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I just realized a major problem with this from corporate perspective:
Generative AI images aren´t copyrightable, so the game IP owner wouldn´t have ownership over game visuals.
Now there is other related IP (character identity etc) but losing copyright over game visuals seems big deal.
It also opens them up to lawsuits over any other IP that may have been violated via the generative AI.
(i.e. it´s training set etc)