AI disrupts the entertainment industry? Major internet platforms benefit first, with the value of "experiential" and "sports" assets becoming prominent

The penetration of generative AI into the entertainment and media industry is accelerating; this is not a distant future but a reality that is happening now.

According to news from the Chase Wind Trading Desk, based on the latest research report released by Morgan Stanley, large technology and media companies such as Netflix, Spotify, Meta, and Google are showing clear growth prospects in the medium term through AI-driven personalized recommendations, content cost optimization, and improved advertising monetization efficiency. The application of AI in content creation is also deepening, from the OpenAI-supported AI animated film "Critterz" to Netflix using AI technology to reduce visual effects costs, all indicating a revolution in production efficiency.

Therefore, the unique and irreplaceable value of shared experiences will not decrease but rather increase. The report believes that companies with "experiential" assets such as theme parks and live entertainment (like Disney DIS, Live Nation LYV) and those with top event copyrights in "sports" assets (like F1 owner FWONK, UFC parent company TKO) will be more attractive.

However, opportunities come with risks. Traditional film and television companies and music labels face a dual task: first, they must defend their intellectual property (IP) value against the infringement risks brought by AI; second, they can leverage AI to enhance content creation efficiency and global distribution capabilities.

Content Creation Revolution: Costs Plummet, Efficiency Soars

Generative AI is fundamentally changing the cost structure and production model of content creation. The report points out that the application of AI in the content field mainly reflects in two aspects: innovation and efficiency improvement.

In terms of cost efficiency, AI is becoming a powerful tool for studios to cut expenses. The report predicts that large media companies are expected to reduce their overall program production costs by about 10%, with the production costs of original scripted content (which typically accounts for half of total spending) expected to achieve efficiency improvements of 10-30%. Specific examples include:

• AMC Networks has partnered with AI company Runway to achieve "incremental production savings" using its tools.
• Netflix is also utilizing AI technology to produce visual effects for the Argentine series "El Eternaut," applying expensive effects to low-budget productions.

In terms of content innovation, both new and old players are actively exploring. The most notable case is the first AI-produced animated feature film "Critterz," supported by OpenAI. This project has a target budget of less than $30 million and a production cycle of only 9 months, far below the typical budget of over $100 million and production time of several years for traditional animated films. Additionally, Amazon's Alexa Fund has invested in the Showrunner platform, known as the "Netflix of AI," where users can generate animated series through text prompts The same is true in the music field, where production costs continue to decline significantly. AI tools like ElevenLabs' Eleven Music can generate complete songs with vocals and instruments directly from text. This has directly led to a surge in content, with the number of tracks on the Spotify platform far exceeding 100 million. However, this has also brought new problems: the music platform Deezer reports that nearly 30% of the new tracks it receives daily are completely AI-generated, with 70% of the playback actions deemed fraudulent attempts to exploit royalties.

New Value Gap: Experiential and Sports Assets Highlighted

In an era where AI greatly enriches digital content, assets that cannot be easily copied and generated become increasingly valuable. Morgan Stanley believes that the value of live "experiential" assets and global "sports" assets is being highlighted as a result.

The report analyzes that as AI provides increasingly customized personal digital experiences for each consumer, the demand for shared, vibrant public experiences in the real world will increase. This trend benefits companies that own unique experiential assets, such as Disney, which owns theme parks and resorts, and Live Nation, the world's largest live music entertainment company.

Similarly, as AI content floods various platforms, the value of global top sports event IPs will further increase in the "attention economy" due to their scarcity, live nature, and unpredictability. Technological advancements are breaking down geographical barriers in sports content, creating favorable conditions for global sports asset holders like the Formula One Group and TKO Group Holdings, which owns UFC.

Dual Challenges of Copyright and Labor Relations

Despite the enormous potential of AI technology, copyright disputes and tense labor relations have become key issues that must be resolved before its widespread application in the entertainment industry.

Protecting intellectual property (IP) is a top priority for traditional media companies. Recently, Warner Bros., Disney, and Universal Pictures have filed lawsuits against the AI company Midjourney, accusing it of using classic IP characters to train AI models without authorization. These lawsuits highlight the "original sin" issue of AI training data. Legal risks are not mere talk; the recent $150 million settlement reached by the AI company Anthropic with a book publisher has sounded the alarm for the industry.

To mitigate risks, industry leaders are proceeding with caution. Netflix recently released its first "AI Usage Guidelines" for production partners, requiring collaborators to declare when using AI in content production and to conduct strict legal and ethical reviews of content involving portrait rights, scripts, or content used in the final product.

Meanwhile, labor disputes are becoming increasingly acute. AI has already become a core issue in the 2023 Hollywood strike, and as the new round of labor contract negotiations approaches in 2026, the impact of AI on creative positions such as writers and actors, as well as the protection of their rights, will undoubtedly become the focus of contention among all parties