SuMi’s Coffee Break Column

The Tokyo Games Show 2023 (TGS 2023) opens later this month with the theme of: ‘games in motion, the world in revolution’. This year’s show aims to push the games industry to “be the tailwind of global growth” and companies appear invested – this year will have a record 770 exhibitors and 2,684 booths. [1] Additionally, this year marks the first fully-open exhibition – including an in-person venue, virtual venue and online exhibition – for the first time in four years. With dedicated in-person areas for AR/VR (Augmented Reality/Virtual Reality), Esports, and a reported 1,762 game titles appearing at TGS 2023, gamers will revel in excitement. Undoubtedly there is much optimism about the games industry and its prospects. But what exactly does the future hold? In this article I would like to introduce five key themes that stand to blossom in the future of gaming.

What future is there for the gaming industry

AI (Artificial Intelligence)

What is it: The use of machines to perform tasks that we would associate with cognitive ability of human beings.

AI poses untold opportunities for the gaming industry. Video games are notoriously long and expensive to make - AAA games like Elden Ring and Resident Evil Village can take up to five or more years to be released. But AI could cut down development times and budgets.

Gaming companies have already begun to implement AI within their workflows. King, the giant behind Candy Crush Saga, reportedly utilises AI to gauge the difficulty of levels in its testing phase. According to Steve Collins, the technology chief of King, using AI in this way is “like having a million players at your disposal.” [2]. If AI can be used to automate processes which would usually require hours of work by a dedicated team, development times and budgets could be cut down drastically, allowing a studio to work on more projects and potentially release more games and content. This could also lead studios to become even more creative and adventurous with their titles.

Cloud Gaming

What is it: The use of remote servers to stream a game rather than using a physical disk/cartridge or digital download.

Microsoft’s planned acquisition of Activision Blizzard has shone a spotlight on cloud gaming and its significance for the future of gaming. This leaves the question to many about what cloud gaming really is and what its importance is. 

Cloud gaming allows players to stream a game on a wide variety of devices, increasing the accessibility of a game to players who may only have a smartphone or low-spec laptop rather than an expensive console. Additionally, cloud gaming is often offered on a subscription basis, which can provide a more affordable option for gamers as they will usually gain access to a huge catalogue of games. Examples of cloud gaming services currently available include PlayStation Plus Premium and Xbox Cloud Gaming. While cloud gaming still has a way to go – infrastructure to support the technology is not fully developed to support the streaming of some high-spec AAA titles – it is a growing market and could revolutionise gaming. This is why this market has been forecasted to jump from $2.73 billion in 2022 to over $13 billion by 2023, according to research firm S&P Global. [3]  

AR/VR (Augmented Reality/Virtual Reality)

What is it: AR refers to the use of technology to implement computer-generated content (sound and visual effects) into the real word. An example of this technology can be seen in the game Pokémon GO. Meanwhile VR refers to a simulated virtual world and usually requires a headset to transport the player into the virtual environment.

AR and VR games offer gamers another interactive element to the gaming experience, drawing more on a player’s senses through a 3D gaming experience. And according to a survey by EY, 97% of gaming executives believe that the gaming industry is the center of the metaverse today. [4]

While controversial for its bulky headsets and high price tags, VR gaming still has an interesting future as technology continues to evolve and offer more innovative and interactive gaming experiences. SONY recently released the PlayStation VR2 and has revealed there are currently over 100 VR games in development, showing that the firm is invested in VR and its future in gaming. [5] The PlayStation VR2 has been praised for its lightweight headset and easy set-up, signalling that VR has come a long way since the release of the Oculus Rift in 2016. While VR seems to have some way to go before it reaches the mainstream, the gaming industry does not seem likely to let go of this technology any time soon. 

Meanwhile, AR gaming has the potential to explode in popularity. AR offers players a new form of interactivity and immersion by combining the game’s assets with their own physical environment. Forbes’ Kaj Leroy notes that “examples like Pokémon Go have effectively showcased the possibilities of AR gaming by utilizing the player's camera, GPS and gyroscope to guide them to locations where the game overlays virtual elements onto the real world.” [6] Additionally, unlike VR, AR games do not require a headset and can be played easily on a smartphone which makes them more accessible to a wider audience. 


What is it: Rather than spending a fixed amount on a game upon release, a growing number of games are being released for free while offering in-game purchases.

The gaming industry is seeing a shift from Pay-to-Play to Free-to-Play. This shift is increasing the player base for games by removing the initial price hurdle for new players. Once a player is invested in a game, there is a greater appeal to spend real currency on add-ons such as in-game cosmetic items or the chance to win items through loot boxes. 

An example of the success of free-to-play can be seen in the success of Monster Strike, a free-to-play JRPG mobile game. Its accumulative revenue surpassed US 10 billion in October 2022 since its release in 2013 and the game has recorded 55 million downloads globally, according to data from Sensor Tower. [7] Other games like Fortnite and League of Legends also operate on this model and have been widely successful at maintaining a longstanding player base.


