"AI has caused an insane inflation in the number of games; it’s becoming harder to capture a player's attention."
Anat Horvitz, a Director at Google Israel, described the upheaval in the sector during the Gaming Conference hosted by Calcalist, Google, and Playtika: "In the past, the bottleneck was development. Today, the battle is for attention." Eitan Reisel, Managing Partner at the fund vgames, noted: "Five-person teams are building games that generate hundreds of millions."
“There is an insane inflation in the number of games, yet it is harder than ever to capture players’ attention,” said Anat Horvitz, a director at Google Israel, during a panel at the Gaming Conference hosted by Calcalist, Google, and Playtika.
The panel, moderated by Meir Orbach of Calcalist, also featured Eitan Reisel, managing partner at investment fund vgames. The two discussed the transformation the gaming industry is undergoing as a result of artificial intelligence, which has made game development faster and cheaper while simultaneously intensifying competition for players’ attention.
The gaming industry needs capital, but the terms of investment have changed. How do you view tcurrent state of the industry?
Horvitz: “Over the past year, we’ve seen an 11% decline in game downloads. At the same time, this is the third consecutive year of revenue growth, with revenue increasing by 1.5% this year. While the industry once focused on attracting new customers and expanding the overall market, the battle today is increasingly centered on market share and retaining existing players.”
Reisel: “Today, games can be released much faster, but significant capital is still required. It’s an incredible industry, full of opportunity. Five-person teams are building games that generate hundreds of millions of dollars in annual revenue.”
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Anat Horvitz (right) and Eitan Reisel (center) talk with Calcalist's Meir Orbach.
(Photo: Oz Mualem)
Is it harder to succeed today?
Horvitz: “It’s harder, but far more interesting. The industry’s bottleneck has shifted. In the past, it was game production. We relied on distribution companies and large studios. Today, thanks to tools such as those provided by Google, even small studios can produce games in a matter of days. We project that 136,000 new games will be released in 2026, a massive increase compared with 2025. There is an insane ‘inflation’ in the number of games, yet capturing players’ attention has become significantly more difficult.
“Only 6% of total playtime is spent on games released within the past year; the rest goes to older titles. The battle today is for attention, and winning it requires AI, creative strategy, and in-depth data analysis.”
Eitan, how does this shift affect the way you invest in companies?
Reisel: “In the past, with a $5 million seed investment, I would have expected a casual-game developer to launch two games. If the first one failed, the company could move on to the second. I essentially had two chances. Today, for the same amount, I expect a company to launch 12 games, effectively giving it 12 attempts. This reduces the risk associated with the capital invested. However, the fact that games can be produced faster doesn't mean running a gaming company has become any easier. You need to constantly create new content and invest huge sums in marketing.”
Do you also see a shift in how companies spend money on game launches?
Horvitz: “In the past, we saw massive launches backed by significant capital, and companies were willing to wait and see how a game developed. Today, many studios launch 12 or more games. Patience is in short supply. They want to determine very quickly whether a game’s economics work and whether the expected return justifies the investment.”
Reisel: “Today, I have 12 opportunities because production can happen much faster. Once you find a game with the right metrics, you need to pour money into marketing and move quickly, because the ability of competitors to clone games has reached an insane level.”
To what extent has artificial intelligence truly transformed the industry?
Reisel: “Creating a game’s visual content, even in 3D, is much easier today. Previously, creating an additional character, a new world, or new levels required a great deal of work. Now, all of this can be produced much faster. Marketing has changed as well. As media-buying systems have become automated, the advantage has shifted to those who know how to generate ideas and develop creative concepts.”
Horvitz: “We are seeing an insane surge in the volume of creative output, driven both by AI and by the battle for users’ attention. It is now possible to produce far more in much less time. The challenge is to test what works in real time, identify the right signals, and invest in what succeeds.”
You have established a financing vehicle that differs from traditional investment funds, allowing gaming companies to grow without giving up equity. How does it work?
Reisel: “We finance expenses. If a company needs $10 million, I can provide $8 million. It’s a financing tool, a kind of ‘bank’ for the gaming industry. If a company needs $200 million in equity to grow, it might raise that capital from investors, but the founders would end up owning a significantly smaller stake.”
The financing model introduced by vgames, which has raised $500 million with backing from The Phoenix and in partnership with General Catalyst, is designed to cover user acquisition costs. Rather than receiving equity in the company, the fund is entitled to repayment from the future revenue generated by the users acquired with its funding. This allows founders to expand their operations while limiting the dilution of their ownership stakes.
Horvitz: “Beyond the growth fund launched by vgames, which provides a major boost to the Israeli industry, we are seeing a similar trend among companies that finance smaller studios. There is a great deal of M&A activity today. Companies don’t necessarily have to develop and launch every game themselves; they can also acquire existing titles.”
How do you envision the Israeli gaming industry a year or two from now?
Reisel: “AI offers us tremendous opportunities. At one of our portfolio companies, we are already generating 800 creative assets a week. It’s a wild market, and not every entrepreneur needs to go into cybersecurity. I’ve invested $800 million, and I intend to invest even more.”
Horvitz: “The revolution the industry is undergoing aligns perfectly with the Israeli DNA. There is deep expertise here in monetization, strong data analytics capabilities, and a willingness to adopt AI early. Furthermore, Israeli companies think globally from day one. They know how to take a game and launch it worldwide.”
