Q1 2024 Gaming Industry Report Released,
View Here

Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.


Key events and trends in gaming from 2023


2023 was another eventful year in gaming. This transformative year was defined by groundbreaking strides in artificial intelligence, cutting-edge developments in computing for both personal and enterprise spheres, and an accelerating shift in content access and distribution methods. While many will likely remember 2023 as the year of “AI in Gaming”, we believe this is one of many core developments for gaming in 2023 and by no means the only one.

At Konvoy, we have been documenting both the upsides and challenges of these evolving trends throughout the year through our weekly newsletter and quarterly Gaming Industry Reports. As we approach the year's end, we want to take the time to reflect on a few of the most significant trends this year and their implications for the future of gaming.

2023: Key Trends in Gaming

In this year-end note, we will focus on the following key trends in gaming for 2023:

  • The Future of User Generated Content (UGC)
  • Free-to-Play is Creating an Unstable Future
  • The Rise of AI NPCs
  • The Web (and PWAs) Could Re-Shape Gaming Distribution
  • Revenue Per Gamer is Stagnant

1) The Future of User Generated Content (UGC) will not look like Roblox: The future of UGC in gaming is a dynamic and promising opportunity. It not only enables players and creators to develop and expand on existing intellectual properties but also fosters a financially rewarding ecosystem.

Over the past few years, we have observed how platforms like Roblox and Minecraft have revolutionized the gaming industry by enabling players to create and share their own content. Currently, platforms like Roblox demonstrate a flourishing UGC economy, with Epic Games (Fortnite) also venturing into this space through Unreal Editor for Fortnite (UEFN). When we look at 2024 and beyond, we see three key UGC archetypes evolving:

  1. Tools-First (Roblox strategy)
  2. Platform with First Party IP transitioning existing games to UGC
  3. Game-centric UGC (Epic Games strategy)

We predict the future of UGC will depend heavily on the success of initial intellectual properties (IP) to attract players before being able to expand to a platform offering (i.e. helping to solve the chicken-and-egg problem for new platforms).

The UGC field is poised to produce some of the most successful gaming companies in the coming decade and we are excited to invest in companies building with this as a core theme.

Newsletter: Future of User Generated Content

2) Free-to-Play is Creating an Unstable Future: Since the early 2000s, free-to-play (FTP) gaming has become one of the most important business model innovations in the gaming industry by offering greater access to consumers and fostering business model innovation for the industry. While the genre in its infancy was scaled by hypercasual / casual games, this business model has produced some of the largest premium titles in gaming such as League of Legends and Fortnite.

However, this model created unique problems; games with FTP business models must drive higher player volumes due to the lower average revenue per player which results in aggressive conversion techniques, semi-creepy targeting, and a flurry of ad monetization. These methods are particularly harmful/unwanted for younger players. Despite making gaming more accessible, FTP games often sacrifice depth and quality, which inadvertently makes many FTP games quite easy to play and therefore massively popular.

Recent regulation around data privacy for consumers (specifically GDPR and IDFA) have dramatically impacted the FTP industry’s ability to monetize given their historical ability to hyper target users. However, this shift in data privacy is forcing the FTP gaming market to adjust its business model towards a more traditional and sustainable path forward (less reliant on the volume approach and more IAP focused). This balancing of profit with a positive user experience is likely to force an evolution of the sub-segment’s business model. We are excited for this development in gaming as its near term adjustment-pains will be rewarded with long term growth.

Newsletter: The Rise and Challenges of Free-to-Play Models

3) The Rise of AI NPCs: Integrating AI-driven Non-Playable Characters (NPCs) into games and virtual worlds opens new possibilities for innovation. Today, AI NPCs are a hot theme in VC investing as VCs try to find value in the depths of AI x Gaming. Companies like Inworld ($120m+ in funding, CBInsights) and CharacterAI ($190m in funding, CBInsights) have seen a lot of funding traction but they are still in the early phases of tech integration. The big question moving forward will be if these companies can seamlessly integrate into existing titles (or those in-development) or build technology that will create completely new gaming genres.

We have highlighted three key applications of AI NPCs in gaming and other sectors:

  1. Emergent gameplay: involves AI NPCs with expanded knowledge and limited autonomy, creating dynamic and immersive game environments.
  2. Populating virtual experiences: focuses on AI NPCs enhancing realism in large-scale virtual spaces, overcoming technical limitations.
  3. Controlled randomness in simulations: emphasizes using AI NPCs to introduce unpredictability, thereby elevating the realism and effectiveness of various simulations across different industries.

