When AI Comes Calling With Cash: Should You Take It?
I try to answer the devilish question of whether Hollywood should agree to license their content to train models as checks get bigger
Erik Barmack writes about AI and Hollywood from the perspective of a working producer every other Tuesday (for paid subscribers). His recent three-part series on AI at the Studios covered how AI tools are threatening exec and development jobs; encroaching on casting and pre-production budgeting and its rapid advancement in script coverage; and how can tell you if Netflix will like your pitch.
In my younger and more vulnerable years, a studio mogul gave me some advice that I have been turning over in my mind ever since: “Whenever you feel like the movie industry will change,” he said with a golden timbre in his voice, “just remember that outsiders don’t have the advantages we have. The same studios have been making the same beautiful films for over a hundred years.”
I took this to mean that Hollywood — with its brutal star system, hedged gates and hushed tones of people waiting to meet a man known only by his first name — was protected from the influence of outsiders trying to wedge their way into our bright, precious world.
And yet, interlopers exist. Every five or 10 years, a new group of tech titans, led by curly-haired guys in outfits that are either too casual or too formal but never quite right, come to town with the one tool that studio heads never seem quite able to resist, the one advantage that my friend, the studio mogul didn’t account for: Easy Money.
The deals between these two groups have always been simple. A new startup or technology craves legitimacy, and studios and talent, careening from one financial mishap to the next, need cash to patch up a broken P & L or pay off an overwhelming mortgage.
Cynicism abounds on both sides, with tech bros seeking to legitimize their efforts by buying vulgarly into a system that had been built carefully on taste and dreams, and Hollywood breezily taking the money thinking it could do so without suffering any major consequences.
The history of these trades is, shall we say, mixed. In the late 1970s, fear of videocassette recorder technology was so profound that studios sued its makers all the way to the Supreme Court before realizing that “this industry is prone to obscene profits,” as Leonard White, former president of CBS / Fox Video told the L.A. Times in 1987.
But for every bit of found money in home video and then DVDs, recent free-money offers have been different shades of obscene. Hollywood took Netflix cash to license their catalogs, believing that streaming either would not last or could at least be controlled by the overwhelming and proper power of these storied institutions. We know how that trade worked out. Others have been a wash, albeit embarrassing ones, such as 2021’s NFT craze, where tech used and embarrassed Hollywood celebrities such as Jimmy Fallon, Reese Witherspoon and Eva Longoria as well as the major talent agencies and Disney to inflate the value of worthless jpegs in rather suspect transactions.
Now we have AI, the latest free-money proposition. As Dan Neely, CEO of the AI startup Vermillio working with everyone from WME to Sony, told my colleague Ashley Cullins for her Dealmakers column earlier this month, “Last year there was about $75 million of licensing deals” between AI companies and media and entertainment ones. “This year, there’ll be about a billion dollars of licensing deals done, and next year there’ll be over $10 billion of licensing done. We know that’s the trend. The most beloved content is going to be worth the most.”
If I’m a studio executive these days, I’d like to be perceived as smart on AI and fiscally responsible. So I’d be shaking with fear about getting these particular bets right. The wrong strategy here could not only be career-ending but, more existentially, company-ending. Or if we want to get really dark, the end of Hollywood as we know it. That’s all.
I’m reminded in this moment of The Great Gatsby and the line “All the bright precious things fade so fast, and they don’t come back.” We’re looking at that green light at the end of the dock and trying to decide whether we see the future or if we’re being deceived into something that isn’t what it seems. So is AI money our next bit of found fortune or the portent of ill to come?
In this article, you’ll learn:
Who has the leverage right now in AI-Hollywood negotiations
The seemingly irresistible billions that appear to be out there from AI companies
The copyright and labor issues currently being discounted when assessing AI money
The eerie parallels between the early streaming era and this AI moment
What Hollywood should learn from the days just before Streaming Wars
The strategic reasons why studios and production companies should take the money from AI companies
Why the economics of a licensing deal might not be as valuable as entertainment companies think
The Solomonic solution between taking AI money and not taking AI money
Why doing nothing is not an option
So. Much. Money
 | A guest post by
|