The AI-Powered Hollywood Studio

Summary

WSJ Tech News Briefing: The AI-Powered Hollywood Studio
Release Date: November 20, 2024
Host: Belle Lynn, The Wall Street Journal

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Introduction

In the November 20th episode of WSJ Tech News Briefing, host Belle Lynn delves into two major topics shaping the tech and entertainment landscapes: Nvidia’s highly anticipated earnings report and the emergence of Promise Studios, a new entertainment venture harnessing the power of generative AI for filmmaking and television production. This episode provides insightful discussions with WSJ reporters ASA Fitch and Deputy Media Editor Jessica Tunkel, offering a comprehensive overview of these developments and their broader implications.

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Nvidia’s Earnings Report: Expectations and Market Impact

Belle Lynn opens the episode by focusing on Nvidia’s upcoming earnings report, a critical event for investors given the company's pivotal role in the AI revolution. Nvidia recently reported a quarter where sales and earnings more than doubled compared to the previous year, surpassing expectations. However, despite these impressive figures, investor enthusiasm appears tempered.

Key Discussion Points:

• High Expectations and Investor Sentiment:

  • ASA Fitch explains the subdued investor reaction by highlighting the sky-high expectations set for Nvidia:
    “It's basically because expectations have become extremely high for the company. Investors have gotten used to the company just blowing people away with its numbers...” (01:58).

• Manufacturing Challenges with Blackwell Chips:

  • Fitch details concerns over Nvidia’s next-generation Blackwell chips, which experienced manufacturing issues:
    “Blackwell is going to be at the top of investors minds... they revealed they had a manufacturing issue with their next generation Blackwell chips...” (02:49).
  • He anticipates that CEO Jensen Huang will provide updates on resolving these issues and the rollout timeline during the earnings call.

• Execution and Market Dominance:

  • The discussion shifts to Nvidia’s ability to maintain its dominance in the AI chip market amidst increasing competition and potential antitrust scrutiny:
    “The question really for the company now, and the question for investors is execution. The company has a dominant market share in AI chips and the question is, can they continue to just dominate...” (03:56).

• Broader Implications for the AI Industry:

  • Fitch suggests that Nvidia’s performance serves as a bellwether for the broader AI sector:
    “If Nvidia delivers a quarter that people are unimpressed with, they might see it as a signal that, okay, people aren't spending quite as much as we hoped on these chips that drive AI...” (04:29).

Investor Expectations:

Most analysts anticipate that Nvidia will continue to beat sales and profit forecasts. However, the critical focus is now on Nvidia’s execution capabilities and strategic responses to market challenges, particularly regarding the Blackwell chips.

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AI in Hollywood: Promise Studios' Revolutionary Approach

After discussing Nvidia, Belle Lynn transitions to the fascinating intersection of AI and the entertainment industry, spotlighting Promise Studios, a pioneering venture dedicated entirely to utilizing generative AI in content creation.

Promise Studios: A New Frontier in Entertainment

• Founding and Vision:

  • Jessica Tunkel explains that Promise Studios is backed by industry veterans Peter Chernin and Andreessen Horowitz. Unlike traditional studios that are gradually integrating AI, Promise is built from the ground up with AI at its core:
    “They are developing their own software that will tap into all the AI tools out there to create their own content.” (07:10).

• Comparative Approach to Established Studios:

  • Tunkel contrasts Promise with established studios like Lionsgate, which are partnering with AI startups to enhance specific aspects of production:
    “Lionsgate... are working with Runway right now to create a model that Lionsgate will use for their own shows and movies... Promise is a startup and they're starting from scratch...” (06:31).

Industry Context and Challenges:

• Historical Skepticism and Labor Concerns:

  • Reflecting on past industry tensions, such as the actors’ and writers’ strikes over AI's potential to disrupt livelihoods, Tunkel outlines how studios are navigating these challenges:
    “...the guild and the industry came to an agreement that would satisfy everyone that they would be compensated for any use of tools and that they had to give their permission for anything.” (07:18).

