That evening at Gaga’s, Akkaraju found himself sitting next to an investor in Stability AI, the company that launched the wildly popular text-to-image generator “Stable Diffusion” in 2022. Despite its early success, Stability AI came precariously close to the situation of being shut down. The unnamed investor told Akkaraju: ‘You should take Stability and make it into the Hollywood-friendly AI model.’

In 2022, Hollywood was facing headwinds: the number of films and TV shows produced in the United States had dropped by about 40%, due to ballooning production costs, competition from overseas, and widespread labour disputes.

AI promised to bring the numbers back up by speeding production and slashing costs, while letting computers automate the grunt work of translating dialogue, adding visual effects frame by frame, and editing boom microphones out of a zillion shots.

But then came another fear: What if AI starts writing scripts and maybe ends up acting as well? And this “what if” led to two of the industry’s biggest unions conducting strikes to obtain assurances that generative AI wouldn’t replace union jobs in the near term.

In May 2023, the Hollywood writers’ strike over pay broke out, but the bigger issue was the refusal of studios like Netflix and Disney to rule out AI replacing human scribes in the future. The Writers Guild of America (WGA) asked for binding agreements to regulate AI’s use.

The association’s proposal was as follows: nothing written by AI could be considered “literary” or “source” material, which are industry terms that decide who gets royalties, and scripts written by WGA members cannot “be used to train AI.”

However, studios rejected it and allegedly countered with an offer merely to meet once a year to “discuss advancements in technology.”

WGA members further felt that Hollywood executives, where Silicon Valley companies have upended many traditional practices such as long-term contracts for writers, may seek to cut costs further by getting computers to write their next hit shows.

OpenAI’s release of ChatGPT 3.5 at the end of 2022 not only disrupted the tech sector and the broader economy but also captured the public’s attention by excelling at precisely the kinds of non-routine skills (including creative tasks) long considered quintessentially “human.”

And Hollywood writers became the first and most visible face of the resistance to generative AI, speaking volumes about the nature of the new technology and the kinds of livelihoods that it will impact most.

Their victory in 2024, in securing first-of-their-kind protections, now offers important lessons for other unions and professional organisations, policymakers, and workers across a range of occupations who may face similar disruptions to their careers.

After the writers, it was the turn of the Hollywood actors, whose union SAG-AFTRA in August 2024 signed a deal with online talent marketplace Narrativ that enables actors to sell advertisers’ rights to replicate their voices with AI.

The concern arose from the fear that AI could commonly misuse artists’ likenesses. The new agreement now seeks to ensure actors derive income from the technology and have control over how and when their voice replicas are used.

Narrativ is known for connecting advertisers and ad agencies with actors to create audio ads using AI.

As of 2025, AI is becoming the new normal in Hollywood, with Stability AI, once in a precarious position, rewriting the industry’s “creativity rulebook” through its innovative solutions.

Stability AI almost floundered

Major studios and streaming services are currently competing to develop their own “AI Strategies.” Since 2022, several startups, including Luma, Runway, and Asteria, have begun creating tools to support these efforts. Akkaraju, back in 2024, saw the opportunity in front of him. Stability AI had the technology. It just needed a Hollywood finish. As far as he could tell, there was only one problem. Didn’t the company already have a CEO?

When Emad Mostaque, a former hedge fund manager, founded Stability AI in 2020, the company’s mission was to “build systems that make a real difference” in solving society’s toughest problems. By 2022, the system Mostaque felt he needed to build was a cloud supercomputer powerful enough to run a generative AI model. OpenAI was gaining traction with its closed-source models, and as per the American tech journalist Zoe Schiffer, Mostaque wanted to make an open-source alternative—“like Linux to Windows.”

“He offered up the supercomputer to a group of academic researchers working on an open-source system where you could type words to generate an image. The researchers weren’t going to say no. In August of that year, they launched Stable Diffusion in partnership with Mostaque’s company,” the scribe recollected.

The text-to-image generator was a breakout hit, garnering 10 million users in two months.

“It was fairly close to state-of-the-art. It allowed researchers to essentially extend the model, fine-tune it, and it spurred a whole community into action in terms of creating enhancements and add-ons,” said Maneesh Agrawala, a computer science professor at Stanford University, while noting that openness was core to the model’s success.

By October 2022, Stability AI had only 77 employees, but with thousands of times that many people in the wider Stable Diffusion community, it could compete with its bigger rivals. Mostaque raised $101 million in a seed round from venture capital firms and hedge funds, including Coatue and Lightspeed (the final million, he tells me, was for good luck). The company became a unicorn.

