AI Startups Raise Millions to Disrupt Hollywood

Artificial intelligence is rapidly transforming the entertainment industry, with venture capital firms investing millions into startups designed to disrupt Hollywood's traditional production cycle. A major turning point occurred in late 2025 when Disney struck a three-year licensing agreement with OpenAI, investing $1 billion into the AI pioneer. This deal positioned Disney as the "first major content licensing partner on Sora" and signaled a truce between legacy studios and tech giants following previous clashes over copyrighted characters.

Elsewhere, a wave of AI startups is raising capital to tackle specific challenges within the industry. These companies are building tools to enhance special effects, streamline dubbing, and analyze scripts. While studios like Lionsgate partner with firms such as Runway to train AI models on their libraries, others remain silent due to fears of IP appropriation. Public sentiment remains mixed; a recent survey showed that while 64% of viewers accept AI for translating subtitles, 65% oppose the technology replacing human actors.

In one of the most significant moves of 2025, Disney and OpenAI finalized a three-year licensing agreement in December. The deal allows Disney to become the "first major content licensing partner on Sora" and includes an investment of $1 billion into the AI company. This collaboration represents a striking peacemaking between the two entities, which had clashed months earlier regarding OpenAI's use of copyrighted characters and works.

The partnership highlights a broader shift in Hollywood as studios look for ways to make projects faster and cheaper. With budgets generally not what they used to be, the industry is turning to AI for solutions. Major streamers have already begun discussing their usage of the technology; Netflix and Amazon have talked about using AI to execute elaborate special effects and improve the viewing experience.

Venture capital firms are backing a diverse range of startups aiming to change the legacy Hollywood film and TV business. These companies are deploying tools across the entire production cycle. Some, like Moonvalley, are focused on enhancing special effects, while others promise to revolutionize marketing, content distribution, and content discovery.

The industry is currently seeing a surge in funding for specific technological solutions. According to shared pitch decks, the following startups have raised significant capital:

• Moments Lab (Series B): $24 million for indexing video libraries and creating new videos from raw footage.
• Neosapience: $21.5 million for a synthetic voice and video platform.
• Papercup (Series A): $20 million to scale dubbing services.
• Wonder Studios (Seed): $12 million to extend IP and create original works.
• Metaphysic: $7.5 million for realistic deepfakes.
• Filmustage: $1.5 million for script analysis and pre-production tasks.
• Strada (Pre-seed): $1.9 million to streamline the production process.
• Fable Studio: Undisclosed funding from Amazon to let creators make animated shows.

Despite the influx of capital, the integration of AI in Hollywood faces significant hurdles. Many studios are worried about tech giants using AI to appropriate their intellectual property. Studios have already taken issue with OpenAI's Sora generating videos that encroach on copyrighted characters. Furthermore, Disney and Universal have sued Midjourney, accusing the platform of using technology to rip off properties like Star Wars and Minions.

Beyond legal battles, studios must navigate the fears of industry talent regarding job displacement. Audience attitudes are also a critical factor. A YouGov survey conducted in early October revealed that viewers are divided on the use of AI. The data indicates that people are most accepting of AI being used to translate subtitles into other languages, with 64% in favor. Conversely, they are least accepting of the idea of AI characters replacing human actors, with 65% against.

As AI founders pitch their visions to investors and Hollywood insiders, the landscape of content creation continues to evolve. While Lionsgate is actively partnering with Runway to train an AI model on its library, other studios are using the technology without public acknowledgment. The push for efficiency is driving this adoption, as the industry seeks to balance creative output with economic realities.

The tension between innovation and regulation remains high. While AI offers tools to streamline pre-production and post-production, the industry must address the potential for copyright infringement and the displacement of human workers. The coming years will likely determine how deeply these AI tools are integrated into the standard workflow of Hollywood productions.