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It’s bus tour season again in L.A., the time when New York media analysts chauffeur their cherished investor clients around town to meet with studio executives, Investor Relations handlers, producers, agency heads, sommeliers, and, from time to time, me. Not surprisingly, the one topic that keeps coming up in these chats—besides whether Netflix will go after another studio… and if so, which one??… and if not, where the heck will the next growth engine come from??—is the A.I. takeover.

I know… the conversation around generative A.I. has become overwhelming lately. A.I. or A.I.-curious films were all over the Cannes market this month. (People seemed to really hate Soderbergh’s “appallingly ugly” John Lennon documentary with A.I. imagery courtesy of Meta.) Tribeca just scheduled Dreams of Violets, a 75-minute docudrama that’s being called the first full-length, live-action A.I.-generated film to be accepted by a major festival. (Cue the John Oliver voice: “Cool.”) And earlier this week, Amazon MGM Studios’ annual A.I. propaganda symposium in Culver City, dubbed “A.I. on the Lot,” doubled in size, to 2,400 attendees. Besides serving as a coming-out ceremony for Albert Cheng, the Amazon exec who last fall was given the title least likely to get him invited to Beyoncé’s Oscar party, “head of A.I. studios,” the event served as a ceremonial launchpad for three fully A.I.-animated shows backed by its GenAI Creators’ Fund and set to debut on Prime Video. These are just a few examples. I didn’t even include INKubator, the Netflix A.I. studio that Netflix insists isn’t really an A.I. studio.

What’s clear is that A.I., the villain of the 2023 strikes and subject of an ever-growing docket of litigation brought by rights-holders against the thieving ghouls of Silicon Valley, has emerged from the shadows to take center stage in Hollywood. For the most part, the studios and streamers are no longer shy about their plans—showcasing and, in some cases, bragging about the coming efficiencies. Disney did so on C.E.O. Josh D’Amaro’s first earnings call. Paramount Skydance can’t stop talking about how A.I. will help the company achieve those promised $6 billion in cost reductions at the merged WarnerMount studio. And Spotify’s stock popped 13 percent last week after the company revealed a deal with Universal Music to let fans create their own covers and remixes using the voices of artists who opt in.

Everyone always includes the required couching and respect for the creative professionals they’re endeavoring to replace. This technology is additive, not a job killer. It’s a tool, not a shortcut. Empowering, not subjugating. “The most important thing to remember is, we’re human-centric,” Cheng declared, echoing the talking point from countless studio earnings calls and investor conferences. “A.I. tools are meant to empower human creativity, and allow TV shows and movies that would not have been possible before.”

It’s all depressing. But whether due to resignation or exhaustion or opportunism, you can kinda feel the creative class in Hollywood shifting its positioning on A.I. from outright resistance to reluctant or cautious accommodation. Not a lot of choice, of course, and it doesn’t mean the resistance has disappeared. Just this morning, Jorge Gutierrez, one of the filmmakers announced by Cheng as participating in its GenAI Creators’ Fund, dropped out after backlash in the animation community. But overall, you hear the vibe shift on red carpets, where everyone from Demi Moore to Darren Aronofsky is all of a sudden excited about A.I. You see it at the labor guilds, whose stances shifted in the recent studio negotiations to much more A.I.-accommodating messaging. And at the talent agencies and management companies, which are more interested in signing A.I. creators and studios than ever before—not to mention willing to put their voice talents into A.I. films.

And you see it in startup initiatives like RSL Media, a nonprofit co-founded by Cate Blanchett that is attempting to work with A.I. platforms to create a standard “consent framework” for the use of creative works and name, image, and likeness rights in training models. It’s an interesting effort, if maybe a bit quixotic, but it’s gotten buy-in from CAA and backers like George Clooney and Viola Davis, and its registry is set to go live on June 24. When I talked to the C.E.O., Nikki Hexum, yesterday about the positioning of the “RSL Human Consent Standard,” which will allow anyone to declare their A.I. “permissions,” she repeated a line I hear a lot these days: “We are not anti-A.I.,” Hexum told me. “We are just very much pro-consent. So we built an infrastructure layer that we felt was missing on the internet to allow people to say what they were okay with and what they don’t want to happen.”

