AI video tools undermine the specialness of Hollywood as production costs tumble 95%

Hollywood is confronting an existential shift as AI-powered video generation tools like Luma’s Dream Machine and Moonvalley enable anyone to create cinema-quality content from simple text prompts. Companies like Luma AI are developing technology that can transform a person into a monkey with a few taps, while startups are building AI-native studios that slash production costs by up to 95%, fundamentally challenging Hollywood’s role as the gatekeeper of professional filmmaking.

The big picture: Silicon Valley is pulling the film industry into its orbit as generative AI threatens to flood the market with personalized, on-demand content that could make traditional Hollywood productions seem obsolete.

• Luma AI co-founder Amit Jain envisions “two hours of video can be generated for every human every day,” shifting from mass-market blockbusters to hyper-personalized entertainment.
• More than 65 AI-native studios have launched since 2022, most with teams of five or fewer people who can now do the work of entire traditional crews.
• The average movie shot is only eight seconds, while current AI tools can generate clips up to 10 seconds long, suggesting near-term viability for full-length productions.

What’s happening now: Major studios are quietly adopting AI tools while startups build from the ground up for the AI era.

• Netflix used AI to complete complex visual effects sequences for “El Eternauta” in a fraction of the usual time, with co-CEO Ted Sarandos calling AI “an incredible opportunity to help creators make films and series better, not just cheaper.”
• Lionsgate, the studio behind “John Wick” and “Hunger Games,” struck a deal with Runway to train a custom AI model on its film library, while Paramount’s incoming CEO David Ellison is pitching a “studio in the cloud” transformation.
• Disney and Universal filed a sweeping copyright lawsuit against Midjourney, a popular AI image generator, in June, marking Hollywood’s most aggressive legal challenge against AI platforms trained on their intellectual property.

The resistance: Hollywood’s creative community remains deeply skeptical of AI’s encroachment on storytelling.

• The 2023 writers’ and actors’ strikes featured picket signs declaring “AI is not art” and “Human writers only.”
• A protest dubbed “Kill the Machine” is being organized against IMAX’s upcoming screening of AI-generated shorts from Runway’s AI Film Festival.
• The Academy of Motion Picture Arts and Sciences issued guidance stating AI use will “neither help nor harm” Oscar chances, but members should consider “the degree to which a human was at the heart of the creative authorship.”

Key technical developments: AI video generation is rapidly approaching professional quality while costs plummet.

• Luma’s Dream Machine can transform existing footage in real-time, turning a hoodie into a superhero cape or a person into a medieval knight without green screens or visual effects teams.
• Moonvalley built its video model Marey on fully licensed material, working with intellectual property lawyers to ensure “every single pixel has had a direct sign-off from the owner.”
• Freepik’s AI tools were used in Robert Zemeckis’ “Here” starring Tom Hanks, while the Danny Boyle-mentored anthology “Beyond the Loop” showcased AI-generated visuals.

New storytelling formats: Startups are experimenting with interactive, real-time content that blurs the line between creator and audience.

• Pickford AI’s dating show demo lets viewers vote on story directions while AI writes and renders scenes in real-time, bringing “the vibe of the crowd back into the show.”
• Amazon-backed Showrunner lets users generate TV-style episodes using prompts and AI voices, with plans to bring Disney franchises to the platform.
• Invisible Universe, led by former MGM executive Tricia Biggio, develops intellectual property directly with audiences across social platforms, bypassing traditional gatekeepers entirely.

The cultural challenge: AI threatens Hollywood’s role as America’s cultural center as attention fragments across platforms.

• This year’s Oscars drew 19.7 million viewers, fewer than watched a typical “Murder, She Wrote” episode in the 1990s.
• Best picture winner “Anora” earned just $20 million domestically, while Hollywood produces 15,000 hours annually compared to 300 million hours uploaded to YouTube.
• Critics worry about “AI slop” — cheap, algorithmically generated content that could trap audiences in recommendation loops rather than exposing them to new perspectives.

What industry leaders are saying: Opinions range from cautious optimism to existential concern about AI’s impact.

• “The solution will come out of the marriage of technology and art together,” says Luma’s Amit Jain. “I think both sides will adapt.”
• USC’s Ken Williams warns of “the kind of wholesale dehumanization of the creative process that people, in their darkest moments, fear.”
• “The Creator” director Gareth Edwards remains hopeful: “There’s a possibility that if this amazing tool turns up and everyone can make any film that they imagine, it’s going to lead to a new wave of cinema.”

Why this matters: The convergence of AI technology and Hollywood represents more than just new tools — it’s a fundamental question about who gets to tell stories, who owns them, and whether narrative itself retains meaning in an age of infinite, personalized content.