Will GenAI Change The Game? Gaming Predictions For 2025

The love for gaming is evident among young Indians, especially those coming from Generation Z, but after a relatively meek 2024, gaming startups would be hoping for a turnaround in fortunes in 2025.

In fact, India is one of the largest markets for gaming companies, with close to 600 Mn active gamers in FY24, according to gaming investor Lumikai.

However, this growth was tempered with regulatory uncertainty that emerged in 2023 and new taxation rules for real money gaming, which caused a stir among startups. While console, PC and casual mobile gaming was unaffected by these regulations, the overall investor sentiment for Indian gaming startups — largely driven by fantasy sports and RMG — was dampened.

According to Lumikai, the Indian gaming market generated $3.8 Bn in revenue in FY24, marking a 23% increase compared to $3.1 Bn in FY23. Real money gaming was the largest revenue driver, contributing $2.4 Bn to this total, but in-app purchases or microtransactions were the fastest-growing segment, up 41% YoY in FY24.

By FY29, Lumikai estimates in-app purchases, with a CAGR of 44%, to surpass RMG revenue. This indicates a gradual yet steady shift towards casual and hyper-casual gaming in India, which is perhaps one of the major trends we foresee in the gaming startup ecosystem in 2025.

What’s In Store For Indian Gaming Startups In 2025

“If we look at new media, its key constituents include gaming, video, TV, social animation, VFX, and audio. Gaming now constitutes 30% of this $12.5 Bn market. There has long been a perception that the market is dominated solely by real-money or skill-based gaming. However, a more holistic view reveals significant growth driven by in-app purchases and ad-based revenue,” Salone Sehgal, founding general partner at Lumikai told Inc42.

Sehgal believes that the upcoming new age for gaming will lift related industries such as animation and VFX as well as content creation.

So, although 2024 began on a gloomy note for the Indian gaming industry, the ecosystem found its footing by the end of the year, as funds started trickling back in for certain startups outside the RMG fold.

For instance, Mayhem Studios, the mobile game development arm of the gaming unicorn Mobile Premier League, raised undisclosed capital in a fresh funding round from gaming-focused VC firm Lumikai.

Similarly, LightFury Games, founded by former Unacademy CMO Karan Shroff, secured $8.5 Mn in seed funding led by Blume Ventures. Following this, In October, gaming studio Funstop Games raised $5 Mn in its Series A funding round.

The emergence of GenAI for content and asset creation has also spurred game development significantly, and this is only expected to exponentially increase in markets such as India, where development resources and talent are scarce.

As we move into 2025, the growth of mid-core gaming in India is expected to accelerate, with more studios emerging on the scene. Moreover, with the increasing number of gaming PCs and the transition of mobile gamers to these platforms, cross-platform gaming is expected to grow significantly.

The question on everyone’s minds is: will 2025 be the year where India finally shows its latent potential when it comes to the gaming industry? Here are our predictions for the gaming industry for 2025 based on what experts and investors believe.

Gaming Investment To Rebound In 2025

After 2023 saw a massive drop in gaming investments, the first half of 2024 also experienced a slowdown. However, the second half already showed improvement. Now, the investment climate for gaming in 2025 is poised for a rebound.

Increased confidence in hybrid monetisation models and the success of emerging markets including India will fuel this rebound, according to experts.

Gaming-focussed investors are likely to favor startups focusing on niche genres or innovative delivery platforms, such as cloud streaming and AI-powered game personalisation.

According to said Anuj Tandon, partner at Bitkraft Ventures, a US-based early-stage investor that recently established a base in India, this market is one of the few bright spots in the global market, with irreversible momentum in mobile gaming and overall video games.

“Globally, I believe M&As are making a comeback in gaming, which will spur the industry’s flywheel and lead to more early-stage investments worldwide. In India, I foresee mobile content, interactive media, cross-platform games, games for new platforms such as Roblox and UEFN, and gaming tech including AI receiving more investments in 2025,” he said.

