It was a strange week in which two things simultaneously became true: artificial intelligence is starting to look like a short-term bubble on Wall Street even as the technology continues to penetrate every industry, including previously skeptical circles within entertainment. On one hand, big AI shares plummeted this week as investors cycled out of speculative AI names and into more defensive stocks amid fewer prospects of a December interest rate cut. But on the other hand, this week brought a major deal between the three major labels – Warner Music Group, Universal Music Group, and Sony Music Entertainment – and AI music company Klay Vision to do what until this week the labels had been suing to stop: use of their copyrighted works to create AI music. Also this week, Warner and Universal settled their lawsuits against AI music creation firm Udio and announced they will collaborate with the company to create a new AI music company.
It’s probably only a matter of time before Sony settles with Udio and joins them. (The RIAA lawsuit against AI music firm Suno on behalf of major labels has yet to be resolved.) Meanwhile, both traditional and “new” Hollywood appear to be embracing AI for both content and distribution. During Disney’s Q3 earnings call, CEO Bob Iger talked about using AI “both to provide tools that make the platforms more dynamic and more sticky with consumers, but also to give consumers the opportunity to create on our platforms.” Comcast President Michael Cavanagh noted that “our new AI engine now supports agents, technicians, and customers through assisted chat, our website, and our AI-enabled Xfinity Assistant platform.”
AI is even more consequential on the user-generated side, with Alphabet CEO Sundar Pichai noting during the company’s Q3 call that “we rolled out a number of AI-powered features that are helping creators supercharge creation and build their businesses.” Of course, Alphabet actually creates those AI tools through its Gemini platform, which just this week released version 3 to rave reviews, so his enthusiasm is less surprising. But backing by Silicon Valley giants with both tech and entertainment ambitions is part of what will fuel overall adoption. Amazon’s Fire TV launched AI-enhanced TV search features late last year, and just this week the company launched a beta test of an AI-powered “Video Recaps” feature for certain English-language original series. The idea is to create cinematic season and episode recaps for fans to help them catch up before leaping back into a show. And Amazon CEO Andy Jassy has talked about AI agents that can help infuse e-commerce into Prime Video and to “reinvent how millions search, compare, and buy.” This as Netflix co-CEO Ted Sarandos continues to recount instances in which the company has used AI for special effects shots or de-aging of characters.
Next? This all may sound like an opposite world in which AI “creation” and customer-experience tools gain some legitimacy just as Wall Street’s AI trade loses steam. But there’s a reason for that. First of all, executive rhetoric – whether in the entertainment sector or in myriad other industries ranging from the legal profession to journalism to oil-and-gas discovery and big pharma to genetics and robotic automation – doesn’t equal broad application and immediate cost savings. It will take time for AI tools to reduce capex, and in fact purchasing those tools will likely increase it in the short-term as clear return on investment remains indefinitely elusive. The AI trade will fluctuate, and the same stocks that seem in the gutter this week could skyrocket the next, with continued volatility likely until Fortune 500 companies start crowing during earnings calls that AI has saved them or made them billions. That’s not happening yet. But with much of AI productivity occurring behind the scenes as companies use it to improve medical research or create more efficient supply chains or telecom networks, one of the first places consumers will see front-facing AI enhancements is on their entertainment platforms – either through ChatGPT-like search and discovery or user-creation tools that give the fans the power to drive storylines, purchase on-screen objects, or watch sports in their own way. Some of that will run into resistance from IP owners, but over time those concerns tend to fade as the money starts rolling in.
That’s exactly what happened with the music deals this week. That industry has faced massive disruption over more than two decades, starting with Napster and coalescing with the current streaming-based economy centered on Spotify and other music subscription services. AI could create a big new revenue stream for labels and artists. As Hollywood grapples with digital AI copies of actors, AI music sync, AI-fueled robotic cameras and drones, AI video creation that replaces thousands of jobs both behind and in front of the camera – and AI-fueled discovery that could actually make it harder for marketers to manually “push” content outside the algorithm, this is a Brave New AI World. Despite some AI talk by major studio heads, they remain cautious – especially when it comes to the production side that could rankle talent. Sarandos’ comments, however, haven’t fomented a rebellion. That’s telling. Most artists and execs alike seem to recognize what’s coming. And even if a few AI companies go out of business during a bubble-deflation event, others will survive. And those likely survivors also have well-capitalized streaming services that increasingly compete for talent, sports rights, and consumer engagement. They’re not going anywhere. And neither is AI.
