Manhattan Beach Studios in Southern California is a pinnacle of revolutionary technology, home to both the “volume” screens where Jon Favreau filmed the “Mandalorian” franchise and Lightstorm Entertainment, where James Cameron has spent years bringing the Na’vi to life. Tucked away at Stage 21 lies Innovative Dreams, an AI offshoot of director Jon Erwin’s Entertainment company Wonder Project. Here, chief operating officer Bryan Yee sips from a Diet Coke can as he showcases the soundstage housing Innovative Dreams’ crown jewel: a collection of LED screens where a team of AI artists weaves generative AI into productions.
It’s not the first time the space has been shown to a journalist. But that it’s happened multiple times this year shows that three-quarters of the way into 2026, AI is no longer Hollywood’s ultimate bad word. The term “AI” has emerged as an addendum to the Hays Code, the 20th-century guidelines dictating what studios should and shouldn’t include in their films.
It’s spooked the worlds of corporate and art alike, especially after months of headlines over the potentially world-ending nature of AI models and warnings that progress needs to be paced. Americans are also increasingly believing the tech is doing more harm than good, according to a recent Gallup poll. But much like the way studios and directors of the 1960s and ’70s embraced the once-taboo profanity and nudity, this year AI has found a new wave of advocates eager to go public.
The technology turned up at marquee film festivals, including Tribeca, which premiered the AI-generated docudrama “Dreams of Violets.” Oscar winner Reese Witherspoon declared that “the AI revolution has begun,” and Martin Scorsese said filmmakers had to be “open to how [film] can evolve.” George Lucas was perhaps the most blunt in a July interview: “There’s nothing you can do about it.” Part of what’s spurred this breakthrough involves creatives getting to know the technology. Some have found it additive to their projects: Veteran producer Ryan Kavanaugh says his firm, Acme Studios, lowered the cost of Doug Liman’s film “Bitcoin” from $200 million to $70 million with the use of AI. Below-the-line costs on “Bitcoin” were brought down from $130 million to $35 million.
Others have experimented with AI features or used AI tools to help with things like audio syncing. Kathleen Kennedy, who served as the president of Lucasfilm from 2012 to 2026, helped organize a group of industry dignitaries to put together a framework for how Hollywood should talk about it. But even with such attitudinal strides, Pew Research shows that people’s fears about AI’s societal impact are high, and digital choirs hurl insults at any project featuring the tech.
It’s led creatives to walk a tricky line between the wish to experiment with AI and the havoc disclosing its use can wreak. Oscar-winning director Steven Soderbergh sparked discourse earlier this year when he revealed how he used roughly 10 minutes of AI in his upcoming documentary “John Lennon: The Lost Interview.” He also disclosed his plans to use AI in his Wagner Moura-starring film about the Spanish-American War. While Soderbergh recognizes AI remains a “very emotional subject,” he says the loudest voices raging against its use are those that haven’t bothered to engage with it at all.
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