The AI-Powered Hollywood Studio

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[00:00:18] Welcome to Tech News Briefing. It's Wednesday, November 20th. I'm Belle Lynn for The Wall Street Journal. Chipmaker NVIDIA is reporting earnings today and expectations are high.

[00:00:30] Last quarter, the chip giant put up sales and earnings that more than doubled from the previous year. We'll find out what investors will be watching for in today's results.

[00:00:40] And then the latest big name in Hollywood is artificial intelligence. And a new entertainment studio called Promise is going all in on generative AI in television and filmmaking.

[00:00:53] Our deputy media editor Jessica Tunko tells us what that could mean for the industry.

[00:00:57] But first, NVIDIA's earnings are the main event for investors this week, as the chipmaker powering the AI revolution gives a quarterly update on its progress.

[00:01:10] For more on what investors are expecting, including potential bumps in NVIDIA's trajectory, we're joined by WSJ reporter Asa Fitch.

[00:01:19] Asa, last quarter, NVIDIA's sales and earnings were more than double from last year, and they beat expectations.

[00:01:25] But that didn't exactly impress investors. Why is that?

[00:01:28] It's basically because expectations have become extremely high for the company.

[00:01:33] Investors have gotten used to the company just blowing people away with its numbers.

[00:01:37] And it's been blowing people away a little bit less over the past couple of quarters.

[00:01:42] Last quarter, also, they revealed they had a manufacturing issue with their next generation Blackwell chips that they're trying to iron out.

[00:01:49] They seemed to be confident that they had ironed out.

[00:01:52] So there was a little bit of spook that sent through the market.

[00:01:55] And those two things probably accounted for some of the performance of the stock after the results last time.

[00:02:01] So it's kind of like NVIDIA's success is its own worst enemy.

[00:02:05] It makes it harder every single time for it to surpass its prior results.

[00:02:09] Asa, you mentioned the manufacturing issues around NVIDIA's next generation Blackwell chips.

[00:02:14] Is CEO Jensen Huang expected to give an update on that?

[00:02:19] Blackwell is going to be at the top of investors' minds.

[00:02:22] And a lot of the questions that he's going to get from analysts are going to be about Blackwell.

[00:02:26] And he's going to, I'm sure, address how it's going, how the rollout is going.

[00:02:32] NVIDIA is expecting to get some revenue from Blackwell in its current quarter, which ends in January.

[00:02:37] And then the expectation is that those revenues are going to ramp up later.

[00:02:42] So Blackwell is basically the first big chip advancement from NVIDIA since the AI boom kind of kicked off.

[00:02:49] And during the AI boom, their previous generation of chips that were dubbed Hopper were kind of the big thing that everybody needed.

[00:02:55] Everybody wanted to build these big AI models that were so flashy and interesting.

[00:02:59] And Blackwell is kind of the next step.

[00:03:01] And so a lot of NVIDIA's future hinges on Blackwell succeeding, these new kinds of chips and the new systems are going and doing well and being good at training these models and et cetera, et cetera.

[00:03:12] So they're counting on this.

[00:03:13] Investors are asking about it.

[00:03:15] And there's been some current concern about the timeline for these things.

[00:03:18] So that's going to be a huge question for people going into the earnings.

[00:03:22] What else are investors expecting from NVIDIA today?

[00:03:26] Most analyst reports you read will say they're expecting to beat expectations,

[00:03:29] the Wall Street expectations for sales and for profit.

[00:03:33] The question really for the company now and the question for investors is execution.

[00:03:37] The company has a dominant market share in AI chips.

[00:03:41] And the question is, can they continue to just dominate this world of AI computing?

[00:03:47] There's a lot of competition.

[00:03:49] There's some antitrust scrutiny around the company because of its dominant position.

[00:03:54] How might NVIDIA's earnings affect Wall Street's outlook for AI more broadly?

[00:03:58] Well, it's just seen as an indicator.

[00:04:00] If NVIDIA delivers a quarter that people are unimpressed with, they might see it as a signal that, okay,

[00:04:06] people aren't spending quite as much as we hoped on these chips that drive AI because they're skeptical about the returns from these AI investments they've made.

[00:04:13] So they're pulling back in some way.

[00:04:16] Even if the pace of growth is a little bit slower in the past, but it's still growing,

[00:04:20] that could still be seen as a negative sign for how AI is going.

[00:04:24] That was our reporter, Asa Fitch.

[00:04:27] Coming up, AI is set to take a much bigger role in Hollywood.

[00:04:31] We'll find out what a studio powered by the tech might look like after the break.

[00:04:45] A new entertainment studio called Promise is looking to use generative AI tools to make movies and TV shows.

[00:04:52] It's backed by veteran media exec Peter Chernin and tech investor Andreessen Horowitz.

[00:04:58] And unlike traditional Hollywood players, who are mostly just testing the waters with AI, Promise will be an entire studio centered on these tools.

[00:05:08] For more on this and what it means for the movies we watch and the entertainment industry at large, we're joined by WSJ Deputy Media Editor Jessica Tunko.

