AI video market rebounds as Higgsfield hits $5.4 billion valuation
Two years after OpenAI's Sora underdelivered following its hyped 2024 debut, a full AI video industry has taken shape, spanning Hollywood productions, marketing platforms and synthetic media businesses.
In Culver City, AI studio Promise is filming the horror movie "Touch Grass" on a budget in the low millions. The Guardian, visiting the set, describes a soundstage of little more than white sheets: a camera captures actress Tori Thomas in a chase scene while software overlays her movements in real time with a swaying field of grass generated by the Chinese model Seedance 2.5, released this month; the scene appears instantly on the director's monitor, and the backdrop can be swapped for an underground cave with a few clicks. Promise is backed by Google, Silicon Valley investors and Disney. Co-founder George Strompolos estimates hybrid productions combining human actors with AI technology run 20 to 50 percent cheaper than conventional films, a gap he says could make filmmakers less dependent on major studios. Netflix has said it will have used AI in 300 of its 1,000 titles by 2026. Ron Howard is working with AI studio Obsidian on an animated documentary whose executive producer projects savings of 30 to 40 percent. Oscar winner Joel Hynek, who created the analog effects for "Predator," likens the shift to the move from film to digital and calls it "incredible promise," though directors including Christopher Nolan and Guillermo del Toro remain critical of generative AI.
Outside Hollywood, marketing-video startup Higgsfield is already commercializing the technology at scale. The Financial Times reports the company, founded by former Snap executive Alex Mashrabov, has raised $400 million at a $5.4 billion valuation, with DST Global, Goldman Sachs, Liberty Global and Intel among the investors. Eight months earlier its valuation stood at $1.3 billion, and its annualized revenue grew from $20 million to $700 million over the year. Business customers made up less than a quarter of revenue in January but now account for the majority; Mashrabov says brands such as Dollar Shave Club now use the platform to produce several marketing videos a day, versus one campaign video in the past.
A parallel industry is building synthetic personalities. The New York Times reports startup Inception Point AI manages more than 100 AI personas, from British gardening expert Nigel Thistledown to DIY influencer Lila Walker, each with a 15 to 30 page "character bible" of a fictionalized backstory. The company runs more than 5,000 active podcasts; CEO Jeanine Wright says production costs are low enough that just 20 listeners per episode make an episode profitable. Similar dynamics are appearing elsewhere: agency Seraphinne Vallora builds AI models for brands including Guess, AI music avatar Xania Monet has reached the Billboard charts, and Spotify plans to add an "AI Persona" tag to such profiles.
The contrast with Sora is stark. OpenAI's early 2024 demos were technically ahead of rivals and jolted Hollywood, but the version eventually released in late 2024 fell short of the hype, and competitors, especially from China, caught up while OpenAI hesitated. Sora 2 launched as a standalone app in fall 2025 but failed to convert its early buzz into sustained success and was later discontinued; a billion-dollar deal with Disney also fell through. Production tools, marketing platforms and persona factories, by contrast, have become durable business models, giving the AI video sector its own valuations, job categories and distribution disputes.
Key facts
- AI studio Promise, backed by Google, Silicon Valley investors and Disney, is filming the horror movie "Touch Grass" on a low-millions budget, overlaying actress Tori Thomas with real-time AI backdrops from the Chinese model Seedance 2.5.
- Co-founder George Strompolos says hybrid AI/human productions run 20 to 50 percent cheaper than conventional films; Netflix says it will have used AI in 300 of its 1,000 titles by 2026.
- Marketing-video startup Higgsfield has raised $400 million at a $5.4 billion valuation, up from $1.3 billion eight months earlier, as its annualized revenue grew from $20 million to $700 million in a year.
- Inception Point AI manages more than 100 AI personas across over 5,000 active podcasts; CEO Jeanine Wright says just 20 listeners per episode is enough to turn a profit.
- The recovery follows OpenAI's Sora stumbling: its hyped early 2024 demo underdelivered on release, the fall 2025 standalone Sora 2 app was later discontinued, and a billion-dollar Disney deal fell through.
Why it matters
Two years ago Sora's demos sent a shock through Hollywood and then failed to deliver a lasting product; that vacuum has since been filled by a broader, better-funded AI video industry with real revenue rather than demos. Hollywood production, brand marketing and podcast content are now three separate business lines built on the technology, each with its own investors, customers and metrics, which marks a shift from speculative hype to a functioning market.
Who it affects
Hollywood studios and directors split between adopters, such as Ron Howard and Joel Hynek, and skeptics, such as Christopher Nolan and Guillermo del Toro. Streaming platforms like Netflix are folding AI into a large share of their catalog. Marketing teams at brands such as Dollar Shave Club get a faster, cheaper way to produce campaign videos through Higgsfield. Investors including DST Global, Goldman Sachs, Liberty Global and Intel are backing the funding rounds. Musicians, fashion brands and podcast listeners are exposed to a growing supply of synthetic personas and avatars, which Spotify plans to start labeling.
How to use it
Three business models are shown as already working: production tools for studios (Promise's real-time AI backdrops, cutting hybrid-film costs 20 to 50 percent), marketing platforms for businesses (Higgsfield, letting brands turn out several videos a day instead of one campaign video), and persona factories for the creator economy (Inception Point AI, where a single podcast needs only about 20 listeners per episode to be profitable because production costs are minimal).
How solid is it
The account is compiled from reporting by three named outlets: The Guardian, which visited Promise's set directly; the Financial Times, which reported Higgsfield's funding round and investor list; and The New York Times, which reported on Inception Point AI's persona business. Figures are attributed to specific people, such as Strompolos, Mashrabov and Wright, or to company statements, such as Netflix's, rather than presented as unsourced estimates. No independent verification of the valuations or revenue figures is offered beyond what each outlet reported.
Risks and caveats
Several details are missing from the reporting: no absolute date is given for Higgsfield's $5.4 billion round or its earlier $1.3 billion mark, only the eight-month gap between them; the article does not explain why the billion-dollar Disney deal for Sora collapsed; and no location, headcount or founding date is given for Inception Point AI beyond what is quoted. Prominent directors, including Christopher Nolan and Guillermo del Toro, remain openly critical of generative AI in film, and profitability claims, such as Inception Point AI's 20-listeners-per-episode break-even, rest on the company's own account rather than independently audited figures.
“incredible promise”
— Joel Hynek, Oscar winner who created the analog effects for Predator