Fear and Loathing (and Hype and Reality) in Los Angeles

Why the Major Studios Won’t Use AI Video Generators Extensively Anytime Soon — And Why That Puts Them in a Bind

Starting April 2025, all full posts, including archived posts, will be available on my Substack, The Mediator.

DALL-E, prompt: “A realistic cartoon image of a middle-aged businessman looking pensively into a crystal ball. The crystal ball is filled with sports paraphernalia, such as two footballs, a baseball, baseball bat, soccer ball, hockey stick, and basketball. The crystal ball is cloudy, indicating that the future is not clear. The businessman is wearing a suit and tie, standing stationary with a pensive and thoughtful expression. The background is clean and simple, emphasizing the scene.”

For the past 18 months, I’ve been writing about why Generative AI (GenAI) is a disruptive threat to Hollywood. (I laid out the case most recently in this investor presentation.)

The idea is that GenAI will democratize high production-value video creation and exacerbate the low-end disruption of Hollywood that is already underway by creator content.

In this post, I explore another angle: why it will be so hard for the major studios to capitalize on these tools — especially AI video generators like Sora, Veo and Runway Gen-3 — themselves.

Tl;dr:

• GenAI has many potential applications in the traditional film and TV production process. These include LLMs to assist in scriptwriting; text-to-image generators for concept art or green screen environments; or purpose-built AI tools to automate VFX processes or localization services. But these only are complementary tools for pre- and post-production.
• The most potentially transformative tools, in terms of time, labor and cost reductions, are AI video generators that may replace some or all principal photography.
• AI video models are advancing at a head spinning pace. In February, OpenAI shocked the industry with its announcement of Sora. Google announced Veo last month and in just the last week or so there has been a spate of similarly impressive next-generation models released or announced, including Kling, Dream Machine and Runway Gen-3.
• As impressive as these models are, the studios won’t be able to use them to replace principal photography for a very long time, even if they want to, for three reasons: labor relations, important unresolved legal issues and technical limitations.
• With a bad taste still lingering from the WGA and SAG-AFTRA strikes last year and IATSE negotiations underway, anything AI is “third rail” for the studios right now.
• If the mantra in Silicon Valley is “move fast and break things,” the mantra in Hollywood is “better run it by legal first.” There are a host of open legal questions about AI, but the most pressing concern copyright infringement and IP rights. For studios, using AI trained on others’ copyrights is a lose-lose: they are either infringing or undermining their own rights.
• Despite the amazing quality improvements in these models, they won’t meet the needs of the most demanding directors/showrunners/cinematographers, probably for years. Sora (and Veo, Gen-3, etc.) “don’t know much about history” — or geography or physics or film school. To really replicate cameras, they will require much larger (maybe annotated) training sets, better understanding of physics and much finer-grained control.
• The earliest adoption and most important use cases will come outside of the major Hollywood studios. These include empowering the massive creator class and independent producers (who are starting to experiment with animation, horror and sci-fi/fantasy genres), as well as advertising, music videos and educational/corporate/documentary video.
• AI won’t replace Hollywood, but the bigger risk is that it disrupts it. Disruption requires two main ingredients: a disruptive innovation that lowers barriers to entry and incumbents who can’t respond. This has both.

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