Lumikai’s Sehgal echoed this sentiment. According to her, as global markets like North America face a slowdown, emerging markets like India and Southeast Asia are poised to attract more investments. She noted that Lumikai invested in eight gaming startups in 2024, including QuriousBit, Bombay Play, and Studio Sirah.

“A number of global investors have partnered with us, and there is significant interest in Indian startups and Indian entrepreneurs. While growth in global markets is slowing, India continues to grow rapidly. In particular, the interactive media and gaming sector is experiencing double-digit CAGR growth rates, which are not being observed elsewhere in the world. This has generated substantial enthusiasm from both domestic and international investors,” she said.

GenAI Catalyses Game Development

Generative AI has captured the attention of the world, and it’s true for gaming too. For example, game developers have already started using gen AI tools such as Claude AI, Cursor, and DALL-E 2.

Apart from generating design elements, on the more experimental front, AI can assist in creating open-world games and real-time design elements, enhancing the development process and reducing dependency on large teams, Sean Hyunil Sohn, CEO, KRAFTON India, added.

Gen AI is also helping in marketing by automating ad creatives besides development.

Within game development, developers are using AI for level personalisation, adaptive game mechanics, and smarter non-play character (NPC) behaviours. The use of AI-powered platforms are helping game developers to create richer experiences with reduced time and resources, Nitish Mittersain, joint MD and CEO of listed giant Nazara Technologies, said.

India lacks a long-standing culture of game development compared to other countries, as the industry here is still relatively new. Hence, finding the right talent has always been a challenge in the market. But the rapid advancements in AI tools are bridging this gap, according to Roby John, founder of gaming studio Supergaming, which launched battle royale game Indus in 2024.

“We see AI as the perfect co-developer—augmenting human capabilities rather than replacing them. It’s a tool that complements and enhances our efforts, making the development process faster and more efficient,” Supergaming’s John added.

Casual Hyper-Casual Gaming To Continue Domination

The innovation in AI and cloud-based tools is expected to benefit AAA game development largely because of the resource-intensive nature of development, but casual game development will also see a big boost.

By slightly reducing production costs, these innovations may encourage studios to reinvest in high-budget projects. This comes at a time when India saw the launch of two homegrown AAA titles- ‘Indus Battle Royale’ and ‘Rage Effect: Mobile’ in 2024.

LightFury Games, which raised funds in 2024, is also looking to develop AAA titles, which typically target the latest generation of gaming hardware, and take several years to develop.

“While AAA game development will see some resurgence driven by next-gen hardware capabilities, the industry will remain cautious due to the high costs and risks associated with blockbuster titles. Instead, a hybrid approach is likely to dominate, where AAA-level experiences are delivered through episodic content or expanded DLCs. Smaller, cost- efficient games with hybrid casual mechanics will continue to thrive due to their quick turnaround and ability to capture broad audiences,” Felicity Games’ Choudhary added.

Despite the demand for cinematic and immersive experience, the trend toward hyper-casual and mid-core games will continue to dominate as these genres are proving to offer a higher ROI, making them particularly attractive to mid-sized studios and emerging developers.

As investors increasingly favour cost-efficient titles, gaming studio founders are also focussing on casual gaming currently. However, according to one gaming startup founder, there is some risk involved in developing AAA titles while relying on casual games for generating revenue, since one cannot completely abandon development of the casual game either.

Cross-Platform Gaming To Grow

Along with transition in game development, gamers’ behaviour is also evolving. While India remains primarily a mobile-gaming market, the demand for gaming PCs and consoles is steadily increasing.

Companies like Asus are making significant bets on gaming PCs, while US-based CyberPowerPC entered India this year to offer customised gaming PCs. Additionally, Backbone, an American company, has entered the market with Backbone One controller, which turns mobiles into handheld gaming consoles.

Hence, cross-platform gaming is gaining significant traction in India, driven by the growing demand for seamless experiences across mobile, PC, and console platforms.The rise of cloud gaming services is also fuelling this growth, enabling gamers to access high-quality games on various devices, regardless of hardware limitations, Krafton India CEO said.

