Where Do AI and the Streaming Bubble Bursting Leave Hollywood?

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Kate Bullivant (0:33)

Hey, What's News listeners, it's Sunday, October 12th. I'm Kate Bullivant for The Wall Street Journal. This is What's News Sunday, the show where we tackle the big questions about the biggest stories in the news by reaching out to our colleagues across the newsroom to help explain what's happening in our world. This week, Hollywood is in crisis mode, with the historic centre of film and TV production looking more like a disaster movie than a glamorous rom-com. Many media houses are finding other, cheaper places to make their shows, like Disney's Marvel Studios, which makes many of its superhero movies in the UK, and Netflix, which has expanded a production facility in New Mexico. Meanwhile, lurking in the shadows is the increasing presence of artificial intelligence. Earlier this year, organisers of the Oscars announced that films made with the help of AI will be able to win top awards. And you might have heard of the so-called AI actor, Tilly Norwood, who's drawing criticism from some A-list celebrities like Emma Stone. So how are Hollywood, and the people who work there, keeping up with these changes? And what does the rise in AI mean for content creation more broadly? To help dig into this, I'm joined by journal entertainment reporters Ben Fritz and Joe Flint. Ben, I want to start by focusing on Hollywood. Why are we seeing this downward spiral when it comes to TV and film production?

Ben Fritz (2:09)

The very short answer is that the streaming bubble has popped. There was, in the late 2010s and early 2020s, this huge rush to establish and grow streaming services like HBO Max and Disney Plus and Apple TV and Netflix. Then investors a couple of years ago started to reshift and say, we don't care about growth, we care about profits. Of course, the easiest way to shift from growth to profits is to cut costs and make less stuff. The studios significantly cut back on the amount of, especially TV shows for streaming that they were making. Then combined with that, the stuff that they are making, especially when it comes to big budget movies, they're increasingly making overseas where they can get bigger tax credits and cheaper labor. You see a lot of movies being made in Canada, in the UK, even in Eastern Europe.

Kate Bullivant (2:59)

What does all of this mean for LA's economy and in particular for workers who aren't the kind of star-studded A-list celebrities?

Ben Fritz (3:07)

There are hundreds of thousands of people who work behind the scenes in very middle-class jobs. They are the camera operators, the makeup artists, the assistant directors, the animators. And they are in many ways the heart of Los Angeles' middle class. And for most of the last several decades, they've worked pretty consistently. Now they're not. There is simply not enough work for them in Los Angeles. They're really struggling. And obviously that's financially and emotionally painful for them. And of course, it ripples throughout LA's economy because these people are spending less money.

Kate Bullivant (3:36)

President Trump has proposed 100% tariffs on films made outside of the US. What does this tell us about the state of the industry?

Ben Fritz (3:47)

Well, it tells us that the dire state of movie and TV production in the United States, especially in California, is getting the attention of the president. It's a significant economic issue.

However, if you talk to anybody who understands the economics of entertainment, they'll tell you a tariff is not the solution. You can't tariff a movie because it's not a physical good that comes in through a port. What people who work in movies and TV really want is a federal tax credit, something like 15% where the government would essentially refund producers the cost of making stuff here. That's what the UK does. That's what Canada does. That's what several states like Georgia, New York, California do. But if you talk to the advocates, we really need a federal task credit on top of the ones in some states in order to make the US competitive again.

Kate Bullivant (4:33)

We mentioned earlier about how artificial intelligence is beginning to crop up in Hollywood. There's this so-called AI actor, Tilly Norwood, created by a Dutch actor and comedian. Here's a short clip of Tilly.