The global video game industry, once considered the 'recession-proof' darling of the tech economy, finds itself in a paradoxical position today. Despite gaming revenues combined exceeding those of the film and music industries, stock markets and investors appear to have turned their backs on the industry's true engine: human talent and intellectual property (IP). Serkan Toto, founder of Kensei Capital, in a recent intervention via Bloomberg, is sounding the alarm, arguing that current pessimism has led to a dangerous undervaluation of creative assets.
The Disconnect Between Market and Reality
Following the pandemic-era boom, the gaming industry underwent a brutal correction in 2024 and 2025, marked by tens of thousands of layoffs and the closure of historic studios. This period of 'rationalization,' as Wall Street analysts termed it, created a climate of fear. However, according to Kensei Capital, investors have focused excessively on short-term balance sheets, ignoring the fact that a studio's value lies not just in its current profits, but in its ability to build worlds that endure over time.
"We are seeing a classic case of market overreaction," Toto states. "Investors see the skyrocketing production costs of AAA titles and get scared. What they don't see is the 'sticky' nature of the communities built around these games. A successful IP today isn't just software; it's a cultural platform." This analysis comes at a time when industry consolidation seems to be freezing, as major powers like Microsoft and Sony become more selective in their acquisitions.
The Transmedia Phenomenon as a Value Multiplier
One of the primary reasons Kensei Capital believes IP is undervalued is the rise of transmedia—the adaptation of games into television and film. The success of series like HBO's *The Last of Us*, Amazon's *Fallout*, and Netflix's *Arcane* has proven that audiences crave the stories born at the controller. When a game transforms into a successful series, the value of the original IP doesn't just add up; it multiplies.
- Increased sales of older titles (back-catalog) following series premieres.
- Creation of new revenue streams through merchandising and licensing.
- Enhanced brand recognition among audiences who do not self-identify as gamers.
Despite this, studio valuations remain low, often because financial models struggle to quantify 'cultural influence.' For Kensei Capital, this represents a golden opportunity to invest in mid-sized (AA) studios that possess a strong creative identity but lack the capital to scale their operations.
The AI Challenge and Talent
At the heart of the discussion is, of course, Artificial Intelligence. While many in the market believe AI will reduce production costs and thus make human talent less essential, Toto radically disagrees. His position is that AI will automate mundane tasks, making the 'architects' of games—the directors, writers, and lead designers—even more valuable.
"Technology is now accessible to everyone. What isn't accessible is the ability to tell a story that will make millions of people feel something. This rare skill is the most undervalued asset in the global economy today," notes the Kensei report.
Kensei Capital aims to help creators 'scale up,' providing not just capital but also strategic guidance on how to protect and leverage their IP in a world flooded with AI-generated content. The focus is shifting from the quantity of code to the quality of the vision.
Conclusion: The Road Ahead
The video game industry is not dying; it is being reborn. The current market undervaluation reflects an old-fashioned understanding of what constitutes value in the digital age. As the lines between gaming, film, and social networking continue to blur, the companies that own the characters and worlds loved by Gen Z and Gen Alpha will emerge as the new giants of entertainment. The challenge for investors is to look beyond quarterly results and recognize the enduring value of human creativity.
