This is no AI illusion. A perfect storm appears to be gathering around the world of generative artificial intelligence that promises to have profound effects on how Hollywood does business.
In fact, there’s a fair chance that the generative AI revolution will have a bigger impact on Hollywood from a business and ownership standpoint, even before the technology itself can transform the making of movies and TV shows.
It comes down to simple business math meets the major trends reshaping media and entertainment. And they’re all connected. Go with me here:
** A handful of AI firms — including OpenAI, Anthropic and Perplexity — are racking up eye-popping valuations. OpenAI hit $500 billion in August. Anthropic is valued at $183 billion.
** These firms are giving the old guard of the tech sector — Apple, Microsoft, Amazon, Facebook, Google — the first serious challenge to their dominance, especially in the eyes of Wall Street.
** The pressure to catch up on AI may well drive tech firms closer to Hollywood, because AI platforms need copious amounts of content in order to train AI services to deliver human-like conversations with users. With AI, there’s suddenly a new business-use case for Big Tech to buy Hollywood companies with large libraries of movies and TV shows.
** This dynamic is playing out just as Warner Bros. Discovery and NBCUniversal are about to get a lot smaller. Both are spinning out their linear cable channels into separate entities, a sign of how drastically streaming has changed Hollywood’s business models. By becoming smaller, the resulting four companies are more attractive as an acquisition target. The new owners of Paramount are so eager to scoop up Warner Bros. and HBO that they’re preparing an offer for the entire WBD, including the cable channels that are now set to be spunoff.
Wall Street and global economists are convinced that the AI boom — the rise of platforms and software tools that allow users to have human-like interactions with computing devices — will drive the next great productivity and innovation wave. (If past is prologue, this, in turn, will turbocharge the U.S. economy.) AI is already so much more concrete as a business proposition for tech firms that are busy designing all manner of specific uses for specific needs. This is not the ephemera of NFTs and Bored Apes, VR avatars and meme coins; AI-driven profits and innovations are poised to fuel the next wave of world-shaking companies à la Amazon and Google and Uber.
Key AI firms such as OpenAI and Anthropic, both based in San Francisco, have become white-hot with investors, and that gives those firms a power that has put enormous pressure on Silicon Valley’s established players. It’s made it clear that even the biggest of Big Tech — Apple, Google, Microsoft, Facebook — are behind the times in developing their own world-changing AI apps. It’s been decades since these companies faced any serious threat to their rule as the leaders in R&D, innovation and market share.
Over the past year, most of tech’s giants have scrambled to recruit top AI engineers and data scientists to help them catch up. It’s a truism in the realm of zeros and ones: Innovate or die. Google, Apple and others have no choice but to be aggressive in integrating AI functions into their products. OpenAI and Anthropic are far ahead of the old guard in developing the large language model engines that are needed to provide the digital brainpower for AI chatbots and agents, such as OpenAI’s ChatGPT and Anthropic’s Claude service.
Many see parallels to the rise of desktop computing in the 1980s and the dawn of web browsers and internet search engines some 20 years later. Amid all this activity, no one has been surprised to see a spike in AI-related copyright litigation from authors and copyright owners.
Disney, NBCUniversal and Warner Bros. Discovery are throwing their legal firepower at a small AI firm, Midjourney. The studios accuse Midjourney of blatant infringement because so much of each studio’s copyrighted material is now baked into Midjourney’s LLM. The studios argue that any text or imagery that Midjourney creates via AI (based on prompts from users, like “Show me Batman and Superman fighting”) uses those copyrighted materials and thus becomes another example of infringement.
There have already been a few court rulings in AI-related cases. These are shaping an emerging consensus on what authorized uses of generative AI tools look like. Anthropic reached a $1.5 billion settlement in a class-action suit brought by hundreds of authors saying the initial iteration of Claude, its consumer-facing AI platform, was trained on pirated books. Anthropic had to write a big check (although a judge still has to approve the deal) — one of the biggest in the history of copyright infringement cases. But the case also yielded an important ruling in June from U.S. District Judge William Alsup in San Francisco spelling out that training LLMs on books was legal, so long as the books were legally obtained. This clarity allows AI firms to market their services more aggressively, with more confidence that they won’t face debilitating legal claims.
These distinct trends and developments are coalescing at the same time that Hollywood creatives need to wrap their arms around a different kind of AI challenge. As Hollywood producers increasingly turn to AI tools to help develop stories, characters and franchises, the creative community needs new training to understand how to protect themselves from copyright infringement claims. The new state of the art for copyright protection is no longer mailing yourself a script — it’s documenting the series of prompts typed into an AI-powered bot that delivered the requested results. Proving who created what at the prompt stage will be the new source of friction in future disputes over authorship — when there’s money to be made on a hit movie or TV show.
In May, Lori McCreary, past president of the Producers Guild of America and CEO of Morgan Freeman’s Revelations Entertainment, and Ghaith Mahmood, a partner at the law firm Latham & Watkins, led an AI workshop offering practical dos and don’ts for producers who use AI tools and AI-generated material, even in pitches not meant for wide public consumption. Understanding the legal nuances of working with AI is “the new front line of producing,” McCreary told the crowd gathered for the PGA’s annual Produced By conference in Los Angeles.
Mahmood’s advice for the audience was succinct: “Look for the restrictions.”
McCreary and Mahmood stressed that producers need to understand clearly the usage terms and restrictions on content created through AI via prompts. And producers need to know whether the generative AI content that they produce will be made available in larger databases for others to use.
“How can the tool providers reuse either the content you’ve put in or the output that’s come out?” Mahmood said. “That’s where the rubber meets the road.”
The volume of AI used in creating a new work can also affect whether it’s covered by copyright. “If there’s something you want to prevent others from reusing or re-creating, an important element of its creativity has to be done by a human,” Mahmood explained. He suggested that producers insist that all outside vendors who work on a project — such as visual effects firms — be “contractually required to disclose when AI is used in any of their material.”
Mahmood and McCreary also touched on the financial opportunities emerging for content owners thanks to the two words that Hollywood loves most: content licensing. McCreary and other AI experts at the session emphasized the voracious need among tech firms to license large databases of content for AI. They told the crowd that AI firms are already spending billions of dollars to purchase or license large collections of high-quality photo and video content.
Hollywood is obsessed with copyright protection and preserving artists’ rights. Mahmood bluntly told the crowd, though, that AI firms are thinking bigger than merely stealing content in order to produce cheap knockoffs of movies and TV shows; they need high-end content to serve as the fuel to drive AI empire-building and to make it the kind of mainstream technology that spurs radical changes in the way we live and work. “They’re not trying to re-create your movie,” he said. “They’re trying to re-create the human body moving through space.”
I spent a lot of time over the past year educating myself about AI and what it will mean for the entertainment industry. I crammed as much data on AI as I could into my frontal lobe, absorbing plain-English discussions about AI at conferences and from podcasts.
I came out the other side of this research mission convinced that the competitive headwinds buffeting the establishment in tech and media will push the two sectors closer together. The wildly successful, influential industries rooted on opposite ends of California have long eyed each other warily. This could be a moment of joining forces against a common threat. Or maybe a well-heeled AI company makes an audacious bid for Disney or NBCUniversal or Warner Bros. and HBO.
Hollywood and Big Tech firms new and old have common needs and common interests. And there’s newfound money to be made in AI. This will change things. My new mission is to fine-tune my AI agent to help me track what is sure to be the big-money, big-stakes, big-drama story of the business world — for as far as Claude can see into the future.
