Disruptive Innovation or Competitive Advantage? Generative AI and the Future of the Hollywood Studio System

Abstract

Generative AI has been a global hot-button issue, but no more so than in the Hollywood film industry. Hollywood was blindsided when in 2022, AI technology such as DALL-E and later Sora, debuted, demonstrating how original images could easily be created solely from text prompts, or how traditional movie sets and locations for filming could be generated by AI, for a fraction of the cost to travel. The industry has since oscillated between states of panic, disbelief, and insurgency over the topic and its possible use to displace creative workers. This innovative technology even triggered a new crop of AI-native and hybrid studios to appear in the entertainment industry. Many of these new entrants are promising, highly efficient workflow models utilizing AI that could reduce filmmaking costs and circumvent the traditional workflow processes and tools employed by the traditional studio incumbents. Other new AI studio entrants specifically target AI to disrupt the traditional studios and democratize the film industry. But is GenAI really “disruptive technology”? Or could the incumbent studios use GenAI to gain a competitive advantage over their incumbent rivals, as well as fend off these new AI native challengers, while also better serving their consumers? If incumbent studios continue to resist this technology, is it possible for new AI studio entrants to disrupt and supplant their dominance over the entertainment industry? This thesis explores the current entertainment industry landscape in the shadow of rapidly emerging AI technology and dissects the historical complexity of the Hollywood studio system to identify historic themes and patterns, macroeconomic trends, and business model design elements. These are analyzed through the lens of grounded business theories, including Clay Christensen’s Theory of Disruptive Innovation. My aim is to gain insight into the industry’s behaviors and the studios’ institutional beliefs in order to better understand the scope of how AI could be a benefit or detriment to their strategic positioning and business offering.Extension Studie