At last week’s CNBC Delivering Alpha conference, actor and producer Ben Affleck delivered a succinct tour-de-force on how and why artificial intelligence (AI) is a disruptive force on the supply side of Hollywood. Clips of the argument went viral, including his example of people eventually being able to make a personalized finale of “Succession” where Kendall and Stewie end up romantically involved.
Affleck predicted that consumers will want “to make 5 minute, 30 second Tik Tok videos where they look like “The Avengers”… Just like you used to be able to buy your Iron Man costume at the store, you're going to buy your Iron Man pack and you and your buddies are going to look like Iron Man and Hawkeye on Twitch.” Done right, that model will create “an additional revenue stream that can replace [the] DVD which took 15 to 20% out of the economy of film making.”
This example touches upon an argument in last month’s “Is There Consumer Demand For Hollywood Content Produced With Generative AI?: Newfound efficiencies in production models from AI will matter less if consumers increasingly prefer their favorite IP in different formats than TV or movies.
It is also an example of the four “back to the people” business models where consumers might license “beloved worlds and characters” to create original content. In other words, Affleck is aware that consumers are increasingly becoming producers. He also conceded that “YouTube is kicking peoples’ ass” and therefore talent “have to work harder and be better.”
Affleck's vision ultimately mirrors the “new business of living room content” I wrote about in September: “The more YouTube competes with Netflix on television screens worldwide, the more YouTube is proving that consumers' 'choice and control' over the medium of the internet means fans are the producers of the content they want to watch.”
Affleck’s interview avoided answering what this new competitive dynamic will mean for producers.
Key Takeaway
The business of being a “producer” is being more broadly redefined. Even if Ben Affleck's Artist's Equity can successfully reduce upfront costs, it may not be enough to compete against an increasingly democratized pool of producers.
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What Should Supply Look Like?
Lurking within Affleck’s predictions and insights are the early seeds of realization that we are living through the next chapter of Marshall McLuhan’s “the medium is the message”.
The business of distributing interactive content to billions of devices (mostly smartphones) over the internet is not the same as the linear distribution business model. Interactive content is not the same as static light signals sent via miles and miles and miles of fiber optic cable to a finite number of homes and businesses (over 100 million homes in the early 2010s and now 76 million). Nor is it the same as convincing hundreds of people sitting in a theater to simultaneously experience the same movie on a giant screen for a few hours.
McLuhan’s point was that mediums matter more than the content. The “invisible ‘groundrules [sic], pervasive structures and overall patterns” working in the background of the internet are doing more to involve humans in both the consumption and production of content than the more passive mediums of TV and theatrical distribution ever did. But, we miss that because we focus on the content instead of how the medium shapes human behavior.
Consumers’ relationships with the content and its creators will no longer be passive in an increasingly interactive medium, especially as they assume the role of producers subsidizing creator content at a smaller scale. For these reasons, demand is evolving, so supply must evolve, too.
TV shows and movies are less bankable products and the internet as a medium favors multiple content models. Affleck concedes this. But, he is less clear on what supply should look like as consumer demand evolves away from TV shows and movies.
The Signals
The vision presented by Affleck and Cardinale at the Delivering Alpha conference has the qualities of an incomplete jigsaw puzzle. There are certain signals that they have identified—the emerging cost efficiencies from AI, the “cultural footprint” of some but not all talent and the growing value of IP beyond TV and movies—that point to changing how the supply of content is likely to evolve away from movies and TV shows.
For the remaining TV shows and movies, his bet with Artist’s Equity—with the backing of Redbird Capital, whose founder, managing partner, and chief investment officer Gerry Cardinale appeared on-stage with him—is to make sure creative talent “act like owners” in the creative product and are not just participating for the “cash grab”.
In short, the talent becomes the producers. That means realigning project incentives away from studio executive compensation packages so that bonuses are awarded in “escalating tranches of money”. “Real success” in a streaming project with the likes of Netflix will mean talent will earn “a hell of a lot more.”
However, the big picture seems otherwise incomplete. The problem with YouTube ”kicking peoples’ ass” is that it implies YouTube is simultaneously redefining success for a Hollywood “production". It is doing so by democratizing the pool of producers to the subscriber bases of a creator and enabling them to fund creators directly via subscriptions, merchandise and tips (all enabled by YouTube’s Partner Program).
I made a version of this point in September's “YouTube Is Forcing Netflix to "Break" Its Business Model”: “The more YouTube pressures Netflix into producing more content at a lower cost, the more Netflix will have “to break [the business]” and undermine the studio side of its model.”
Even if Artist’s Equity figures out how to produce lower-cost content that will succeed on the back end—and it is a reasonable bet to assume they will—market forces are working to push those costs even lower while expanding the possible pool of creators and producers. In the long run, that competitive dynamic is not viable for Hollywood talent.
Rethinking The "Producer"
For this reason, Affleck and Cardinale may be too focused on the competitive dynamics of the talent side of the equation. They have fascinating competitive insights into these, particularly the “cultural footprint” of talent like LeBron James or Matt Damon offering a safer return on investment.
The uncomfortable question is whether they should be rethinking how the business of being a “producer” is being more broadly redefined. They have exponentially more competition in the production space from fans than they seem to realize, and those fans do not always need TV shows or movies.