game purchases in its sports games, where ongoing updates add continuous value for players.

2. Development Tools and Platforms: The Silent Powerhouses

Beyond studios, companies like Unity and Epic Games control the technology that powers the majority of games. Their influence is pervasive, as developers worldwide rely on these platforms.

Unity: Powering over 50% of mobile games, Unity has become the go-to development engine for indie developers and smaller studios. They reported $1.4 billion in revenue in 2022, drawing income from licensing fees and in-game ad placements. Unity’s accessibility and robust ecosystem have made it indispensable, but it has also centralized control of mobile game development.
Unreal Engine (Epic Games): Known for its fidelity and powerful toolset, Unreal Engine is favored by AAA studios. Epic Games, valued at $31.5 billion, not only generates revenue through licensing but also directly from its Epic Games Store. By offering competitive revenue splits, Epic has positioned itself as a challenger to distribution giants like Steam

3. Distribution Platforms: Controlling Access and Profits

Once developed, games must reach players, and distribution platforms play a critical gatekeeping role.

Steam (Valve): Dominating the PC game distribution market with over 75% market share, Steam charges developers around 30% of their revenue. Valve earns an estimated $3 billion annually from Steam, benefiting from its monopoly-like hold on the PC ecosystem.
Console Platforms (PlayStation, Xbox): Sony and Microsoft benefit not only from console sales but also from every digital purchase on their stores. PlayStation generated $17.4 billion in revenue in 2022 from game sales, in-game purchases, and PlayStation Plus subscriptions. This vertical integration makes them essential players in the digital gaming economy.

Engagement Dynamics: Few Games Capture Lasting Attention

While thousands of new games are released each year, only a select few manage to sustain engagement and drive long-term revenue. Fortnite, League of Legends, and Call of Duty exemplify games that dominate through frequent content updates, seasonal passes, and subscription models. These games set the standard for engagement and retention, shaping player expectations and creating models that smaller games struggle to replicate.

India’s Perspective: What’s Worked and What Hasn’t

India’s gaming sector, estimated at $3 billion with a user base exceeding 500 million gamers, has emerged as a unique market. Real-money gaming (RMG) and fantasy sports have taken off, driven by cricket and sports fandom. Companies like Dream11, Nazara Technologies, and MPL have found success by catering to local preferences, mobile-first access, and leveraging affordable smartphones.

Success Stories:

Dream11: India’s first gaming unicorn, Dream11 has thrived by capitalizing on cricket fandom. By creating a scalable, monetizable fantasy sports platform, they’ve established a loyal user base and continue to lead the fantasy sports market.
Nazara Technologies: With a diversified portfolio, Nazara has grown through strategic acquisitions and focus areas like gamified learning and esports. Their approach combines brand-building with category leadership in high-growth verticals.

Challenges and Failures:

High CAC in Real-Money Gaming: With multiple RMG apps vying for user attention, customer acquisition costs (CAC) have surged, impacting profitability.
Regulatory Ambiguity: The lack of consistent regulation for real-money gaming and fantasy sports has created a challenging environment, with companies often facing legal hurdles.

A Market Dominated by Few, Controlled by Many

The gaming market remains tightly controlled by a few players who wield control over content, technology, and distribution. For India, the path forward will require navigating regulatory challenges, diversifying beyond RMG, and capitalizing on unique cultural touchpoints to create global appeal. In Part 2, we’ll explore the transformative potential of AI in breaking these monopolies and democratizing game creation. In case you’re building in this space, connect with me here: natasha@kae-capital.com

The Transformative Power of GenAI in Media & Entertainment

Posted on April 5, 2024March 18, 2026 by Natasha Malpani Oswal

In the second part of this series, we delve into the unique blend of opportunities and challenges that the rise of GenAI in media & entertainment has brought about, along with evolving consumer preferences.

