The Future of the Entertainment Industry

Overview of the Movie industry right now in the United States

Industry Snapshot

While technology available to film makers right now is light years ahead of the first Star Wars Film and much cheaper, what was bored kids hooked on Pac Man in a video arcade in the late 70s is now a video game industry that has already eclipsed the television and movie industries. Total sales from video games in 2020 were $180 billion versus $136 billion for TV and movies.

Think of it this way, $550 per person was spent on video games in the US in 2020, compared to $420 per person on movies and TV. And as the baby boomer generation retires, moves into long-term care facilities, and dies off, that difference will become even more stark. What has been happening in the video game industry is just a glimpse of what’s coming to the movie industry, courtesy of automation.

I don’t know why anyone would want a movie company today

Barry Diller – former Hollywood CEO

Silicon Valley has already won. It’s just that Hollywood hasn’t figured it out yet.

Vanity Fair

Who is this industry run by right now?

Large multinationals – the big Hollywood players which now includes Silicon Valley – run the industry and will run the industry into the future. However, they won’t be Hollywood studios anymore.

Here’s why.

• To create economies of scale necessary for large-scale AI data processing, you need huge companies with billions in spare cash. Like Microsoft or Alphabet or Meta.
• , oligopolies – informal networks of large enterprises and agencies – will call the shots.
• The adoption of automation in the movie industry will be shaped by these powerful interest groups, including government agencies that set the rules and regulations, the large players in the entertainment industry that have the experience and the billions if not trillions in capital, and the ever-expanding gaming industry.
• These are the groups that will influence the development of automation in the industry, and who will control how technology changes the way movies are made and consumed.

The question is, when automation is complete, which of these powerful players will be left standing? Will Hollywood lose control as technology creates an alternative that no longer needs them?

Approximate employment numbers

As a percentage of total workforce

• Global Numbers: 0.08%
• Australia: 0.19%
• Canada: 0.58%
• China: 0.66% to 1.3%
• European Union: 0.65%
• India: 0.56%
• United States: 0.2%

In terms of employment, the movie industry in most countries is not nearly as important as the supermarket industry, for example. This is not to downplay its cultural or other economic impacts. Rather, loss of jobs will not be as severe for the overall economy in terms of the numbers, compared to some other sectors, especially in the US, as well as Canada, Australia, and the EU.

What is the main objective of the movie industry, including the growth model?

• Grow film and tv audiences by ensuring they are captive – addicted to a treadmill of continually emerging stars that they follow obsessively. As explained below in our forecast, this is no longer sustainable.
  • For example, the film Crazy Rich Asians had enormous success with no recognizable stars. This marks the beginning of the end of Hollywood’s current star system
• Recycle existing product by upgrading the format using digital effects along with new actors following cautiously reworked story lines. There are only slightly more than half-a-dozen story lines that have been continuously regurgitated by Hollywood for several generations of viewers.
  • The Hollywood term for this is comps, previously released films similar in content and style to the film being worked on. Favorable “comps” means executive producers are more willing to pump money into a new project.
  • In the last 5 years, several Asian-centric films have become global blockbusters, which has shifted the comps from NorthAmerican and European perspectives towards more Asian ones.
• Invest in editing and other post-production technology within a star-centric system where the stars still account for a significant share of the production costs.
• Tailor scripts to appeal to a broad, international audience. Dialogue in big Hollywood movies is direct and easy to understand to ensure engagement with non-native English-speaking audiences.
• For example, scripts are also vetted and modified versions of the films are created to appeal to audiences in China. In general, cultural stereotypes previously used by Hollywood for dramatic or comedic effect are now taboo.
• Use the movie theatres and cineplexes in the U.S. as publicity platforms to promote new releases and as cost recovery vehicles to recoup soaring production costs.
• Use the international market – which lately accounts for 70% of box-office revenues – to make their profits. Just the Chinese market for movies in 2019 was estimated at $11 billion compared to the U.S. market of $12 billion.

