Artificial intelligence (AI) presents an existential threat to Tinseltown. New AI-powered technologies have democratized access to production and distribution and now anyone with minimal skills and a smartphone has the power to churn out cinema-quality content. Remarkable as these tools are today, they will pale in comparison to what is on the horizon. The movie business and related creative industries are facing a set of perilous challenges unlike any in their long history as the entry barriers become negligible. The manner in which these challenges play out may be a harbinger of AI’s eventual impact to other sectors. For this reason, it’s an industry worth paying close attention to.
Hooray For Hollywood
Making movies and television shows is big business. Los Angeles, Southern California has been the home of a vast global entertainment empire since the first years of the 20th century and today directly employs over 165,000 people in the region. When considering the broader economic impact across the US, the number of jobs supported is over two million.
In 2024, Hollywood movies earned over $30 billion globally at the box office. But that’s just one part of a much larger pool of revenue that includes the sales of merchandise, licensing, music, television shows, and more.
Beyond wealth generation, Hollywood has an outsized role in shaping popular culture in the US and around the world. It’s also a leading driver of technological innovation.
In recent years it has faced declining attendance at movie theaters, almost 40 percent less than in 2019, but the significant shift to video streaming has created new opportunities, for example, by enabling the production of more content at lower cost.
Without a doubt, the Hollywood film industry is a remarkable and important business that, while acknowledging some detractors, is largely revered.
Hollywood Is A Technological Powerhouse
Throughout its history, the motion picture industry has been defined by the march of technological progress. From silent movies to Dolby Atmos, from black and white talkies to IMAX and 3D, and analog to CGI, it has embraced and pushed the boundaries of what’s possible and continually brought new experiences to its audiences.
In particular, the industry’s adoption of computers changed both the tools available to movie makers and creative artists, and the spectacular visuals in which stories could be told. Unconstrained, imaginations could now run free. Audiences everywhere would believe in a park where dinosaurs really roamed free.
As each of these technological innovations were introduced they were generally welcomed by the industry and the public alike. Perhaps with the exception of Smell-O-Vision, a technology that aimed to enhance the movie-watching experience by adding scents into the theater, others were seen as a positive by growing audiences and increasing the size of the workforce and revenue of the industry.
Up until recently, technological innovation has been an additive feature of Hollywood, as it has been for most industries.
AI Creates A Watershed Moment In The Movie Business
Now the movie business faces its most formidable innovation. The rapidly advancing capabilities of AI appear to be taking the wheel and may be on a path to creating the biggest change the entertainment business has ever experienced. A transformation is underway in the manner that motion pictures are being created and delivered.
What is happening to Hollywood is part of a bigger context; a cognitive industrial revolution that is being defined by the use of AI to produce thinking machines that are mechanizing the human mind. It is anticipated to change the nature and operations of every industry.
Those employed or contracted by the business in Los Angeles know this isn’t hyperbole. As each month passes, it’s becoming harder for them to find opportunities. Advanced AI-powered technologies are enabling fewer and lower cost skills to be needed in areas such as visual effects, graphics, writing, music and audio, and postproduction, some of which is now easily outsourced to other countries too.
In fact, so evident is the rise and impact of AI that in 2023, the Writers Guild of America (WGA) and the Screen Actors Guild (SAG) unions went on strike and shut down Hollywood for several months to demand, among several items, concessions on AI’s use. Eventually they won promises from management to limit some uses of AI in filmmaking.
While the most obvious negative result of these new technologies is the shrinking size and reduced demand for movie making talent, this is perhaps not the greatest challenge that the industry will face from AI in the longer term.
The real risk may be relevance.
Hollywood’s Entry Barriers Are Collapsing
In 2005, a new online service called YouTube started. It was difficult to see it then, but this platform, later to be bought by Google, would democratize the distribution of videomaking at scale. Today, millions of people make all manner of content of varying quality for YouTube, some generating millions of dollars annually in income.
YouTube didn’t kill Hollywood, but it did cause it to evolve by embracing a new pipeline for talent and ideas, enabling a new channel for content, creating competition for attention, and even influencing how stories were being told.
Up until recently, producing movie quality content by users for YouTube and other online streaming services was limited to those with time, creative skills, money, and a good command of the latest software tools.
Doug Shapiro, a media analyst who studies the role of AI in the entertainment industry, says Hollywood historically thrived because the substantial resources required to make a movie created a persistent and effective moat around the studio business.
AI is destroying these assumptions.
Today, the big tech firms and several startups are delivering compelling AI-created content that also teases at what is to come. Products like Midjourney, Google’s Veo3, and Kling, can produce cinema quality video, albeit only a few seconds at a time right now, generated with simple, plain English prompts.
The impacts are already obvious in the advertising world. One AI-generated 30-second national TV ad (see the video below) that was aired during the 2025 NBA finals was created in three days and cost just $2000 to produce. In the absence of AI, it’s estimated that making the same ad using traditional methods could have cost up to a million dollars and taken almost 12 weeks.
When the cost and time differential it so vast, the legacy approach is doomed.
What Might This AI-Powered Future Look Like?
Can it be long before anyone with just a few prompts will be in a position to generate a full-length cinema-quality movie? Creating another Indiana Jones sequel will be as easy as describing the basic plot and in minutes the feature film will be available to watch and share.
How about creating a TV series that continues indefinitely, either generating its own plotlines or taking input from the user?
Perhaps a user will watch a TV show or movie and not like the ending. A simple prompt will fix that.
Showrunner from Fable, a new AI-powered online service that enables users to create their own full length shows, may be an example of the shape of things to come.
The advantages of AI to an individual creator or small production company are obvious, but what becomes of Hollywood? In a future state where everyone can be a producer of high-quality content, the role of an entire industry comes into question. Arguably, there’s room for Hollywood in this new playing field, but without substantial reinvention might it be much smaller and less relevant?
Critics will put forth that AI will never have the creativity and imagination of a human. That may or may not be true in the long run—we simply don’t know yet, but there’s nothing stopping AI today from analyzing the writing style of Stephen King and the directing chops of Steven Spielberg and then offering those to a user to apply to the output of their simple prompt.
As a consequence of AI, Hollywood is facing a critical juncture. If it is to remain relevant, it must prepare to tell a new story for itself in an era that will be here sooner than most imagine.
For other industries, take note, your moment to transform is coming soon too.