Former Stability AI employees describe Mostaque as a visionary. He spoke eloquently about the need for a democratic AI. In the not-too-distant future, Mostaque told employees, the company would solve complex biomedical problems and generate season eight of Game of Thrones.

However, Mostaque was way over his head. “I was brand-new to this. With my Aspergers and ADHD, I was like, what’s going on? Mostaque talks fast, his tone matter-of-fact: On the research side, we did really good things. The other side I was not so good at, which was the management side,” said a former employee. Mostaque didn’t think deeply about building a marketable product. His fascination was with building AI models.

“The company’s success brought heightened scrutiny—particularly around how the models were built. Like many text-to-image models, Stable Diffusion 1.5 was trained on LAION-5B, an open-source dataset linked to 5.8 billion images scraped from the web, including child sexual exploitation material and copyrighted work. In January 2023, Getty Images sued Stability AI in London’s High Court for allegedly training its models on 12 million proprietary photographs. The company filed a similar suit in the US weeks later. In the stateside complaint, Getty accused the AI firm of brazen theft and freeriding,” Schiffer said.

In June 2023, Forbes published a story alleging that Mostaque had inflated his credentials and misrepresented the business in pitch decks to his investors. The article also claimed that Mostaque had received only a bachelor’s degree from Oxford, not a master’s. What’s more, Stability AI reportedly owed millions of dollars to Amazon Web Services, which provided the computing power for its model. Though Mostaque had spoken of a partnership, Stability AI’s spokesperson acknowledged to Forbes that it was, in fact, a run-of-the-mill cloud services agreement with a standard discount.

And the article resulted in investors losing confidence. VCs from both Coatue and Lightspeed left the board of directors, followed by the departures of the company’s head of research, chief operating officer, general counsel, head of human resources and the prominent researchers. Mostaque finally left the company on March 22, 2024, just a few weeks after Lady Gaga’s greenhouse soiree.

Akkaraju and Parker saw opportunity

Akkaraju and Parker joined Stability AI, taking over as CEO and chairman of the company’s board. However, industry competition was fiercer, with another startup, Runway, signing the AI industry’s first big deal with a movie studio. Runway would get access to Lionsgate’s proprietary catalogue of movies as training data and develop tools for the studio.

Early on in his tenure, Akkaraju decided that Stability AI would no longer compete with OpenAI and Google on building frontier models. Instead, it would create apps that sat on top of those models, thereby freeing the company from enormous computing costs.

Akkaraju negotiated a new deal with Stability AI’s cloud computing vendors, wiping away the company’s massive debt. Asked for specifics on how this came about, Akkaraju, through a spokesperson, demurred. Investors, however, came flocking back.

Whereas Mostaque painted a picture of AI solving the world’s most difficult problems, Akkaraju is building Stability AI as a software-as-a-service company for Hollywood. The goal is not to generate films, but to use AI to augment the tools that filmmakers already use.

“I really do think that our differentiation is having the creator in the centre. I don’t see any other AI company that has James Cameron on its board,” Akkaraju said.

Yes, the same legendary director, who was leading Hollywood’s charge against the technology. He didn’t appreciate the premise of the streaming platform, the “Screening Room,” which let people watch new releases at home for $50 on the same day they came out in theatres.

Cameron reportedly told a crowd at CinemaCon that he was “committed to the theatre experience.” In the years that followed, none of the major studios publicly announced deals with the Screening Room, and in 2020, the company rebranded as SR Labs.

That same year, Akkaraju and Parker took over Weta Digital, the visual effects studio behind blockbusters such as The Lord of the Rings, Game of Thrones, and Cameron’s Avatar movies. Weta developed virtual cameras that let Cameron see a real-time rendering of the artificial environment through a viewfinder, as if he were filming on location in the fictional world of Pandora.

Then came the meeting between Cameron, Akkaraju, and Parker over dinner, where they discussed how technology was changing the film industry. “The tequila was flowing. A friendship formed. Any tension that had existed over the Screening Room melted away,” Cameron recalled.

“I never really talked with him about it. He knew, and I knew. It was very funny,” Akkaraju told WIRED, while continuing, “So Cameron is on the board, but is the creator in the centre? When I spoke with Parker, he emphasised the importance of using open-source models and spoke of respect for creators and respect for IP. That sounds potentially kind of rich, coming from me, given my past association with Napster and early social media. But it is a lesson learnt.”