Current Landscape

The decline in traditional media globally contrasts sharply with the digital transformation successes seen in India. Digital platforms like Disney+ Hotstar’s utilization of cricket broadcasting rights to amass a large subscriber base exemplifies the potential for innovative monetization strategies despite the high costs associated with content and rights acquisition. In 2022, their strategy led to a 30% increase in subscribers during the IPL season alone, demonstrating the power of targeted content delivery.

The industry’s pivot towards premium content across sectors, despite existing monetization challenges, is also notable. While homegrown vernacular social media platforms have struggled to find monetisation models, the road for more niche communities and content is just being paved.

The audio segment, along with the comic book and gaming industry, points towards a thriving ecosystem ripe for innovation, with new-age platforms like Pratilipi, Dashtoons and Mugafi paving the way for new intellectual property (IP) development.

The GenAI Disruption

GenAI is setting the stage for a revolution in content creation and distribution. The technology’s capacity to generate personalized, engaging content at scale offers unprecedented opportunities for M&E companies. This cutting-edge technology is already reshaping how content is produced, from pre-production and development to distribution and marketing.

Tools like Midjourney and Stable Diffusion are paving the way for new forms of art. Audio platforms like PocketFM are using GenAI to scale up hits. Sora, Descript and RunwayML are expanding from generative video editing to creation. In India, startups like Rephrase.ai and HippoVideo in India are harnessing GenAI to create hyper-personalized video content, indicating the technology’s transformative potential across text, image, video and audio.

Tyler Perry has already halted his $800m Hollywood studio expansion plans in the face of this seismic shift to new models of production.

Predictions and Future Trends

These are my bets for some of the next-generation startup models we’ll see emerge in this sector:

1) Everyone is now a creator:

Given the rise of LLMs, everyone is now a creator. Supply is no longer the constraint across formats- moderating quality, generating demand and rethinking search are the real moats to building at scale. We will see the rise of entirely new AI-first platforms focused on highly personalized content and digital goods, with Gumroad leading the way.

2) Rethinking search and monetisation:

Regardless of the format you choose- audio, video, comic books, or animation- if you’re building a content marketplace in 2024, the game-changers will unlock or create a new category of consumer behavior when it comes to discovery or monetization. Wobot Intelligence, an Indian startup, is pioneering AI-driven solutions that transform content marketplaces.

3) Hacking for hits:

If you’re building a content platform, you will still have to show your path to either generating a ‘hit’ or building on existing IP. Every generational media business- whether it’s Disney, Netflix or T-series- is built on one IP that ‘works’ to begin with, and you can only hack or buy distribution up to a certain point. You have to hack both supply and demand until you get that elusive ‘hit’

4) Gaming gets more immersive:

Gaming will be reimagined and will become the largest category in this sector. We will see entirely new fantasy sports, virtual worlds, and never-ending games as GenAI changes the way we build games and makes them increasingly immersive. Real-time AI integration, as seen with Epic Games’ Unreal Engine, allows creators to build dynamic, responsive worlds, pushing the boundaries of user interaction.Kae is investing in a company which helps users create 3D assets from text using Gen AI, which could have interesting applications in gaming. A16z has already set up a new arm that focuses on investing in the disruption of gaming.

5) Social media gets less social:

The next generation of social media networks will go deeply vertical and niche, focusing on AI friendships like or being highly private. There is no middle ground. The rise of platforms that pioneer personal AI interactions like Replika, Anima, and CharacterAI are already showing that we’re finding solace in AI.

Conclusion

While the rise of GenAI does pose several challenges when applied in this industry such as lack of originality, deep fakes, intense competition for creators and IP minefields, the evolving landscape of India’s M&E sector offers a golden opportunity for founders to innovate and thrive.

Embracing GenAI, understanding nuanced consumer behaviors, and pioneering new models in content creation and distribution will be key to navigating this sector successfully.

If you’re building in this brave new world, do reach out (natasha@kae-capital.com). I’d love to brainstorm with you on staying close to the user and going deep on understanding their pain points, building for retention and quality, and hacking growth.