• Economic Pressures and AI Adoption:

  • The post-COVID landscape has led to reduced production budgets, making cost-effective AI tools increasingly attractive:
    “Production is not ever coming back to the levels that it once was before the COVID pandemic... tools like Generative AI are pretty attractive because you can create things for much less expensive and you can do things much faster.” (07:18).

Competitive Edge and Democratization:

• Promise’s Strategic Advantage:

  • Tunkel highlights that Promise’s fresh, AI-centric approach could give it a competitive edge over traditional studios that are merely integrating AI tools:
    “...starting from scratch using these tools, as opposed to these traditional studios... they think they'll have an edge.” (08:45).

• Empowering Independent Creators:

  • The studio aims to democratize content creation, enabling creators to produce high-quality stories without relying on major studio financing:
    “You're going to see more people be able to create very quality stories at the same level at some point as these big studios. And you're not going to have to rely on these big companies.” (09:19).

Concerns and Future Outlook:

• Intellectual Property and Ethical Considerations:

  • While Promise is optimistic, Tunkel acknowledges ongoing concerns regarding IP protection and ethical use of AI in content creation:
    “How you protect that IP is still really not clear. They say they will deal with it as it comes to them.” (10:36).

• Timeline for AI-Driven Content:

  • Promise anticipates releasing its first AI-generated content within three years, starting with smaller formats to establish its capabilities:
    “They expect to have things out in the next three years. They'll probably start smaller, like smaller interactive formats and shorts...” (11:20).

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Conclusion

The WSJ Tech News Briefing episode on November 20th provides a deep dive into the evolving dynamics of AI in both the tech and entertainment industries. Nvidia’s earnings report serves as a critical indicator of AI’s economic viability and market sentiment, while Promise Studios exemplifies the transformative potential of generative AI in redefining content creation. As AI continues to advance, its integration into diverse sectors underscores both the opportunities and challenges that lie ahead, shaping the future of technology and media.

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Notable Quotes:

• ASA Fitch on Nvidia’s Expectations:
  “It's basically because expectations have become extremely high for the company. Investors have gotten used to the company just blowing people away with its numbers...” (01:58).

• ASA Fitch on Blackwell Chips:
  “Blackwell is basically the first big chip advancement from Nvidia since the AI boom kind of kicked off... a lot of Nvidia's future hinges on Blackwell succeeding...” (02:49).

• Jessica Tunkel on Promise’s Approach:
  “They are developing their own software that will tap into all the AI tools out there to create their own content.” (07:10).

• Jessica Tunkel on Democratization:
  “You're going to see more people be able to create very quality stories at the same level at some point as these big studios.” (09:19).

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This comprehensive summary encapsulates the key discussions, insights, and conclusions from the episode, providing a clear and engaging overview for those who haven't listened to the podcast.

Transcript

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[Belle Lynn]

Welcome to Tech News briefing. It's Wednesday, November 20th. I'm Belle Lynn for the Wall Street Journal. Chipmaker Nvidia is reporting earnings today and expectations are high. Last quarter the chip giant put up sales and earnings that more than doubled from the previous year. We'll find out what investors will be watching for in today's results. And then the latest big name in Hollywood is artificial intelligence, and a new entertainment studio called Promise is going all in on generative AI in television and filmmaking. Our deputy media editor Jessica Tunkol tells us what that could mean for the industry. But first, Nvidia's earnings are the main event for investors this week as the chip maker powering the AI revolution gives a quarterly update on its progress. For more on what investors are expecting, including potential bumps in Nvidia's trajectory, we're joined by WSJ reporter ASA Fitch. ASA Last quarter, Nvidia's sales and earnings were more than double from last year and they beat expectations. But that didn't exactly impress investors. Why is that?

