The Market Signal: Runway Raises At $3 Billion Valuation
A hypothetical of a "canonical + fan fiction" model for studio partnerships using "John Wick 5"
The Medium identifies essential signals on how technology is shaping the business of culture, and how the marketplace is evolving in response.
The Market Signal
Runway, the artificial intelligence (AI) video startup which partnered with Lions Gate Entertainment last September for editing and production capabilities, raised $308 million in a new Series D round that valued it at “about $3B”. The round was led by General Atlantic and other investors include Nvidia, SoftBank Group, Fidelity Management & Research Co. and Baillie Gifford.
Runway is now valued at near double its valuation ($1.5 billion) from its last fundraise almost two years ago (June 2023).
Why It Matters
The investment aligns with broader investment trends in AI: Crunchbase’s global funding report found that AI led venture funding in the first quarter with $59.6 billion invested.
Runway CEO Cristóbal Valenzuela shared in a blog post that the funding would go “towards our goal of creating a new media ecosystem with world simulators”—an AI system that builds an internal representation of an environment, and uses it to simulate future events within that environment—and expanding Runway Studios, our first-of-its-kind AI film and animation studio dedicated to producing original content.”
A conversation last month with Fable Simulations CEO Edward Saatchi—unrelated to and without discussion of the fundraise —outlined one potential roadmap for Lionsgate and Runway in a world where “rogue outfits” using AI tools to create unauthorized scripts and videos with well-known IP. The funding brings Runway closer to this outcome.
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Saatchi suggested a three-stage process roadmap for Runway using Lionsgate’s "John Wick 5" as an example.
First, in pre-production Lionsgate executives use Runway tools to “pre-visualize” the entire film:
“maybe the character looks a bit like Keanu, with Keanu's permission, and that's great. You can kind of assess how you're going to spend the money, and maybe some of it will help you with some VFX shots too.”
Second, during production executives watch this pre-visualization and it is an interactive process.
So the executive can say, well, what if we had, at the end of act two, this villain reveal?
Let's change the villain reveal. Let's have a different character. And [Runway] understands story, it understands the visuals, and it generates the new act two reveal.
Last, after the movie has been finalized following this AI-driven editing process. “John Wick 5” is released in cinemas. In response, fans use generative AI tools like Runway and Fable Simulation’s Showrunner to create their own scenes, clips [and alternate versions of ‘John Wick 5’]”.
Saatchi labels the theatrical version as “the canonical ‘John Wick 5’”. Meaning, there is a tacit agreement between both the studio and the fans that iss the authoritative version of the movie.
All other clips created will be fan fiction, all of which can be monetized by the Lionsgate and the platforms it partners with. Saatchi believes this will happen based on the precedents of YouTube, social media and modifications in gaming aka “modding”. Modding is the process of alteration by players or fans of one or more aspects of a video game such as how it looks or behaves.
Saatchi noted that Hollywood treated each of these technologies poorly “until it became understood that this could put money into the pockets of the original creators and the artists.” It’s now “totally intuitive that someone would mod your game, would create their own kind of, or even within the game, make decisions that are unexpected to what the original designer wanted.”
Is The Market Signal Bullish or Bearish?
The fundraise seems bullish for Runway and generative AI. However, it also may a bearish signal. The fundraise and valuation come in lower than the $450 million at about a $4 billion valuation that The Information reported General Atlantic was seeking last July.
Press reports do not refer to this, and is not clear why the final amount they were able to raise was lower. It would seem that General Atlantic assumed it could get a broader pool of investors with the Runway pitch, but did not. That seems notable.
Saatchi’s vision for Runway and Lionsgate is informed by both Showrunner’s business model and his conversations with Hollywood studios, to date. It also reflects his belief that the short-term future for generative AI in Hollywood will be visual effects (VFX) and pre-production processes becoming cheaper.
In the long-term, “with games being much larger than movies”, Saatchi believes it “feels too obvious” that platforms like Runway and Showrunner will make AI “an interactive medium, a remix medium”.
This exciting vision of AI as a new medium has not yet been publicly articulated by Runway leadership or investors. That is neither a bullish nor bearish signal, but it is a question mark.