The Medium is for executives, investors and creators navigating a market where the rules for owning and monetizing AI-native IP are fragmented, incomplete and unevenly developing. Hollywood Just Drew a Line in the Sand on AI Actors... which Bollywood Already Crossed.What the new SAG-AFTRA deal actually says—and why the real test is when anyone enforces it.
[Author’s Note: This essay will be free for all subscribers.] SAG-AFTRA recently released to its members the terms of its tentative agreement with AMPTP. Last week SAG-AFTRA’s board recommended that its members approve the agreement. The agreement reflects openness to the use of AI likenesses, which is a stark contrast to SAG-AFTRA’s four-month strike back in 2023. It builds upon established consent-based frameworks for digital replicas from the 2023 deal that ended the strike. I previously wrote in “Why SAG’s ‘Tilly Tax’ Falls Short of Bollywood’s AI Future” that the business rationales for the old Hollywood production playbooks are “steadily eroding”. By contrast, Bollywood’s aggressive embrace of new AI-driven playbooks has created “new sources of revenue with more cost effective models.” That aggressiveness included a studio using AI to re-cut a 2013 hit movie “Raanjhanaa” over the lead actor’s public objection. I argued that: “Hollywood needs to follow Bollywood’s lead and experiment with those to figure out its future. That is going to involve choices that have been anathema to actors, directors and writers. There are no sacred cows anymore—except for the canon of popular IP (e.g., “Star Wars”).” This new agreement opens the door to some Bollywood-levels of risk-taking, but it also closes others.
Closed DoorsSAG-AFTRA had proposed a “Tilly Tax”, a fee named after the “first” AI actor in Hollywood which studios would have to pay to the union in exchange for using a commercially deployed, fully synthetic AI character with no underlying human performer. The agreement SAG-AFTRA actually reached is more nuanced and sophisticated than the “Tilly Tax” would have been. Section 39 sets 12 basic ground rules for the use of digital replicas. It is built upon a guiding principle of “acknowledg[ing] and reaffirm[ing] the importance and central role of human performance in motion pictures and the potential impact on employment under this Agreement when a Synthetic created through a [generative AI] system is used in a human role that would otherwise be performed by a human.” Instead of a “Tilly Tax”, the AMPTP agrees that an AI actor will not be used unless it brings “significant additional value” that neither a human performance nor their digital replica could bring. That means the use of Synthetics—AI characters not recognizable as any specific real person, not voiced by a human—faces a higher bar than digital replicas and the one the “Tilly Tax” would have established. That proposal assumed that AI actors like Tilly Norwood portended the inevitable replacement of human actors. Producers are now agreeing that human talent is the rule and AI talent will be the rare exception. They also agree that if they choose to violate this provision, SAG-AFTRA may seek damages in arbitration in an amount that could be larger than what could have been paid to a natural performer for rendering a performance for which the Synthetic was used. In both cases, it is more expensive than the Bollywood model. The tentative agreement closes doors to allowing producers to use a digital replica to render a performance into another language without the performer’s consent. That provision will start for productions commencing principal photography on or after July 1st, 2027. Films that began shooting before the cutoff carry the old no-consent rule for the life of those pictures. Open DoorsLast month’s essay outlined how Bollywood’s ecosystem lacks every constraint that paralyses U.S. media and entertainment is absent: no SAG-AFTRA equivalent forcing consent for digital replicas, no U.S.-style litigation pressure on AI training data and no insurer refusing to underwrite AI risk. Bollywood is able to do so because it is building an AI-native media marketplace that does not require U.S. IP, consent law or distribution. SAG-AFTRA’s tentative agreement anticipates these dynamics while forcing the market to prioritize and protect human actors and their digital likenesses. For producers seeking Bollywood-type cost efficiencies and business success stories, this creates friction. The outcome of “Raanjhanaa” —which sold 35% of available Tamil-language tickets in the release month—involved little-to-no friction. The only Bollywood-like provision permits studios to license performer footage to non-affiliated third parties for “training a public-facing, commercially-available Generative Artificial Intelligence System”. However, that is subject only to written notice and a meeting with the union. What Does Friction Look Like?The question now is what this friction will look like in practice. Generative AI is targeting Hollywood’s production cost model directly, and Bollywood is the live proof of concept. The market reality is that Hollywood producers will rationally seek Bollywood-like cost-efficiencies and business case studies. The producers and SAG-AFTRA have opted to reshape the rules rather than adapt to the market—which is the strategic choice my earlier essays argued they would make. Because these rules are enforceable via both agreement and arbitration, they add approval processes and disincentives at a time when competitive markets in Asia and Africa are emerging without similar rules. This may be either a soft, selective enforcement mechanism or a more sophisticated deterrence mechanism. This suggests that—for all protections for human talent that the agreement achieves—these protections may come at the expense of competitive advantage in a global marketplace. Bollywood is demonstrating that there is a business to be built in embracing AI technology at the expense of traditional norms. Similar case studies are rapidly emerging in Asia and Africa. The SAG-AFTRA deal suggests Hollywood is the lone exception. The real “tell” will be in whether the arbitration clause is ever enforced. That will be the best measure of how Hollywood is managing its existing global power against AI-driven upstarts across the world. Past essays related to today’s analysis:
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