[ASA Fitch]

It's basically because expectations have become extremely high for the company. Investors have gotten used to the company just blowing people away with its numbers, and it's been blowing people away a little bit less over the past couple of quarters. Last quarter also, they revealed they had a manufacturing issue with their next generation Blackwell chips that they're trying to iron out. They seem to be confident that they had ironed out. So there was a little bit of spook that sent through the market and those two things probably accounted for some of the performance of the stock after the results last time.

[Belle Lynn]

So it's kind of like Nvidia's success is its own worst enemy. It makes it harder every Single time for it to surpass its prior results. Asa, you mentioned the manufacturing issues around Nvidia's next generation Blackwell chips. Is CEO Jensen Huang expected to give an update on that?

[ASA Fitch]

Blackwell is going to be at the top of investors minds and a lot of the questions that he's going to get from analysts are going to be about Blackwell and he's going to, I'm sure, address how it's going, how the rollout is going. Nvidia is expecting to get some revenue from Blackwell in its current quarter, which ends in January. And then the expectation is that those revenues are going to ramp up later. So Blackwell is basically the first big chip advancement from Nvidia since the AI boom kind of kicked off. And during the AI boom, their previous generation of chips that were dubbed Hopper were kind of the big thing that everybody needed. Everybody wanted to build these big AI models that were so flashy and interesting and Blackwell is kind of the next step. And so a lot of Nvidia's future hinges on Blackwell succeeding these new kinds of chips and the new systems are going and doing well and being good at training these models and et cetera, et cetera. So they're counting on this. Investors are asking about it and there's been some current concern about the timeline for these things. So that's going to be a huge question for people going into the earnings.

[Belle Lynn]

What else are investors expecting from Nvidia today?

[ASA Fitch]

Most analysis reports you read will say they're expecting to beat expectations, the Wall street expectations for sales and for profit. The question really for the company now, and the question for investors is execution. The company has a dominant market share in AI chips and the question is, can they continue to just dominate this world of AI computing? There's a lot of competition, there's some antitrust scrutiny around the company because of its dominant position.

[Belle Lynn]

How might Nvidia's earnings affect Wall Street's outlook for AI more broadly?

[ASA Fitch]

Well, it's just seen as an indicator. If Nvidia delivers a quarter that people are unimpressed with, they might see it as a signal that, okay, people aren't spending quite as much as we hoped on these chips that drive AI because they're skeptical about the returns from these investments they've made, so they're pulling back in some way. Even if the pace of growth is a little bit slower in the past, but it's still growing. That could still be seen as a negative sign for how AI is going.

[Belle Lynn]

That was our reporter ASA Fitch. Coming up. AI is set to take a much bigger role in Hollywood. We'll find out what a studio powered by the tech might look like after the break.

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Technology can be a catalyst for compelling customer and employee experiences. On the third episode of techfluential, Deloitte's Ludi Lorenzo talks with Sabina Ewing, SVP of Business and Technology Services and CIO at Abbott and Linda JoJo, EVP and Chief Customer Officer at United, to learn how they are redefining technology's role in elevating the customer experience. Where technology and influence converge, new opportunities can emerge. That's techfluential, a podcast from Deloitte and custom content from WSJ.

[Belle Lynn]

A new entertainment studio called Promise is looking to use generative AI tools to make movies and TV shows. It's backed by veteran media exec Peter Chernin and tech investor Andreessen Horowitz. And unlike traditional Hollywood players who are mostly just testing the waters with AI, Promise will be an entire studio centered on these tools. For more on this and what it means for the movies we watch and the entertainment industry at large, we're joined by WSJ Deputy Media Editor Jessica Tunkel. So, Jessica, when you last came on the show, it was after Lionsgate Entertainment announced a deal with the AI startup Runway in September. Tell us how this new studio, Promise, is planning to use AI.

[Jessica Tunkel]

So Lionsgate is an established studio. They've been making movies and shows for years and years and years. John Wick is one of their big franchises. So what they did was they are working with Runway right now to create a model that Lionsgate will use for their own shows and movies. So think about special effects blowing things up, which is a big thing in lots of Lionsgate movies. Promise is a startup and they're starting from scratch, right? So they don't have any ip. They are just going to be using generative AI tools. They're developing their own software that will tap into all the AI tools out there to create their own content.

