Last week The Wall Street Journal reported that Lions Gate Entertainment has agreed to give access to its content library to AI startup Runway. In exchange, Runway will build a new, custom AI model that the studio can use in the editing and production process.
Its movie studio Lionsgate “plans to initially use the new AI tool for internal purposes like storyboarding—laying out a series of graphics to show how a story unfolds—and eventually creating backgrounds and special effects, like explosions, for the big screen.”
The obvious story is cost-cutting in pre-production and post-production: Lionsgate studio expects to save “millions and millions of dollars” in production costs. The less obvious story is more interesting: Lionsgate expects Runway to become a “game-changer” for its lower-budget films because “it will give them access to the same resources as bigger ticket movies.”
This echoes something Adobe Chief Product Officer Scott Belsky tweeted last fall:
“Often lost in the narrative: AI will help small companies leverage advantages typically reserved for big companies (making sense of data, security, marketing at scale, personalized experiences, etc…), and this could redefine how we think about [small-to-medium-sized businesses].”
Lionsgate seems to be aiming to leverage AI to redefine its disadvantages as a smaller studio. If AI can improve storytelling and production, its content can better compete in the attention economy.
Given that we are “exiting the era of big IP”—as Sony Motion Pictures Group chairman Tom Rothman declared earlier this summer—and the decentralization of the media conglomerate—as I argued two weeks ago— is this partnership the right solution at the right time?
Key Takeaway
Last week's Made on YouTube event and the Lionsgate-Runway partnership have a lot more in common than people realize. Together, they offered two futures for creators that seem divergent but also could overlap on YouTube.
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The Argument For
The pro argument is simple: Linear, theatrical and streaming are declining as viable businesses for original content. Any innovation that reduces costs improves the unit economics of production.
Rothman told Deadline:
“Streamers, who don’t have an individual film-profit-based model, inflated the cost of making films and all the studios, who do have such a model, succumbed to varying degrees. Mega-negatives became Giga-negatives, and budgets are up across the board.”
Rothman argued these negative costs are also “bad for the audience” because they impact creative risk-taking, which “decreases the ability” for studios like Lionsgate and Sony to push for “super talented artists” to take “really bold steps” and “make great things… that are culturally imperative”.
Efficiencies in pre-production and post-production are valuable, too. In the attention economy, production frequency is key and quantity over quality is the best strategy. Anything that can improve the time-to-market of a quality production should improve business results in streaming.
There is also a business opportunity for Lionsgate. The Wall Street Journal reports that “Lionsgate and Runway are discussing potentially licensing the generative AI model to other entertainment companies in the future.” That would create a low-cost, software-as-a-service supplemental source of revenue.
Generally, media companies’ bets in licensing proprietary software have proven to be poor bets in the long run. But here, given that Runway controls the software, there are reasons to be optimistic about Lionsgate’s first-mover advantage. Other studios have been hesitant to take the plunge.
The Argument Against
I argued last Thursday that “creator content increasingly competes with professionally produced content” and “[c]onsumers no longer perceive Hollywood’s content “quality” as an impetus for spending money on media or devoting time. “
I concluded that “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.” YouTube’s growing dominance in the living room—according to Nielsen’s The Gauge—is blurring the lines between the fans as consumers and fans as producers.
The better AI solution is arguably something like Fable Simulation’s Showrunner, which I wrote about in August’s “Giving Fans AI to Riff on Popular Shows”. Showrunner is a platform that can write, voice and animate episodes of shows.
Lionsgate produced and owns the “The Hunger Games” ($1.6 billion box office) and “Twilight” ($1.3 billion) franchises. It also owns popular IP from the Starz channel, including the popular series “Power”.
Enabling users to modify characters and worlds would allow Lionsgate to build “a cross between YouTube—thousands of creators telling stories to smaller audiences—and gaming platforms such as Fortnite or Roblox.”
That said, it is worth noting two obvious counters to this argument against the Runway-Lionsgate partnership. First, Showrunner is focused on animation only. Second, nothing is stopping Lionsgate from working with both Showrunner and Runway.
Made on YouTube
The Made on YouTube event last week highlighted how YouTube presents a deeper, more dynamic competitive threat to both Runway and Showrunner. In addition to announcing “a major revamp” of its connected TV app, YouTube announced eight other new features, two of which—Veo for Dream Screen and auto dubbing—make the pre-production and post-production processes easier for creators.
Dream Screen was announced last Fall as an experimental feature that allows creators to create AI-generated video or image backgrounds for Shorts videos simply by typing an idea into a prompt. Google announced it will integrate Veo—“Google DeepMind's most capable model for generating video”—into Dream Screen for YouTube Shorts. Veo will bring “more realistic backgrounds” and “standalone video clips” to add to existing footage in a Short.
It is also expanding access to its “auto dubbing” tool—announced last Fall, too—to more creators and offering it in more languages. The feature enables creators to make their content “accessible to even more people around the world”
Unlike Lionsgate, YouTube does not directly fund its content. Its Partner Program indirectly subsidizes creator content through a variety of monetization channels. These tools aim to drive more uploads and happier creators.
"Creator-Friendly" Models
The two stories echo July's essay “Conflicting Definitions of ‘Creator-Friendly’ Models”. The essay mostly focused on whether YouTube creators’ success would force studios into “a fundamental rethink of ‘creator-friendly’ away from elite ‘A’ content.”
The Lionsgate-Runway model is a step in this direction.
But, I also wondered at the end of that essay whether Hollywood's and YouTube's opposite definitions of "creator-friendly" are too far apart. They risk creating a schism between Hollywood and the creator economy.
Lionsgate’s partnership with Runway brings me a step closer to an answer. Creators cannot aim for studios' version of "creator-friendly" while studios and streamers favor creators who deliver elite “A” content. The former are better off creating on YouTube, and the Made on YouTube event sold that point hard.
A schism could emerge if the Lionsgate-Runway model becomes exclusive to Hollywood studios. Hollywood may end up with a single toolset for pre- and post-production while YouTube offers and evolves multiple toolsets for its 3 million-plus creators.
That is unlikely but not out of the realm of possibility.
The Lionsgate-Runway Opportunity
However, if the Lionsgate-Runway model is also offered to YouTube creators, two notable things would happen. First, “creator-friendly” will remain a spectrum within Hollywood because they will have the Runway platform in common.
Second, giving millions of creators access to the Lionsgate-Runway model could help the platform emerge as a serious competitor to YouTube’s creator tools. This would mirror how ChatGPT has emerged as a competitor to Google’s Gemini.
In that outcome, all creators would benefit. The business opportunity for Lionsgate-Runway would expand from solving production pain points for its creators to a broad swath of creators. Lionsgate-Runway would go from niche to global, suggesting this partnership may be far more significant than press coverage seems to realize.