[Author's Note:With the New Year fast approaching, I have decided to run a survey about the seven entrepreneurs or "builders" I interviewed this year, all of whom sit at the intersection of Artificial Intelligence (AI) and media. How could I go deeper with them in a new offering for readers like you?
My latest Medium Shift column for The Information went live last Tuesday. In “Armed With AI, Small Businesses Also Challenge Hollywood”, I wrote about Don Allen Stevenson III who is both a creator publishing content using AI tools like Meta's Movie Gen and also the owner of a small business.
Don Allen has built his own hybrid model for the AI era.
My favorite “a-ha” moment from the interview with Stevenson happened when he told me that 80% of his videos will be made with AI and require little or no additional labor. Social media audiences will watch, usually for free (he has paying Instagram subscribers). The followers, likes and views of the 80%—aka “vanity metrics”—will help attract the “luxury audience” who will pay to consume the other 20% of his content.
Normally we think of the 80/20 rule—or, the Pareto Principle—as 80% of outcomes come from 20% of causes. Stevenson’s business model flips that logic on its head: 80% of his work helps him monetize 20% of his work better than he could do with advertising or sponsorships alone.
This math is bread-and-butter business logic for marketers and retailers: Stevenson generates and captures attention with AI-generated content, first and frequently. He then drives those audiences down various buyer’s journeys—or conversion funnels—where he converts a smaller percentage of those audiences into paying customers with other content and services.
As Stevenson told me, “Three years ago I would have assumed that if you wanted to make stuff that looked like cinema-quality, feature-ready you would need a large studio. That’s not how I feel anymore.” In other words, visual effects (VFX) professionals no longer need to rely on the TV or theatrical mediums, only.
As consumer demand evolves away from traditional TV shows, movies and even console games, creators like Stephenson and platforms like Meta seem best-positioned to capture and shape that new demand.
Key Takeaway
There may be at least 100,000 Don Stephensons out there with direct access to audiences at scale who will not have a business need to monetize all or almost all impressions in order to break even. The implications seem terrifying for Hollywood and traditional media.
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Total time reading: 4 minutes
The Rise & Fall of VFX
Visual effects has long been "a global patchwork of studios, effects houses, boutique shops, and freelance contractors", as Defector’s Drew Magary wrote two years ago. VFX departments did not exist—particularly in television—until a decade ago. Three years ago, the post-production process became oversaturated with demand, creating a crisis that slowed TV series, movies and video games getting to market.
Stephenson highlighted how resource constraints—time and money being the main ones— drove the post-production market's struggles to meet that demand:
[I]f I can generate something that a studio would take a month to generate in 15 seconds, then that has amplified my ability tremendously. I mean I couldn't hire that many people at DreamWorks to do that work for that one-off concept so you get time back.
In other words, a fear of waste factored into post-production, perhaps as much as if not more than creativity did. Stephenson explained how time and creative constraints go hand-in-hand: “
"In the past, I would always kind of tailor my ideas off of how much time do I think I have to execute on that idea? If I started to get too creative with the idea, I would just pull it back and say, ‘You know what? Let's not go down that route because we won't have time if that's the wrong route.’”
In 2022, Magary explored how those constraints impacted the demand-saturated post-production market. As one anonymous source told him:
“There are so many differing views and egos involved that it wasn’t uncommon to be on the hundredth version of a CGI animal or big action shot. Either might be on screen for only a split second. The amount of notes and revisions would inevitably push our delivery dates, which would always be an annoying conversation with the client. They usually wouldn’t understand the time that even rendering, let alone creative, takes.”
Magary highlights a web of relationships and responsibilities across Hollywood production studios, on-set creative talent, post-production shops and streaming platforms. It was a mess, and it still is.
“I can innovate faster on my own”
Listening to Stephenson, the obvious suggestion is that the post-production market for VFX will be advanced by AI tools like Meta's Movie Gen. Both Hollywood studios and gaming studios will be less resource-constrained by the post-production process. In theory, that should mean productions will be more cost-efficient and time-efficient, resulting in more profitable theatrical runs and TV series.
But, it will also mean the downfall of VFX shops. Last week, actor and producer Ben Affleck described them as being “in trouble” because “maybe it shouldn't take a thousand people to render something but [AI] is not going to replace human beings making film.”
Stephenson sounded more cynical after his experience at Dreamworks during the pandemic. He shared the story of how one of the first teams let go by Dreamworks during that period was the future technologies team. He shared his reaction then: “I was so blown away that, when things got rough at the studio, they threw away their future technologies team.” It was then that he realized “that's the wrong place for me to be at. I can innovate faster on my own.”
The implication is that the same people who were quick to throw out the next-generation technologies are also still in charge of the studios. The more things change, the more things stay the same. Perhaps AI will transform post-production studio processes to become faster and cheaper, but it is unlikely to happen at the speed at which creators like Stephenson are moving.
The Crossroads
If we take Stephenson's model, scale it up across “hundreds of millions” of creators and small businesses, and then assume the top 0.1% to 1% will succeed, an important point emerges: There are at least 100,000 Don Stephensons out there with direct access to audiences at scale who will not have a business need to monetize all or almost all impressions in order to break even.
Moreover, Stephenson’s model is not utilizing this newfound, unburdened creativity to create movies like “Where the Robots Grow”, the first feature-length fully animated movie made entirely with AI tools. Instead, he is exploring faster and cheaper creative outputs made possible by AI.
He does not need to produce movies or TV series because, on Instagram, audiences prefer short-form content to long-form movies or TV series (which are not available). There is the lurking sense that his creativity—and the creativity of hundreds of thousands of other creators—will ultimately produce a different kind of output from short-form content, movies or TV series.
It is unclear yet what that will be. The uncertainty seems terrifying for Hollywood and traditional media. What will be the long-term of all this innovation in the hands of hundreds of thousands of creators who will not need the post-production marketplace for income?
At the same time, this uncertainty is exciting and promising for savvy creators like Stephenson, too. The only certainty seems to be that Meta is increasingly positioning itself to be the heart of all this change.