Challenges lie ahead

In June 2025, the company scored a major win when Getty dropped its copyright infringement claims from a broader lawsuit as the trial neared a close in the United Kingdom. The US trial is ongoing.

Akkaraju said the company “sources data from publicly available and licensed datasets for training and fine-tuning,” and that when “creating solutions for a client”, it “fine-tunes using the dataset provided by the client.”

When Schiffer asked Akkaraju if the company trained exclusively on licensed data, he responded, “Well, that’s the majority of what we’re using, for sure.”

Even those who are bullish on AI admit that, for the most part, the technology isn’t ready for the big screen. Text-to-image generators might work for marketing agencies, but they often lack the quality required for a feature film.

“I worked on one film for Netflix and tried to use a single shot. The AI-generated footage got bounced back from quality control because it wasn’t 4K resolution,” said an anonymous filmmaker, not wanting to discuss the use of AI publicly.

Another problem with Stability AI’s solution is the issue with consistency. Filmmakers need to be able to tweak a scene in minute ways, but that’s not possible with most of the image and video generators on the market. Enter the same prompt into a chatbot 10 times, and you will likely get 10 different responses.

“That doesn’t work at all in a VFX workflow. We need higher resolution; we need higher repeatability. We need controllability at levels that aren’t quite there yet,” Cameron noted.

“That hasn’t stopped filmmakers from experimenting. Almost every person I spoke with for this story said that AI is already a core part of the previz process, where scenes are mapped out before a shoot. The process can create new inefficiencies,” Schiffer remarked.

“The inefficiency in the old system was really the information gap between what I see and what I imagine I want moving forward. With AI, the inefficiency becomes ‘Here’s a version, here’s another version, here’s another version,” said Luisa Huang, cofounder of Toonstar, a tech-forward animation company.

One of the first people in Hollywood to admit to using generative AI in the final frame is Jon Irwin, the director and producer of Amazon’s biblical epic House of David. He became interested in the technology while shooting the first season of the show in Greece.

“I noticed that my production designer was able to visualise ideas almost in real time. I was like, tell me exactly how you’re doing what you’re doing. What are you using, magician?” he recalled.

Irwin started playing around with the tools himself and ended up making a presentation for Amazon outlining how he wanted to use generative AI in his production. The company was supportive.

“We film everything we can for real—it still takes hundreds of people. But we’re able to do it at about a third of the budget of some of these bigger shows in our same genre, and we’re able to do it twice as fast,” he told WIRED.

A burning-forest scene in “House of David” (historical web series depicting the rise of the biblical figure David) would have been too expensive to do with practical effects. So, AI stepped in.

Despite Irwin showing interest in Stability AI’s tools, he has not been able to use the solutions successfully on a show at scale. Schiffer believes that Stability AI’s text-to-image generators need to cross a few hard yards before Hollywood starts using them professionally.

However, Stability AI can take solace in the fact that the taboo on studios acknowledging their embrace of AI seems to be softening. In July 2025, Netflix co-CEO Ted Sarandos told investors the company had allowed “gen AI final footage” to appear in one of its original series for the first time. He said the decision sped up production tenfold and dramatically cut costs.

Hanno Basse, Stability AI’s chief technology officer, showed Schiffer an image of his backyard in Los Angeles: a grassy lawn surrounded by high hedges, rose bushes crowding a bay window, and a tree in the far left-hand corner. Suddenly, the 2D image unfurled into 3D.

A generative AI model has filled in the gaps, estimating depth (how far away the hedge is from the rose bush, the tree from the window) and other missing elements to make the scene feel immersive. Basse can replicate camera moves by selecting from a drop-down menu: zoom in or out, pan up or pan down, or spiral.

“Instead of spending hours or days or weeks building a virtual environment and rehearsing your shots, the idea here is actually that you can just take a single image and generate a concept,” Basse says.

However, the company admits that its offerings are still in their early days and need perfection.

“I hear artists at VFX companies say, Hey, I don’t want to get replaced. Of course, you don’t want to get replaced! If you guys are going to lose your jobs, you’re going to lose your jobs over the work drying up versus getting bumped aside by these GenAI models,” Cameron said.

Akkaraju and Parker, too, believe that as movies become cheaper to produce, more films will get made and overall employment will rise.

The AI revolution is here and already transforming Hollywood. That collapsing building, that burning forest, that crowd of people the audience sees when streaming a show or going to the movie theatre will be created using a keyboard. Technology will be a creator’s ally to give a project the “larger than life” elevation it deserves, without hurting the purse much.

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