Gaming stocks are down substantially on Google’s Genie 3 release. Seems a bit premature.

Yesterday Google DeepMind publicly launched Genie 3, a real-time AI world model that generates navigable 3D environments from text prompts, and public market went into panic, drawing the same analogy as the AI-driven selloff in SaaS.

At TIRTA Ventures, we’ve been tracking world models since Genie 1’s 2D platformers in 2024. This release doesn’t surprise us. What surprises us is that the market still doesn’t understand why people play games.

The software analogy doesn’t apply here.

When AI coding assistants emerged, the thesis was straightforward: developers want to ship code faster. Code is functional. Efficiency gains translate directly.

Games are different. People don’t play games to “consume content efficiently.” They play for:

• IP and narrative: the worlds and characters they love
• Mastery: skill progression within a defined rule set
• Persistence: progression systems, achievements, status
• Social connection: fostering connection and communities with friends

Genie 3 delivers none of these. It generates impressive vibe simulations, 60-second explorable environments at 720p. But there’s no persistence, multiplayer, or designed challenge.

This is a new media format: interactive, real-time videos that many have dreamed about for years, but not a replacement for games. What Genie creates is closer to interactive concept art. Useful for prototyping? Absolutely. A threat to Fortnite or GTA? Not remotely.

Unit economics are also quite unfeasible, even with scaling laws, for at least 5+ years. At $250/month with 60-second sessions, you’re also not shipping a live service game on this infrastructure anytime soon. Unlike AI-generated workflow-software, real time video have to be generated in real time for each end user, a massive variable cost for an industry where players are used to spending <$1 per hour of entertainment.

World models will create new experiences and accelerate certain workflows. However, they won’t replace the fundamental reasons humans have played games for thousands of years: competition, mastery, community, and story. But one thing is for certain - this will enable incredible new “experiences” in the future. We’re excited to see where this technology goes a couple of papers down the line!