Hollywood's AI Trojan Horse

In the movie business, creativity has always been expensive—and precisely what made studios essential. They took on the financial risk so writers, actors, and directors could focus on making something great. But now, studios are chasing a dream of AI-generated content—instant blockbusters built by machines instead of artists.

In this compelling guest essay, writer Eric Cunningham walks us through what happens when the studio system, obsessed with cutting costs, builds a future where it’s no longer needed at all. It's a fascinating look at how AI could eliminate the very problems studios were built to solve.

And while this might seem like a Hollywood issue, the ripple effects reach much further. Indie filmmakers, creators, and production teams everywhere, including right here in Palm Springs and the broader Coachella Valley could be among the first to feel both the opportunities and threats this kind of AI introduces. If a laptop can generate a film with A-list actors and viral dialogue, what happens to the value of local talent, hard-won storytelling skill, and human creativity?

This isn’t just about studio executives—it’s about all of us who create.

The Foundation of the Studio System

In the world of entertainment, the major studios—Netflix, Warner Brothers, NBCUniversal and other big names in TV and film—exist because making movies is so expensive. Let's say that creating a film costs around $30 million, accounting for actors, writers, directors, sets, locations, crew, all that stuff. Even a "low-budget" movie can easily cost about $5 million. These are massive investments that don't generate any return until the content reaches theaters or streaming platforms. That's what stops most actors, writers, and directors from just making their own movie. It's a huge financial risk that most individuals can't afford, and most banks won't loan money for.

Studios exist precisely because they have the capital or credit to fund these expensive productions. Their role is risk management: if they believe a movie concept will be profitable, they'll front the huge investment needed to produce it. So after spending $30 million on production, they'll go ahead and add another $15 million for marketing and advertising. At this point, they're $45 million in the red before the movie has hit theatres and they've seen a single dollar on their investment—and this represents just an average film, not even a major blockbuster.

Now, their business model works because films often generate revenue far exceeding these costs. A movie that costs $45 million to make and market but earns $100 million is a great margin, which is what keeps these studios in business.

At their core, studios operate as financial institutions specializing in investing in content that will (after significant cost) make money.

Hollywood's Attitude Toward AI

Given their business mindset, studios are constantly looking to 1) increase revenues and 2) shrink expenses. As any business would! While AI might help them boost revenues in various ways, its immediate appeal is cost reduction. If artificial intelligence can replace writers, editors, or even create digital representations of actors, studios see huge opportunities for cutting the costs of making a movie, leaving only the costs of marketing it.

These possibilities lead to what I call the "holy grail" of AI in Hollywood: software that allows, say, a Netflix executive to type instructions into a box on a computer—"Create a heist movie starring Brad Pitt and Sydney Sweeney with broad appeal, snappy dialogue, and groundbreaking action sequences. And some product placement with Pepsi, why not?"—and within seconds, receive a complete 93-minute blockbuster that cost virtually nothing to produce.

This vision eliminates that $30 million production cost, leaving only marketing to be done. We're not there yet (not by a long shot) but AI experts agree this is where we're headed -- high-quality virtual film creation that is indistinguishable from film movies, and maybe even better. For studio executives, this is the ultimate efficiency, a pathway to massive profits -- and this is where their imagination typically ends.

The Unintended Consequences

So, this is where we need to expand our thinking. Creating an AI system like that would fundamentally transform the entire industry in ways the studios don't seem to be anticipating.

The first studio to develop this holy grail of movie-making technology—let's call it "the box"—would definitely enjoy unprecedented profits. They'll rake in the money putting Box-created movies that are actually very good into theatres. Movies that could never be shot, movies that we'll gladly pay $20 a ticket to see because they're good!

But we live in a competitive market. If Warner Brothers creates such a system, Disney will develop their own version. Soon, every major entertainment company would have their own variation of the Box, each capable of generating high-quality content at almost no cost.

The critical inflection point happens when this technology escapes the walled gardens of the studios—whether through a leak or through someone developing a public version. Once the Box becomes available to the public (the way ChatGPT it's currently available), the entire studio system collapses.

When consumers can personally generate content on demand, they no longer need to wait for studios to produce it. Anyone could request "a fourth Back to the Future movie that feels like it was made in 1994, but funnier than the original" or "gimme something romantic, and have it take place in my hometown. At Christmas, or Valentine's Day." Whatever you want right then! Or maybe even it learns what you want and gives it to you before you ask for it. Unlike movies in the theatre, films would no longer need to appeal to broad audiences; they could be specifically tailored to individual preferences.

At this point, why subscribe to Netflix or go to theaters when you have technology that delivers entertainment customized precisely to your tastes? You've got The Box. Eventually, The Box might become its own subscription service, or just be free, the way Wikipedia is.

What's crucial is that this development eliminates the need for traditional studios entirely. Their primary function—financing expensive productions—becomes obsolete when content creation costs approach zero.

The Shortsighted Strategy

This is the fundamental paradox for today's studios. Writers, actors, and directors have been using their unions to push against AI advancement. Studios eagerly embrace it, focused on short-term cost reduction. But they don't seem to recognize that the very costs they're trying to eliminate are the foundation of why they're in the equation at all. They exist to absorb the financial risk of content creation—if that risk disappears, so does their reason for existing.

The studios' aggressive push toward handing the reins over to AI represents a profoundly shortsighted strategy. This transformation would revolutionize entertainment and leisure, but studios need to consider what happens when their role as financial intermediaries is no longer necessary.