In gaming, AI NPCs can significantly enhance gameplay and user interaction within virtual environments. Their potential lies in their ability to simultaneously scale and enhance the immersive experience in a virtual world. If they can achieve this, this would transcend gaming limits today and expand the industry dramatically.

Newsletter: AI Non-Player Characters

4) The Web (and PWAs) Could Re-Shape Gaming Distribution: This year, we have highlighted the evolution of web and app distribution, focusing on the gaming industry and the rise of Progressive Web Apps (PWAs). Our interest in this trend has grown due to ongoing legislation (Google vs Epic, Apple vs Epic) that points to a higher likelihood of open app distribution ecosystems in the future.

The potential of PWAs in gaming is even higher than traditional apps as gaming apps specifically have an outsized benefit from the PWA’s ability to be lightweight, faster, and able to work offline. Additionally, PWAs offer wider distribution and better discoverability compared to native apps, suggesting a significant impact on gaming distribution and consumption.

Developers are seeing the repercussions of IDFA-deprecation and increased focus by companies like Apple and Google on targeting new players and delivering relevant ads to existing users. These walled gardens are coming under increased scrutiny by regulatory bodies but there isn’t a clear solution that is being proposed by these same bodies. Apple and Google are also generally coming out as winners in these lawsuits. The increased pressure for features like side loading opens up opportunities for developers to leverage the web as a portal, distribution, and UA channel through the development of PWAs. On the graphics side, where there is no legislative pressure, WebGPU (a new web standard that supports modern graphics on the web) has officially shipped in newer versions of Chromium (Google).

Newsletter: PWAs Will Shape the Future

5) Revenue Per Gamer is Stagnant: As of 2022, the gaming industry earns about $59 per gamer annually, a figure that has remained stagnant since 2019, despite the addition of approximately 400 million new gamers and $30 billion in revenue.

This stagnation is attributed to factors like the predominance of mobile gaming in emerging markets with lower revenue per user, the free-to-play model's prevalence, and the reluctance of game studios to introduce paywalls due to the risk of alienating passionate gamers. Our newsletter, Revenue Per Gamer ($59), highlights the potential for significant revenue growth if the industry can improve monetization, especially considering the low cost of gaming per hour of entertainment compared to other media forms.

Below, you will see our internal analysis that shows if the gaming industry were able to add $0.01 or $0.02 to each hour of entertainment across all three platforms of gaming, this would add between $29-49b to the industry in annual revenue.

Takeaway: In 2023, key gaming trends included the evolution of UGC, focusing on original IPs and diverse models like Roblox and Fortnite; the evolution of monetization and game quality of the Free-to-Play (FTP) model; innovation of AI-driven Non-Playable Characters (NPCs); and infrastructure development to support PWAs as an avenue for game distribution. These developments indicate that we are entering a transformative era in gaming, emphasizing innovation, user engagement, and the balance between profitability and player experience. The industry is navigating new business models and technological advancements, shaping the future of gaming and reinforcing our confidence to continue investing in this exciting space.

Great things ahead in 2024.


Key events and trends in gaming from 2023

Welcome to Game Changers, the podcast that takes you beyond the games and into the heart of the gaming industry's future. Brought to you by Konvoy, a Denver-based venture capital firm investing in the platforms and technologies at the frontier of gaming. This podcast is your backstage pass to the pioneers, innovators, and visionaries who are redefining how we play and experience these virtual worlds.

In each episode, your hosts—Josh Chapman, Jason Chapman, and Jackson Vaughan, the founders of Konvoy — invite you to join them for candid and open conversations with the industry's most influential leaders. These guests are the “Game Changers”, the masterminds behind the scenes who've built remarkable enterprises and continue to push the boundaries of what's possible for our industry.

Whether you're a gamer, a tech enthusiast, or a startup aficionado, the Game Changers podcast offers valuable insights, inspiring stories, and exclusive access to the minds shaping the future of the gaming industry. Join us as we explore who these Game Changers are, what they've built, and what they're doing now.

Are you ready to level up your understanding of the gaming industry? Subscribe now to "Game Changers" and embark on a journey that goes beyond the screen to uncover the stories behind the gaming world.