What is the current investment in automation in this industry?  

Let’s follow the money and see what the investment levels in automation are in the movie industry.

While major studios currently invest a large amount in post-production tech, it is unlikely they would be willing to dispense with on-site production processes – even ones that use a lot of technology to digitally enhance what was filmed on location – and create entirely AI-driven platforms. To do so, they would have to invest as much as Microsoft, Meta, Google, Amazon, and other tech giants who are willing to do so and who, in fact, are already investing heavily in AI. It would also involve Hollywood having to fire 95% or more of their employees.

How will the industry start changing? What to look out for?  

Ask yourself this: how many actors work in the video game industry (speaking, singing, and whatever else an actor gets paid to do by video game creators) per $1 million in sales compared to in Hollywood?

This means that as the entertainment industry continues evolving and investing in new technologies at an accelerating rate to bring the latest and greatest to the masses, automation is changing the way movies are made and consumed.

And that means no more live actors in the not-so-distant future.

• As younger generations weaned on video games become the majority, the expectations of what a film or series should look and feel like will be radically different from what baby boomers or even Gen X consumers think. And younger consumers won’t – in fact they already don’t – care if the actors are humans or AI generated. In fact, most people won’t be able to tell the difference. You could argue that we’re almost there already in 2023.
• On the production side, one of the most significant benefits of automation is cost savings. As technology advances, the cost of movie production continues to come down because automation makes the process more efficient and streamlined. Less mistakes are made to get to where the creators need to get, and they get there faster using AI. By technology, we don’t mean cheaper digital cameras and editing platforms. We mean the type of Artificial Intelligence that will use existing films as mere data points to generate new content.
• In fact, what will really transform the industry is that the AI they use to automate processes is itself continually getting cheaper as computing clouds (huge server farms) dedicated to AI data processing create huge economies of scale. This is what really translates into significantly lower costs for producers and more savings for the consumers.
• As expensive actors are no longer required to create a flawless film, the cost savings for the producers will be significant. Given that the current system of the entertainment industry is built on distracting the public with star worship, it is not clear whether this system – we call it Hollywood – is capable of changing or not.
• However, in the end it is likely that new stars from other mediums will be picked and promoted to replace the current ones. Younger generations won’t care about the out-of-date definition of what a star is and already have been happily accepting CGI-generated characters. Remember that they have been fully accepted in video games for decades.
• AI-generated stars have the added benefit of not ending up in 28-day rehab or taking their creators to court.
• Instead, stars will be made from the fan base that interacts and creates a following around the AI-generated medium. 
• Automation is not just about cost savings, however. At some point, the technology will be so advanced that stories and ideas can be brought to life by the end-user themself with some simple requests.
• For example, a subscriber to an AI-generated film content platform with a small monthly fee could ask for a movie about the life and times of Justinian (527-565) that is realistic but not too awkward, and make the whole movie into 10 parts, with each part 20 minutes long. With automation, this request could be fulfilled, and changes and tweaks could even be made as the viewer watches their unique movie.

And this begs the question of what will be left of the movie industry in a few decades.

A single episode of a typically modest television show can cost $3 million to shoot and produce. By comparison, a typical start-up in Silicon Valley will raise that much to run a team of engineers and servers for two years.

Vanity Fair

What will this industry look like when automation is fully complete?

Despite the many benefits of automation currently in the movie industry, Hollywood is not likely to survive full automation. This is due to several reasons.

