Hollywood 2.0: How AI, IP, and Indie Innovation Are Redefining the Film Industry

As artificial intelligence reshapes Hollywood, IP continues to appreciate and media giants will need to diversify themselves to survive the battle against the indie film studios.

Last year, A24 swept the Oscar, winning all 6 top awards with two of their films, including 'Everything Everywhere All At Once' and 'The Whale.' This year, indie film production and distribution companies continue to be a large presence at the Academy Awards ceremony, with A24 and Neon Rated both nominated for seven awards. The rise of indie film certainly is attributed to the creative nature and the unique style, but technological advancement also plays an integral part in forming this new trend. As AI continues to democratize the content production process, how should the legacy media companies and the independent studios each adapt moving forward? 

In contemporary digital production, AI lowers the barrier of entry for small players to produce premium cinematic content. This technology represents a fundamental shift in how media companies operate and compete within the industry. We have recently seen the prototype of Sora and can reasonably infer that AI will soon be capable of producing theater-quality content. This significantly reduces the technical constraints of high-quality media production that are only accessible financially to conglomerates such as Disney and Warner Bros. As the playing field starts to level, more independent studios will gain market share through what they do best - creativity.

With production advantages eroding, what remains as the key differentiator? Intellectual Property.

With an endless stream of content flooding every screen, audiences aren’t short on options. That's exactly why popular IP has become king. Whether it's an actor like Ryan Reynolds, a studio like A24, or a legacy franchise like Iron Man, familiarity is what wins the battle for attention. Yet creating new blockbuster IPs from scratch has never been harder, simply because of the oversupply. This makes the popular IPs more expensive and the not-so-popular ones almost worthless. For example, Amazon’s $100 million deal with Mr. Beast may seem crazy, but after knowing that his videos routinely pull more eyeballs (125 million on average) than this year's Super Bowl (123.7 million), it all makes sense. As valuable original IP becomes rarer, deep-pocketed media giants are inevitably going to bulk up their libraries inorganically through acquisitions. Smaller indie studios, with their niche ideas and fiercely loyal fanbases, have become prime acquisition targets. We could also see another group become the potential target - talent management companies. By snapping up talent portfolios with large franchises, media companies can lock down potential valuable creative IP early. This tactic is especially powerful for studios with strong brands—think A24—which command a loyal audience that is willing to watch anything they produce or distribute. This way, A24 can use that brand leverage to help develop its own movie stars while securing a stake in all of its future hits.

With popular existing IPs in their portfolio, how should legacy media giants best monetize them? Gaming.

The ways that people consume content are evolving and diversifying. There are many ways companies can turn a name into a product beyond traditional movies and TV shows. The emergence of virtual and augmented reality offers new opportunities for immersive fan experiences. We've all witnessed the success of Disney World and Universal Studios, which allow fans to immerse themselves in movie settings and interact directly with the characters they've seen on screen. But we have not seen more new theme parks from for example DC or Sony because these projects require large capex, demanding significant upfront capital before generating revenue.

Now that we have AR and VR technology, media companies can collaborate with tech giants to launch virtual platforms that enable fans to engage with their favorite storylines from a first-person perspective. These platforms are not only cheaper to develop and operate but, more importantly, are accessible to a wider audience—anyone is just an Apple Vision Pro away from stepping into Superman’s shoes. As a result, the total addressable market expands significantly through increased volume, despite potentially smaller average lifetime value of each customer.

Similarly, partnerships with gaming companies provide entry into an untapped sector. Disney’s recent Spider-Man 2 on PlayStation generated a gross profit of $104 million, translating to a 120% return on investment. Encouraged by this success, Disney subsequently invested $1.5 billion in Epic Games to further leverage the gaming platform to monetize Disney stories and experiences within the gaming market, previously an area with limited focus IPs. Any media companies that are not partnering with a gaming studio to develop their own video game are dinosaurs. 

Finally, where is the competitive edge for the rising independent studios? 

Firms like A24, known for pushing the boundary of traditional films, exemplify the unique advantages independent studios hold in today’s evolving market where the audience has growing aesthetic fatigue of the predictable endings and repetitive production style. Indie studios’ unconventional storytelling and genre-bending narratives excite audiences in ways superhero blockbusters never can, often leaving open endings that invite personal interpretation. They also tackle controversial issues like inequality and intergenerational trauma, cast actors from underrepresented communities, and introduce acclaimed foreign films to U.S. audiences. Essentially, they're thriving by targeting the very markets legacy media giants do not serve—and their approach is clearly paying off, consistently outshining conglomerates at major awards ceremonies.

As independent studios earn their name, they're attracting more capital from investors, enabling them to feature bigger names and secure wider releases. This continued fundraising presents a compelling opportunity for private investors looking to diversify their portfolios, with the potential for significant upside. However, it’s crucial to recognize that this is a highly risky long-term investment as there are substantial upfront costs and lengthy production timelines inherent to film projects. Most studios only produce only a few films per year and their financials are heavily exposed to the performance of each individual project, while legacy media companies have the financial scale and diversification to better absorb hits and misses. In this context, an investor’s risk appetite ultimately shapes which opportunities are most attractive.

As AI democratizes the production process, IP becomes the game changer, and what decides the winner is how each firm is going to navigate this complex landscape with new consumer preferences and new business products. As investors assess opportunities in this dynamic space with many emerging powerful players, understanding their own risk appetite and strategic objectives is essential. The next decade of Hollywood will belong to those bold enough to rewrite the rules—and as the battle unfolds, we should expect to witness some giants fall, and new kings rise.