Hollywood’s AI Hype Hit Reality in 2025. Next Year, It All Moves Faster

Like it or not, artificial intelligence is already playing a role in the entertainment industry, even if most people don’t want to admit it. In early 2026, entertainment companies may start to get more vocal about it. 

“Everyone in Hollywood is eager and in their bathing suits and standing around the pool,” said Jason Zada, founder and chief creative officer of AI studio Secret Level. “They’re waiting for the first person to jump in.

“Early in the year, you’ll see someone jump in the pool.”

Disney might have been the first in, having signed a deal to take a $1 billion stake in OpenAI in exchange for licensing 200 of its characters from properties like Pixar, Star Wars and Marvel to the startup’s Sora AI video platform. 

On the production side, studios this year began embracing the technology in a real way — with mixed results. Some, like Lionsgate, realized that the technology wasn’t quite fully baked for their ambitious goals of producing films with simple AI prompts, while Disney likewise faced a combination of technical challenges and opposition from talent. 

But those AI models continue to improve at a rapid rate, and the stigma around the technology is fading as more people embrace it in their everyday lives. While there will remain resistance to AI use — particularly in controversial areas like synthetic AI “actors” — 2026 could bring a big leap in adoption with improved models taking on more critical tasks in the production and pre-production process, and companies not being as afraid to talk about it. 

“2025 is really an onramp to what we’re going to see in 2026,” Chris Ross, an analyst for Gartner, told TheWrap.

The year that was

2025 was underpinned by a seemingly universal mandate by corporate leaders to incorporate AI into the workplace, all in the effort to create the appearance they were hip to the technology. The effort has largely been disappointing, with 96% of CEOs saying they failed to see any meaningful return on investment, according to a survey by software tools maker Atlassian.

That’s not to say AI hasn’t been useful. In Hollywood, AI has helped in areas like pre-visualization or breaking down scripts to organize into shooting schedules, Universal VP of Creative Technologies Annie Chang said at TheWrap’s TheGrill business conference. Sony and its Crunchyroll division, meanwhile, are testing AI for dubbing of anime episodes. Fox CTO Melody Hildebrandt said her company has used AI to quickly repackage sports clips in vertical shorts that more quickly capture a specific viral moment. 

While Lionsgate’s AI work didn’t meet its initial aspirations, that didn’t mean it was abandoning the technology, with AI being put to use in other facets of productions. Likewise, plenty of creatives at Disney are testing various AI models, even if the broader organized effort stalled. 

While they may save time and bring some quality-of-life improvements to traditional workflows, they don’t move the needle on financial savings and are far from being able to snap a finger and have AI generate a film or even whole scene. 

Still, interest in AI has never been higher and that includes the next generation. Film schools across the country began launching AI classes, with professors often learning as they go as they attempt to integrate large language models that are changing every few weeks into their curriculum.

Indeed, being knowledgeable about AI seems to be a prerequisite for breaking into the business, with many of the entry-level positions and the traditional pipeline of Hollywood talent facing the risk of being killed off by AI chatbots. 

That’s just one of the reasons why folks in Hollywood are concerned. The other comes from controversies like Tilly Norwood, the AI “actress” that its creator teased would eventually get representation from a talent agency, an idea that elicited immediate and vocal backlash. Even if talent agencies shut that idea down quickly, the concern over actors and writers being replaced lingers.

When Netflix co-CEO Ted Sarandos talked up the company’s use of AI in the sci-fi series “El Eternauta” in July, it caused a stir. Three months later at the next quarterly conference call, he downplayed AI’s role, saying it would mostly be for user-generated content and positioned it as a “creator’s tool, not a creative tool,” underscoring the fine line executives have to walk when talking about the technology.

Then there’s the ongoing litigation between Hollywood and AI companies, with Disney and Universal both suing Midjourney, an AI company specializing in text-to-image generation, over outputs that borrowed the look of characters like Elsa from “Frozen,” Darth Vader from “Star Wars” or the Minions. In September, Warner Bros. Discovery filed its own suit against Midjourney, while Disney sued AI chatbot startup Character.AI. The crux of the issue is these companies are taking publicly available information — often times the media industry’s valuable IP — and using it to train their models and generate eerily similar facsimiles. 