• First, creativity hit its height in the 70s, and since the mid-2000s, the industry has steadily declined in originality, rehashing the same half-dozen story lines over and over. This strongly suggests that AI-generated scripts will be easily able to compete with anything a human can do and still appeal to viewers.
• Second, the entertainment industry is unwilling to take risks in new areas. This is because getting your research and development department to find the next level in entertainment is simply too costly to adopt in the 2020s. Only a cash-laden leviathan like Microsoft or Meta has the resources to build out the infrastructure needed to support AI, especially in a complex data-hungry process like movie making.
• Finally, the partnership between theaters and film producers is expensive and cannot compete with other forms of entertainment that deliver movies-as-a-service that you pay a monthly fee to use a sophisticated AI platform to create your own customized movies and view them on any device you want anywhere.
• Audience expectations are changing and will change at a faster pace. As automation continues to grow in the movie industry, audiences will find it increasingly ridiculous that the same actor appears in many roles, meaning hiring a star actor to attract audiences will no longer be necessary. 
• While technology now takes up a modest percentage of the total cost of movie production, this percentage is expected to increase year after year. Technology here means AI-based systems, rather than the increasingly cheap equipment used to make films.
• Yes, cheaper equipment due to technical advances means films can be made on a cheaper budget. But all those cheaper independent films as well as the big productions will increasingly be just a lot of data that can be fed into Ai-generated platforms to help create films without having to build sets, or hire actors, or directors of photography, or other crew members. 
• The critical point will be when actors and on-set production are no longer needed. Full automation will have been achieved.

Timeline – Approximately when will this industry be fully automated?

Microsoft worked for close to a decade to bring us ChatGPT in November 2022. As Stephen Wolfram explains in his detailed exposition of how Large Language Models (LLMs) like ChatGPT actually function, you would need 60 trillion written words to train a statistical model on simple 3-word combinations. If you want to use 20-word sentences or fragments of paragraphs to train a statistical model that estimates which word should be next, you would need to train it on more written words than the estimated number of particles in the universe.

LLMs solve this by estimating the probabilities of the next word, rather than calculating them from a data set that can never be assembled because it is simply far too large to ever exist. They do this by setting up theoretical models that guess what the probabilities might be. ChatGPT’s model uses 175 billion parameters that are adjusted to create human-like sentences, paragraphs, essays, and on and on, using what are called neural nets.

175 billion parameters constantly adjusting in a neural net run on enormous cloud computing facilities. 

Does Hollywood have the money to create that kind of data processing power? Even if they did, would they invest in sufficient cloud capability, including data scientists, along with movie industry professionals to analyze as many movies as possible, and then create the platform of the future as described in the previous section?

The evidence suggests that the ones who will get this right are not the studios but the tech giants working with the best and brightest data scientists as well as script writers, directors, etc. who will be glad to have the employment. But within a few years, those script writers, directors, directors of photography, and other movie specialists will no longer be needed.

The data will be self-generating.

How long will this take?

ChatGPT came out in November 2022. You already can google “75 text to video prompts” and get links to platforms that offer this. They may not be Hollywood quality yet, but that is coming and coming soon.

We estimate impressively functional text to movie platforms are perhaps 3 years away. Perhaps less. Much less.

Possible political and legal restraints of automation of this industry

• Hollywood will launch a thousand lawsuits in a desperate attempt to restrict AI platforms and drive them out of business.
• The judiciary will eventually agree with Silicon Valley’s reasoning as they did when they ruled against the music industry a decade or so ago.
• Government legislation will be behind the curve as Washington waits to see how things play out. Lobbying by Silicon Valley will target legislators and administrative rule-makers to ensure that rules and regulations are not overly restrictive.

The positive

• Films will be far cheaper to make and cheaper and easier to watch.
• You will be able to order bespoke films specially made for an audience of one – you – that look like a million dollars.
• Video games will be far more immersive and will finally give us a virtual reality that isn’t third-rate.
• The effect of automation in the movie industry won’t be as deeply felt in the labor market as they represent a small percentage of the total workforce.
• The video game industry will continue to boom for a while longer than the movie industry.
• Truly artistic geniuses and uniquely talented people will have no restriction to showcasing their talent.

The Negative

• Only a handful of actors, directors, and writers will have jobs working for engineers at tech companies until they’re no longer needed and are laid off.
• Humans run the real risk of being unable to face reality and instead will opt to live in AI-generated realities.
• All the other oversized, union-supported, well-paid members of film crews will be out of work.
• After a few years, the same fate will strike the video game industry.