[00:05:18] So, Jessica, when you last came on the show, it was after Lionsgate Entertainment announced a deal with the AI startup Runway in September.

[00:05:27] Tell us how this new studio, Promise, is planning to use AI.

[00:05:31] So Lionsgate is an established studio.

[00:05:34] They've been making movies and shows for years and years and years.

[00:05:37] John Wick is one of their big franchises.

[00:05:39] So what they did was they are working with Runway right now to create a model that Lionsgate will use for their own shows and movies.

[00:05:47] So think about special effects, blowing things up, which is a big thing in lots of Lionsgate movies.

[00:05:53] Promise is a startup and they're starting from scratch, right?

[00:05:57] So they don't have any IP yet.

[00:05:59] They are just going to be using generative AI tools.

[00:06:03] They're developing their own software that will tap into all the AI tools out there to create their own content.

[00:06:10] Jessica, why are so many people in Hollywood cautious about putting generative AI into any aspect of movie and television making?

[00:06:17] As you recall, a little over a year ago, Hollywood writers and actors were on strike.

[00:06:22] And one of their big concerns was about these generative AI tools and that it would basically completely kill their livelihood, that these tools could copy the image of actors and they wouldn't get compensated for their performances.

[00:06:37] Same thing with writers, that it would be able to just use their scripts or shows and they wouldn't be compensated for it.

[00:06:45] So the guilds and the industry came to an agreement that would satisfy everyone that they would be compensated for any use of tools and that they had to give their permission for anything.

[00:06:55] So cut to now.

[00:06:57] Every studio you talk to is trying to figure out the best way to use these tools.

[00:07:02] We are in a new era of Hollywood.

[00:07:05] Production is not ever coming back to the levels that it once was before the COVID pandemic.

[00:07:12] People thought it would come back and it doesn't feel like that's happening because the money is not there.

[00:07:18] People are much more cautious with their budgets for various factors.

[00:07:23] So as a result, tools like generative AI are pretty attractive because you can create things for much less expensive and you can do things much faster.

[00:07:34] So are those some of the reasons why Promise is jumping headfirst into putting generative AI into every aspect of movie and filmmaking?

[00:07:44] Yeah.

[00:07:45] I mean, when I spoke to the founders of Promise, which interestingly, two of them, they were in the early days of the creator economy.

[00:07:52] And so there are a lot of similarities there where this is a new art form to some degree.

[00:07:58] The way they view it is if we can get in this first and create a company that is starting from the ground up using these tools, as opposed to these traditional studios, many of which are trying to figure out how to sprinkle it into existing processes.

[00:08:13] They think they'll have an edge.

[00:08:15] So how promising is that edge?

[00:08:18] There is something to be said about the fact that you're going to see this new breed of studios that are going to be built around these generative AI tools.

[00:08:28] As much as people are worried about the implications of these tools on the entertainment industry, it's happening.

[00:08:34] Yeah. And when you mention the creator economy, I think about these parallels that you bring up as well, where there's this sort of democratization of making movie and filmmaking available to everyone, just like social media platforms did the same thing.

[00:08:50] Do you think that's also at play here? And how is it at play?

[00:08:53] That's something that I spoke to the founders quite a bit about.

[00:08:55] What's interesting is if all things go as they seem to be going, you are going to see more people like Dave Clark, who is this generative AI artist.

[00:09:06] He's one of the founders of Promise.

[00:09:09] He isn't a big Hollywood name.

[00:09:11] But if you look at some of the clips he's creating, they're pretty high quality and they're just going to get better.

[00:09:16] So you're going to see more people be able to create very quality stories at the same level at some point as these big studios.

[00:09:24] And you're not going to have to rely on these big companies for financing anymore.

[00:09:28] It's going to change the dynamics.

[00:09:30] Those actually sound like some pretty good benefits.

[00:09:32] But what are some of the concerns around using AI this way?

[00:09:36] I do think that there are some real concerns and real things that need to be worked out with regard to not so much these new studios that are starting from scratch,

[00:09:46] but when you have these bigger companies that are creating models based on IP that's out there, how you protect that IP is still really not clear.

[00:09:56] How is Promise dealing with that?

[00:09:58] They say they will deal with it as it comes to them.

[00:10:01] They're going to respect the guilds.

[00:10:03] As they start actually creating shows and movies, they'll follow the rules.

[00:10:07] On the IP front, since they don't have any IP, they don't have to worry about infringing on anyone else's right now.

[00:10:13] So when can we expect the first movie or television show that Promise puts out into the world with AI?

[00:10:20] They told me that they expect to have things out in the next three years.

[00:10:23] They'll probably start smaller, like smaller interactive formats and shorts and things like that.

[00:10:29] So I would imagine you'll start seeing things coming out in a year.

[00:10:33] That was our deputy media editor, Jessica Dunkel.

[00:10:36] And that's it for Tech News Briefing.

[00:10:37] Today's show was produced by Julie Chang with supervising producer Catherine Millsop.

[00:10:43] Logging off, I'm Belle Lin for The Wall Street Journal.

[00:10:46] We'll sign back in this afternoon with TNB Tech Minute.

[00:10:49] Thanks for listening.