“If you have received stolen goods, we intend to pursue you relentlessly,” News Corp. CEO Robert Thomson said in November about AI companies scraping its data to train their models. 

Where AI goes from here

If you think AI has disrupted things already, buckle up for 2026. 

“If it seems fast right now, it might actually be faster,” Ajit Jain, CEO of startup Luma AI, told TheWrap.

Secret Level’s Zada believes 2026 will be a “transformative year.”

“I can’t imagine Hollywood can continue to go in the direction it’s going,” he said

The AI studio is known for projects like the now annual AI-generated Coca-Cola ads and last week hired former Netflix and Dreamworks executive Christina Lee Storm to lead its new narrative studio. Next year, it plans to launch an AI-powered production platform aimed at making film production more efficient. 

“Our bet is a resurgence in indie films and stories that previously couldn’t be told,” Zada said. 

With AI tools advancing all the time, the pressure to utilize them will continue to grow. As it ratchets up, so will be the tension between creatives, with some actors calling the technology an abomination even as some filmmakers start to embrace it. 

“The intensity of it will start to pick up,” Ross said. “That tension will increase as well because the technology has gotten better.” 

The upside is the belief that AI’s ability to bring costs radically down will enable more projects to be greenlit. But the downside is the technology will likely start to eat up jobs that have already been wrecked by a pandemic, two strikes and continued media consolidation — with below-the-line workers like set builders or grips bearing the brunt of the pain. 

Zada compares the transition to when digital effects started replacing some practical effects, a disruption in filmmaking that caused many to either adapt to the new technology or leave the business. He said he believes that those additional projects made possible by AI will ultimately spur the creation of more jobs, albeit ones that will require a new set of skills. 

“There are roles if you’re willing to evolve,” he said. 

Still a legal mess

While Disney is willing to cozy up to an industry leader like OpenAI, it’s less likely to play nice with the smaller players in the AI universe. Or even other bigger ones: Just look at the cease and desist letter it sent to Google accusing it of copyright infringement in the training of its Gemini AI model. 

That action, in addition to the existing lawsuits, could start to play out in the courtroom or through settlements. Lingering in the background is the court case that Anthropic won over the summer which effectively gave it a loophole around having to strike formal licensing deals for content. Legal experts are waiting to see if that case will serve as precedent in future legal battles over the uses of content to train AI models. 

Unions like SAG-AFTRA are taking notice. 

“There’s a way in which ingesting the material from our performances into the models for training is a form of exhibition of our work that isn’t being reported and we are not being given the opportunity to approve of its use,” Sean Astin, president of SAG-AFTRA, told TheWrap. “This is a radical new thing that people are trying to do with our stuff, and they need to get our permission and compensate us.”

There are some protections against the use of likeness and voice, particularly in California and Tennessee. And New York last week passed a series of AI protection bills requiring more transparency when using synthetic performers and consent when permission from the estate or heirs for use of an individual’s likeness after death. 

But all that was thrown for a loop when President Donald Trump on Thursday — shortly after New York Gov. Kathy Hochul signed her bills — signed an executive order punishing states for their own AI regulation. His preference is for AI companies to follow a unified federal framework of guidance. 

The only problem is there isn’t one.  

While there is litigation working its way in Congress like the NO FAKES Act, which would hold individuals or companies liable if they produced content using your voice or likeness without permission, it’s unclear if this is what Trump envisions or if he wants to create his own set of rules. Trump’s position leans towards looser regulation and he previously said AI companies can’t pay for all the content used to train their models. 

There’s enough out there that it’s easy for Hollywood actors and writers to bury their heads in the sand. But as many experts say, they would be smart to educate themselves about AI and how it could impact their livelihoods over time. At least one actor is taking those steps. 

“I’m personally no longer interested in being overwhelmed by the onslaught of artificial intelligence,” Astin said. “It’s much more interesting to me to stay focused on what we can do to protect our members.”

Jeremy Fuster contributed to this report.

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