What is it: Short for electronic sports, Esports refers to competitive gaming to win a prize or title within a tournament or competition.

The rise of Esports also signals a boost for the gaming industry, with the market estimated to be worth $1.7 billion by 2025. [8] Esports matches are often streamed online but have also filled arenas. The rise in Esports has not only created opportunities for professional gamers and gaming companies, but also for advertisers and content creators/streamers. An example of this is the recent boom in popularity of the FPS (first person shooter) game VALORANT in Japan. VALORANT held its tournament – the 2023 VALORANT Champions Tour - in Japan in June, filling up around 37,000 seats over 12 days, highlighting the huge appeal of Esports. [9]  Esports represents a new avenue of game promotion and marketing, as well legitimacy to the industry within the mainstream. 


Stocks to watch

With the above five themes in mind, now I would like to introduce two stocks that I believe stand to benefit and are ones to keep an eye on.

Koei Tecmo Holdings Co Ltd (3635.T) – Theme: Generative AI

Koei Tecmo Holdings is a leading entertainment company with operations in video games, amusement facilities and real estate. However, Koei Tecmo is probably best known for its franchises such as Dynasty Warriors, Dead or Alive, Nioh and the Atelier Series. We highly evaluate its business franchise and diversified business portfolio. Moreover, we are excited to see the company’s openness to adopting generative AI in an ethical way. The firm is currently working on their own internal guidelines to consider security and copyright risks. [10] Koei Tecmo are also looking into implementing AI into their in-house game engine, Katana Engine, to aid developers. One of Koei Tecmo’s strengths is the ability of the firm’s proprietary Katana Engine which allows the firm to use AI for what they want to do rather than moving simply in line with AI. We believe that this company will embrace technological developments and its investment will pay dividends in the mid to long term.

Disco Corporation (6146.T) – Theme: AR/VR

Disco Corporation is a manufacturer of precision machines, precision processing tools as well as semiconductor equipment. Semiconductors play a key role in the development of new technologies such as AR, VR, AI and the IoT (Internet of Things). Lightweight VR headsets would not be possible without the miniaturization of semiconductor components. In fact, semiconductors are essential to produce AR and VR devices that are energy efficient and have a high processing power to deliver interactive experiences. [11] As the gaming industry expands further, we can expect to see semiconductor related manufacturers like Disco Corporation to benefit from increased demand for their technology.


With new technology being developed every day, we believe the gaming market has untold expansive potential in the future. The above five aspects of gaming – AI, AR/VR, Cloud Gaming, Free-to-Play and Esports – will play a key role in the future of the gaming industry and we will continue to monitor developments in these areas. 



[1] CESA, 4 September 2023, ‘開幕まであと17日! TGS2023の全貌が徐々に明らかに 出展社数、出展小間数とも過去最多 出展ブース概要、出展タイトル、公式番組タイムテーブルが公開’, tgs0904newsjp.pdf ( [accessed on 12/09/2023]

[2] The Economist, 5 April 2023, ‘How AI could disrupt video-gaming’, How AI could disrupt video-gaming ( [accessed on 23/05/2023]

[3] Mary-Ann Russon, 28 April 2023, ‘What is cloud gaming and will the death of the Microsoft Activision Blizzard deal affect it?’, [accessed on 23/05/2023]

[4] Scott A. Porter, 2022, ‘EY Gaming Industry Survey report: Chapter 3 | Insights on the metaverse and the future of gaming’, [accessed on 11/09/2023]

[5] Tomislav Bezmalinovic, 22 May 2023, ‘Playstation CEO promises long-term supply of games for PSVR’ , [accessed on 23/05/2023]

[6] Kaj Leroy, 21 June 2023, ‘Revolutionizing Reality: The Current Uses And Future Of AR’,

[accessed on 11/09/2023]

[7] Hideyuki Tsuji, October 2022, ‘モンストが世界累計収益100億ドルを突破、202210月に入って国内ダウンロード成長量でも4位に上昇’, [accessed on 26/05/2023]

[8] The Week, 13 January 2023, ‘How esports are taking over the globe’, [accessed on 23/05/2023]

[9] 平嶋健人、岡村真帆, 26 July 2023, ‘ヴァロラント 見る専熱狂1R2分の戦闘ゲーム、視聴 1.5億時間 女性も会場で推し活’, [accessed on 27/07/2023]

[10] Kazuhisa, 30 August 2023, ‘[インタビュー]コーエーテクモという会社のAIへの向き合い方は,堅実かつ歴史に裏打ちされたものだった。AIの使い方から会社のポリシーに至るまで,普段は表に出ない人にあれこれ聞いてみよう’, [accessed on 13/09/2023]

[11] Marcin Frąckiewicz, 22 July 2023, ‘Role of Semiconductors in the Development of VR and AR Technology’, [accessed on 13/09/2023]

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