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Happy Sunday,
Part of any daily dialogue these days seems to include the argument over whether we are in an AI bubble. The sentiment changes almost hourly while the camp of of not if but when is picking up momentum. But it’s a rollercoaster. SoftBank selling its nearly $6 billion stake in Nvidia fueled bubble theories, but Nvidia’s knockout quarter reported on Wednesday seemed to shut those down — for now. The analysts’ estimates vary widely projecting that from 40% to as much as 75% of the stock market’s gains this year are attributable to AI-related equities. Either way, it’s substantial.
This chart from Bank of America Global Research highlights the ongoing concerns of fund managers through a new November survey.
Hollywood and the larger media sector have had a love-hate relationship with AI so far, which begs the question that if we are indeed in a bubble and that bubble bursts, how bad will it hurt business?
Here’s a few thoughts on those with the most exposure:
Netflix — A robust early adopter of AI for content personalization, dubbing, localizing programming, and automated trailer production has high exposure. Those tools depend on early-stage AI vendors that would get crushed if a bubble burst. Bottom line is that localization efforts, key to building sub growth outside U.S., would get more expensive.
Disney — With its internal efforts at integrating AI stalling, Disney is increasingly looking at partners to help with production and VFX. It’s also beginning to use AI-driven personalization and robotics at its parks. A bubble burst would mean fewer outside options to fully take advantage of the capabilities of AI.
Warner Bros. Discovery — AI isn’t much of a presence at WBD beyond the promise of the technology cutting costs from everything to marketing to production. WBD is pitching as positive a narrative as it can to Wall Street right now as it shops itself. The bubble bursting would kill that narrative, but presumably CEO David Zaslav would have sold the company already.
Sony Pictures — Sony Animation and Crunchyroll use AI-dependent localization and subtitling pipelines. Its gigantic gaming division is experimenting with AI in the creative process, especially at the intersection of film and TV IP.
What’s more, VFX shops, like Framestore, Weta FX and DNEG, are getting help from AI on so-called rotoscoping, upscaling and simulation. Same story: This kind of help comes from startups that would be wiped out in a bubble burst.
It’s worth considering, too, the growing divergence between AI stocks and consumer sentiment, as the Wall Street Journal’s Greg Ip pointed out last week, highlighted by this chart. The so-called Magnificent Seven include Microsoft, Nvidia, Meta, Apple, Amazon, Alphabet and Tesla.
Stepping back, an AI bubble burst would not kill innovation in Hollywood, to be clear. But it will be a setback and likely force the delay of any planned technology rollouts. One upside, I guess, is that a bubble burst might take some of the tension out of labor relations that have been rocky since AI arrived on the scene.
Enjoy your Thanksgiving and see you back here next Sunday.
Tom Lowry
Senior Vice President/Editorial Strategy
tom.lowry@thewrap.com
1. U.S. Political Divide Revealed on Social A recent survey from Statista Consumer Insights reflects pretty much the U.S. political divide on an even basis.
Some light differences do show up in the survey conducted between October 2024 and this past September; Facebook is where centrists feel most at home. X is where partisanship is most visible, with more users leaning right. No surprises there. LinkedIn also leans more right with its more business-focused user base. Reddit is the one platform of those included in the survey that leans left. BlueSky, which was created at a time when Elon Musk took control of the old Twitter, was not included in the survey.
2. Streaming’s Sticker Shock We all feel the weight of subscriptions we are carrying but this chart fromLeverage Shares brings it all home. It shows the price changes for the most popular streaming services since 2019, with Disney+ topping the list at 172% inflation, a factor that probably made it easier for subscribers to drop the service over parent company’s decision to suspend Jimmy Kimmel.
The inflation gives you pause to remember that streaming was created, in part, to be the low-cost alternative to traditional pay platforms like cable and satellite. But content is expensive and growth slows, and streamers feel like they’ve got the pricing power. But for how long?
The work of determining the fate of Warner Bros. Discovery begins in earnest now. With bids submitted at Thursday’s deadline, let the due diligence begin.
CEO David Zaslav will no doubt be leaning heavily on a team of advisors, no one more so that Paul Gould, the veteran investment banker with Allen & Co., one of the firms WBD hired to navigate a potential sale or split of the company.
Allen & Co. has been advising media companies for more than half a century and Gould has been part of the team there since 1972. He is also an independent director on the WBD board, and has a long history of working with one of the company’s largest individual shareholders, billionaire cable mogul John Malone. The boutique investment bank is probably best-known for hosting its annual gathering of media, entertainment and tech executives every July in Sun Valley, Idaho. Gould is a fixture there. The confab has become known as the “billionaire’s summer camp.”
But unlike the outsized personalities of the executives he serves, Gould is happy behind the scenes and famously press shy. In fact, the only photo we could find of him is the above picture from Sun Valley more than 10 years ago, walking alongside Malone.
Gould has been an advisor on thousands of deals over the decades. Allen’s recent record includes the AT&T / Time Warner deal in 2016, advising Time Warner in its $108 billion acquisition by AT&T; advising Activision in 2022 in the nearly $70 billion acquisition by Microsoft; the firm advised on the 2015 separation of eBay and PayPal, a deal valued at $49.16 billion, the firm also brokered the Jeff Bezos’ 2013 acquisition of The Washington Post.
The play for Warner Bros. Discovery is one of the biggest and most high-profile bidding wars in recent years for any company, not just in media. Zaslav will continue to be the public face of the unfolding drama. But you can’t underestimate the investment banker whose team is busy behind the scenes with an opinion or two about the potential buyer that will make the most sense.
Timothée Chalamet’s best role yet is your weirdly intense coworker on Zoom, Fast Company
Could a luxury high-rise condo tower work at Dodger Stadium?, The Real Deal
Why Business Leaders Need Political Diplomacy Skills Now, HBR IdeaCast