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Tech Investors Go to the Movies
With Hollywood in a depression—both literally and figuratively—due to the hangover from last year’s strikes and the financial woes of the big entertainment conglomerates, it’s no surprise that we’re seeing a new version of an old stand-by: Silicon Valley goes to Hollywood.
For all the chatter about how AI could up-end movie-making and entertainment, the two recent tech/Hollywood deals that have made headlines don’t have a lot to do with that, at least for now. David Ellison, the son of Oracle’s Larry Ellison, is buying Paramount Pictures, one of the original Hollywood studies that dominated big-time movie-making for a century. Joshua Kushner’s Thrive Capital, meanwhile, is investing $75 million in independent distributor A24, which has won praise for movies such as the Oscar-winner Everything Everywhere all at Once. The studio is certainly open to new AI tech: VFX artists on EEAAO used Runway to illustrate a key scene in the film.
Stories of tech and Hollywood don’t traditionally have a happy ending. Consider, as just one recent example, the spectacular flop that was Quibi, a short-video app helmed by former eBay and HP CEO Meg Whitman that burned through around $1.5 billion before shutting down without most people ever having heard of it. Relieving outsiders of their money is a long Hollywood tradition, whether they be Japanese (Matsushita) or European (Vivendi) or just random rich guys looking to rub elbows with movie stars.
Data from S&P Global shows VC and private equity funding to movies and entertainment companies was the lowest in 2023 that it’s been since 2019, totaling only $2.77 billion across 142 deals. Comparatively, firms invested $10.46 billion across 190 deals in 2022.
The latest forays could be different. David Ellison is no dilettante, having proven his capabilities with his Skydance production company, though obviously this deal wouldn’t be happening without his dad’s $6 billion commitment. A deck for the deal shown to investors emphasized traditional strategies like reviving stagnant brands and investing in winning franchises like “Star Trek” and “Top Gun,” though it also emphasizes cost-cutting. It’s not a stretch to think that using AI and other tech to modernize production processes and super-charge marketing could make a big difference in an industry married to tradition.
A24 is also old-school in its way: it was founded by three art-house film fans, and a lot of its success can be attributed to their good taste. But a social media-first approach to marketing has also been central to the strategy, and that’s real innovation in a business where marketing can cost as much or more than making the movie itself.
A source close to Thrive said they believed AI and other new technologies that help creators make movies faster and cheaper will soon be widespread in Hollywood. A source close to A24 said the first AI use-cases would likely be around the unsexy operational work of running a studio.
At our Cerebral Valley New York event two weeks ago, Runway CTO and cofounder Anastasis Germanidis contended that filmmakers will be able to generate Hollywood-quality feature films using Runway in just 2 years. That drew some skeptical chuckles even from our very AI-forward audience.
Entertainment industry people mostly don’t think much of the idea either: big movies are driven by stars, and the emotions evoked by artists and writers and actors, and it’s not obvious how generative AI can replicate that.
An open question is whether it can solve the problem that the famed screenwriter William Goldman identified as “nobody knows anything”: it is still impossible to predict whether a given movie will prove popular, despite all the effort that goes into such predictions. Algorithms that anticipate what an individual might want to see are core to services including Netflix and YouTube, but whatever you might think of their efficacy, algorithms that can forecast whether a movie like, say, Everything Everywhere all at Once is a good investment are a far bigger AI test.
Analysts Weigh In
Soaring AI Costs Highlight the Bubble Question
Two of the biggest power-players in the tech world are questioning the logic behind the AI investment frenzy, suggesting without quite saying so that we’re in a bubble, which will eventually pop.