[Belle Lynn]

Jessica, why are so many people in Hollywood cautious about putting generative AI into any aspect of movie and television making?

[Jessica Tunkel]

As you recall, a little over a year ago, Hollywood writers and actors were on strike and one of their big concerns was about these generative AI tools and that it would basically completely kill their livelihood that these tools could copy the image of actors and they wouldn't get compensated for their performances. Same thing with writers, that it would be able to just use their scripts or shows and they wouldn't be compensated for it. So the guild and the industry came to an agreement that would satisfy everyone that they would be compensated for any use of tools and that they had to give their permission for anything. So cut to now. Every studio you talk to is trying to figure out the best way to use these tools. We are in a new era of Hollywood. Production is not ever coming back to the levels that it once was before the COVID pandemic. People thought it would come back, and it doesn't feel like that's happening because the money's not there. People are much more cautious with their budgets for various factors. So as a result, tools like Generative AI are pretty attractive because you can create things for much less expensive and you can do things much faster.

[Belle Lynn]

So are those some of the reasons why Promise is jumping head first into putting generative AI into every aspect of movie and filmmaking?

[Jessica Tunkel]

Yeah, I mean, when I spoke to the founders of Promise, which, interestingly, two of them, they were in the early days of the creator economy. And so there are a lot of similarities there. Where this is a new art form to some degree. The way they view it is if we can get in this first and create a company that is starting from the ground up using these tools, as opposed to these traditional studios, many of which are trying to figure out how to sprinkle it into existing processes, they think they'll have an edge.

[Belle Lynn]

So how promising is that edge?

[Jessica Tunkel]

There is something to be said about the fact that you're going to see this new breed of studios that are going to be built around these generative AI tools. As much as people are worried about the implications of these tools on the entertainment industry, it's happening.

[Belle Lynn]

Yeah. And when you mention the creator economy, I think about these parallels that you bring up as well, where there's this sort of democratization of making movie and filmmaking available to everyone, just like social media platforms did the same thing. Do you think that's also at play here? And how is it at play?

[Jessica Tunkel]

That's something that I spoke to the founders quite a bit about. What's interesting is if all things go as they seem to be going, you are going to see more people like Dave Clark, who is this Generative AI artist. He's one of the founders of Promise. He isn't a big Hollywood name, but if you look at some of the clips he's creating, they're pretty high quality and they're just gonna get better. So you're gonna see more people be able to create very quality stories at the same level at some point as these big studios. And you're not going to have to rely on these big companies. For financing anymore. It's going to change the dynamics.

[Belle Lynn]

Those actually sound like some pretty good benefits. But what are some of the concerns around using AI this way?

[Jessica Tunkel]

I do think that there are some real concerns and real things that need to be worked out with regard to not so much these new studios that are starting from scratch, but when you have these bigger companies that are creating models based on IP that's out there. How you protect that IP is still really not clear.

[Belle Lynn]

How is Promise dealing with that?

[Jessica Tunkel]

They say they will deal with it as it comes to them. They're going to respect the guilds as they start actually creating shows and movies. They'll follow the rules on the IP front since they don't have any ip. You don't have to worry about infringing on anyone else's right now.

[Belle Lynn]

So when can we expect the first movie or television show that Promise puts out into the world with AI?

[Jessica Tunkel]

They told me that they expect to have things out in the next three years. They'll probably start smaller, like smaller interactive formats and shorts and things like that. So I would imagine you'll start seeing things coming out in a year.

[Belle Lynn]

That was our deputy media editor, Jessica Dunkel. And that's it for Tech News Briefing. Today's show was produced by Julie Chang with supervising producer Katherine Milsop logging off. I'm Belle Lynn for the Wall Street Journal. We'll sign back in this afternoon with TNB Tech Minute. Thanks for listening.