Edmonton-based Artificial Agency to bring AI to video games with first title next year

Andrew Eiche, chief executive of gaming studio Owlchemy Labs, had been puzzling over how to make a single-player version of one of the Austin-based company’s virtual reality titles. Called Dimensional Double Shift, the game is designed for groups of friends to inhabit characters that serve customers at an interdimensional diner and garage. Everything the company had tried made the gameplay worse, and the collaborative element was lost when reduced to single-player mode. Maybe artificial intelligence could help, Mr. Eiche wondered.

At an industry conference last year, he found an answer when he met Artificial Agency, an Edmonton-based startup bringing AI to the US$214-billion video game market.

The company has partnered with Owlchemy, which is owned by Google, to build a custom AI model to determine the actions and responses of non-player characters in Dimensional Double Shift, resulting in an interactive experience for single players that could not be achieved if every movement and response was hard-coded in a traditional way. “They can understand your intention. They can co-operate with each other. They can goof off with you. And you can have this multiplayer experience with AI,” said Brian Tanner, chief executive officer and co-founder of Artificial Agency.

Targeted for release next year, the AI-powered single-player mode marks the first commercial application of Artificial Agency’s technology in a video game since the company launched in 2024.

The company’s four founders, including Alex Kearney, Michael Johanson and Andrew Butcher, have extensive experience in AI and previously worked for research lab Google DeepMind in Edmonton. After the tech giant shut down its Alberta outpost in 2023, the foursome spun up Artificial Agency. (Mr. Johanson and Mr. Butcher have since left for roles at the University of Alberta and Google DeepMind, respectively.) The company has also raised US$16-million from investors, including Radical Ventures, which has backed many of Canada’s most promising AI companies, such as Cohere Inc. and Waabi Innovation Inc.

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Mr. Tanner said Artificial Agency made significant progress over the summer on its technological approach and has been able to train custom AI models that are small enough to run on local devices, such as a smartphone or a gaming console. That significantly reduces costs compared to running advanced foundation models from OpenAI and Anthropic.

“Foundation models are quite expensive, so us cracking how to make game-specific models that are efficient enough to deploy them in a way that studios don’t have to change their monetization and go-to-market strategy is a huge game-changer,” said Ms. Kearney.

Artificial Agency fine-tuned an open-weight model using gameplay data from Dimensional Double Shift, which can run at about 1 per cent of the cost of a frontier AI model, according to Artificial Agency. (Open-weight models are free for developers to modify, unlike proprietary models.) The company expects to take a similar approach with other studios. In June, it hired Greg Canessa – who previously worked at Activision Blizzard and gaming divisions at Microsoft, Sony and Google – to serve as chief operating officer and expand its commercial operations.

The use of AI is contentious in creative industries, and gaming is no exception. A state of the industry report tied to the GDC Festival of Gaming conference this year found that 52 per cent of professionals said that generative AI is having a negative effect on the field, up from 18 per cent two years ago. Visual and technical artists held the most unfavourable views of the technology.

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Some titles have courted controversy by using AI. Arc Raiders, a popular title from Swedish developer Embark Studios, initially used some AI-generated voices for characters before the company re-recorded dialogue with humans. “A real professional actor is better than AI,” Embark CEO Patrick Söderlund told trade publication GamesIndustry.biz in March. Gamers also spotted seemingly AI-generated assets this year in a preview for another title, 1666: Amsterdam, prompting an apology from developer Panache Digital Games, which called the matter an oversight.

Artificial Agency’s approach is different. “We are not doing any generative content that replaces work or that puts human game designers or technicians out of a job,” Mr. Tanner said. The characters in Dimensional Double Shift were designed by humans, while the dialogue was scripted by writers and recorded by voice actors. Artificial Agency’s technology decides which preset actions and dialogue the AI characters will take based on what the human player is doing and saying.

Mr. Eiche at Owlchemy said any studio looking to adopt AI will have to decide how much freedom to give the technology to shape events in a game. AI can create new possibilities, but also risks straying from a designer’s intent. “We want precise authorial control over large parts of the game,” he said. “The AI can do anything within its limited set of actions.”