As seamless gaming experiences across mobile, PC, and console platforms will become more prevalent, developers will have to focus on unifying gaming ecosystems, allowing players to access their progress and assets on any device, Nazara’s Mittersain said.

Gaming Partnerships Will Become A Lever

Besides cross-platform gaming, cross-sector partnership is also becoming more prominent in the gaming ecosystem. While gaming has not been considered as a part of traditional media, the lines are blurring gradually.

Partnerships with OTT platforms, film industries, and entertainment sectors are driving transmedia storytelling, enabling licensed gaming IPs to expand into movies, series, and even live events, as per experts.

For example, KRAFTON has collaborated with Bollywood stars like Ranveer Singh and Deepika Padukone for broader audience appeal. On the other hand, OTT platforms are also embracing gaming increasingly. For example, this year JioCinema released a 6-part Poker focused reality TV series, Poker Masterclass with PokerBaazi.

Beyond entertainment, partnerships are driving innovation in education and healthcare. Gamified learning platforms, powered by AI-based adaptive learning systems, are making education more interactive and engaging. Similarly, the healthcare sector is leveraging gaming technologies for mental health therapy, physical rehabilitation, and fitness, with wearables and AR/VR enabling immersive, health-focused experiences. Hence, corrs-media partnership is expected to emerge as more common in 2025.

New Monetisation, In-App Purchases To Grow Rapidly

Keeping in pace with the growth of gamers and new formats, monetisation opportunities are also growing in India. In-app purchases continue to thrive, with developers leveraging personalised microtransactions to engage users through cosmetic upgrades, power-ups, and unique experiences. In-app purchase emerged as the fastest growing segment with 41% year-on-year growth in FY24 to reach $600 Mn revenue in the financial year, according to the Lumikai report.

“We’ve seen three primary forms of monetisation emerging in the gaming industry: in-app purchases or microtransactions, ad-based monetisation, and the growing trend of virtual gifting and tipping. For instance, one of our portfolio companies is thriving solely through virtual gifting and tipping, a model experiencing remarkable growth,” Lumikai’s Sehgal said.

According to her, this shift has been largely facilitated by UPI, which has eliminated the friction of entering debit or credit card details. UPI has unlocked the potential of microtransactions, enabling first-time users to pay seamlessly. Microtransactions as low as INR 29 have become the preferred entry point for new players.

Interestingly, on the higher end of spending, subscription-based models like Xbox Game Pass and PlayStation Plus are also gaining popularity as players look for affordable access to vast game libraries.

In addition, reward-based advertising is also becoming a staple for free-to-play games, ensuring steady revenue without disrupting the player experience. With the rise of cloud gaming, pay-per-use and time-based models are also emerging, redefining how games are monetised in India, according to industry experts.

Real Money Gaming Is Not Dead

Over the past year, casual and mid-core gaming have dominated discussions in the gaming industry. Meanwhile, real money gaming, the largest segment in India’s gaming market, appears to be on the back foot. While it may seem that the industry is struggling, the numbers tell a different story.

According to a Lumikai report, RMG platforms added approximately $400 Mn to their topline in FY24, driven by absorbing users’ GST costs and a packed live sports calendar featuring two cricket World Cups and an IPL season. However, despite the topline growth, taxation challenges in the RMG sector led to margin compression and negatively impacted profitability.

“What’s more positive is that larger companies have become more financially responsible, focusing on sustainable business models and controlling losses. Although they have to absorb GST costs and offer some discounts to retain players, they are cutting costs in other areas.” according to a high-level executive at an RMG startup.

India’s fantasy and overall RMG market has proven resilient in 2024. While there has been a slowdown in startups within the RMG sector, the incumbents have continued to grow. Despite the challenges posed by retrospective GST taxation issues, which remain an overhang on regulations, resolving these concerns in 2025 could unlock significant liquidity for investors, employees, and other stakeholders, according to BitKraft’s Tandon.

With strong macroeconomic conditions and growing retail enthusiasm for new-age businesses, some RMG companies may even consider going public and launching IPOs, he added.

[Edited by Nikhil Subramaniam]