In this specific video game context, fair use is almost totally up in the air. It's kind of crazy given how much of a market there is on videos and streaming of games, but it's how it is. Both "sides" of that argument prefer the status quo to the risk that a legal decision would go against them.
There was a period of time several years ago when some publishers were not allowing some kinds of streaming, and there was a need for them to post public statements allowing things like Let's Play videos. Even now you'll have the occasional game where the publisher just says streaming isn't allowed, or is only allowed under restrictive terms.
Now imagine combining both video game streaming and generative AI to create generated video game streams.
Given the relative simplicity of video game worlds, it should be far easier to generate those than than photorealistic video (i.e. Deep mind Veo, OpenAI Sora).
Yes, it might just saturate the world with low quality content, leaving the good stuff still distinguishable, but many content business models are built on low quality content.
There was a period of time several years ago when some publishers were not allowing some kinds of streaming, and there was a need for them to post public statements allowing things like Let's Play videos. Even now you'll have the occasional game where the publisher just says streaming isn't allowed, or is only allowed under restrictive terms.