Indeed, Hollywood’s best hope now isn’t to corral or even slow the takeover by A.I., but instead to shape its evolution by playing a role in creating the framework for its deployment. It feels a little like the early 2000s, when Apple’s iTunes Store and iPod, among other “legit” music players, helped shift the culture of lawless music filesharing to a pay-for-download model that eventually led to the streaming economy. Similarly, the frameworks for A.I. use and training are now being created, it’s all about getting a seat at that negotiating table.

The way we evaluate the consumption of entertainment should probably shift for the A.I. age, right? If you don’t pay attention to that stuff, the “engagement” metric has overtaken the streaming industry. Time spent is the goal, regardless of quality of audience.

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I’ll blame Nielsen for this one. It wasn’t the first data firm to compare engagement on various platforms, but the company’s monthly Gauge report caught on soon after it debuted in 2021, and created a public horserace. When Netflix and most other streamers stopped reporting monthly subscriber numbers, “engagement” became the default metric of growth, and eventually the YouTube narrative that free, mostly user-generated content is dominant and simply “TV now.”

I know it drives Netflix C.E.O.s Ted Sarandos and Greg Peters crazy to be compared to YouTube each month, since Netflix consistently lags a few percentage points behind. That comparison, and its aggressive push into advertising, has led to programming shifts at Netflix, such as the push for video podcasts that eat up time with low-cost content. In just the past week, Netflix agreed to air Charlamagne tha God’s The Breakfast Club pod for three hours a day and partnered with Spotify to lure Jay Shetty’s pod from YouTube.

But imagine when A.I.-generated content truly comes to dominate on YouTube and YouTube Shorts, forming a thick, sludgy sedimentary floor over which the rest of the content floats. Most analysts believe that A.I. layer will juice the engagement numbers even more, allowing YouTube and other free, ad-supported services to pull away on the Gauge numbers. At the same time, the quality-control guardrails of the premium subscription services, despite their shifts to be more like YouTube, will hold a lot of that stuff back.

But what if the industry shifts to an engagement model defined not only by pure time spent but at least a contributing notion of “quality” time? Something that acknowledges that playing a rainstorm video while you sleep for eight hours is not the same as focusing deeply on each unnecessarily gory medical procedure on The Pitt? Basically, a quantifiable version of what the traditional networks and subscription streamers talk about endlessly at their upfront presentations each spring: a better audience.

Robert Fishman, the analyst at MoffettNathanson, got that ball rolling this week with his own “Quality” rankings, which he judged by five metrics: time of day viewership (primetime being a better indicator of intentionality and attention than, say, the middle of the night); content demand, as evidenced by data services; franchise depth; prestige (critics and awards); and sports/live events. “As free, ad-supported competitors such as YouTube grow in scale, paid streaming services must look to quality as a differentiator to justify their price tags to consumers,” Fishman wrote in a note to clients.

By using those guideposts, “engagement quality encompasses the aspects of viewership—beyond sheer scale and hours—that feed into a platform’s ability to monetize via price increases, subscriber additions, churn mitigation, and advertising revenue.” In other words, the overall health of a service, not merely who delivers the most eyes—open, closed, or focused on folding underwear—against which ads can be sold.

I know… the streamers already do this analysis, and it explains why some highly watched shows get canceled or services shut down. But it’s not public, and a shift to an industrywide metric that doesn’t just reward volume would benefit those whose platforms don’t just post whatever. For instance, Disney, which leads the “Quality” ranking based on its “unmatched franchise depth and sports portfolio,” also happens to spend more on content each year than any other entertainment company. HBO Max, which consistently ranks last among non-Apple streamers on the Gauge, comes in second on the quality metric, thanks to its strong brand and prestige.

Fishman’s “quality” rankings aren’t perfect, of course. Snobby critics and bicoastal dads would argue that Apple TV has higher quality than Netflix, but is their opinion more important than the teen girls who binge Love Is Blind or Virgin River? Even so, the rankings are a solid measure of which platforms are, in Fishman’s words, “earning their viewing rather than simply accumulating it.” As A.I. floods into Hollywood, that’s a welcome assessment, and perhaps a better indicator of where the industry is headed than engagement alone.

See you Monday,
Matt

Got a question, comment, complaint, or a ’90s pop act willing to play Trump’s “Great American State Fair”? Email me at Matt@puck.news or call/text me at 310-804-3198.

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