Hollywood Still Cautious Over Implementing Generative AI

Concern over the maturity of artificial intelligence coupled with copyright issues are among the hurdles facing the film and TV industry’s adoption of generative AI, but the potential cost savings associated with the technology are fueling studios’ interest in adopting it.

Those is among the findings in Deloitte’s Tech, Media & Telecom 2024 report issued this week, which focuses primarily on the impact of AI.

Despite such misgivings, the residual impacts of COVID-19, coupled with the pressure for media companies to see profits from their streaming businesses, are cited as the main reasons that studios are taking a serious look at gen AI, Deloitte said.

“Revenues are high, but operating expenses and the costs of production, marketing, and advertising have typically become higher,” the company said in its report. “This is often true for many studio streamers that are funding their streaming services without profit while losing revenues from declining cable TV subscriptions and advertising. Inflation, higher interest rates, and the impacts of the COVID-19 pandemic have further inflated costs, and studios now also compete with social media, user-generated content, and video games for consumer attention and revenues.”

Fewer than 3% of film and TV studios in the U.S. and the European Union will devote their production budgets to gen AI tools in 2025, Deloitte predicted, but 7% of operational budgets will be targeted for tools supporting functions like contract and talent management, permitting and planning, marketing and advertising, and localization and dubbing of content.

“This approach can help studios slow the potential disruptions that gen AI can pose to talent and content, while more quickly adopting gen AI tools that can help reduce costs and accelerate performance across their businesses,” Deloitte said.

However, the researcher noted that social-media brands—which often face less liability and fewer business issues than the big studios—are already staking their claim to Gen AI and this could further impact Hollywood’s bottom line.

“Independent content creators and social media platforms are moving quickly to adopt gen AI into their workflows and content, potentially enabling new forms of media to emerge that could further disadvantage traditional studios competing for scarce attention time,” Deloitte said in its report.

As for the quality of AI-generated content, Deloitte said the technology is advancing rapidly enough to allow Hollywood to dip its toes in. With AI advancing to a point where viewers will no longer be able to distinguish what is real from what is AI-generated, though, studios are also looking to protect themselves against legal action from individuals impacted by the use of AI to alter their likenesses.

“The availability of cheap, off-the-shelf large language models (LLMs) and diffusion models have helped enable studios to experiment with rapid prototyping of scripts, dialogue and story elements, and with early visualization and discovery of character and set design,” the report noted. “Some studios are using generative tools to de-age their celebrities or create digital twins that can be lent to commercials—or to postmortem productions. In such cases, studios can help control for potential liabilities by writing protections directly into the contracts with actors. The coming year will likely see more third-party production groups selling services and tools to studios offering such capabilities.”

Film and TV studios hold a valuable card in the media industry’s transition to AI, Deloitte added: the need for AI companies to have enough data to feed their modeling. The studios own a massive amount of data that could be highly valuable to these companies, the consultancy said.

“Hungry for more data to feed their training sets, leading gen AI providers have been courting studios and incentivizing them to license their content archives,” Deloitte said. “However, studios may resist this entirely since their IP is their livelihood, or they may charge onerously high rates to gen AI companies that may already be straining under their own operational costs. Studios could even see an advantage in collectively denying data to training sets in hopes that they might inhibit frontier models—the algorithms being encoded and trained to generate text, audio, image and video.”

In addition to opposition from Hollywood guilds about the threat of AI to the industry’s livelihood—a major sticking point in 2023’s actors and writers strikes—the costs of creating fully private models are prohibitively expensive, leading Deloitte to predict studios will have to team up with AI tech companies.

“To build more effective private models, studios and investors may have to think and act more like tech companies, building and maintaining ecosystem relationships with—and paying rents to—tech providers,” Deloitte said. “For these reasons, studios may be less likely to train their own models without considerable shifts in economics. However, the year ahead could see a flurry of partnerships between studios and providers that could share the cost burdens more equitably.”