
Generative AI and content creation: investing in ‘superstar’ markets
Generative AI (GenAI) is changing the way content is created, distributed and consumed. From music and video to social media and video games, GenAI tools are changing the creative industry at an unprecedented rate. But apart from headlines and hype, what does this mean for investors?
‘We are entering a new era where creativity and technology reinforce each other more than ever before. GenAI is not a replacement for human expression - it’s a catalyst for new forms of storytelling,’
Jose Hernandez, Portfolio Manager at KBC Asset Management
says José Hernandez, Portfolio Manager at KBC Asset Management. ‘Even top creators are embracing these tools to overcome mental blocks and improve their output. The makers of the Fast & Furious film are reportedly exploring the use of AI to bring back Paul Walker's character, using his brothers as doppelgangers and with AI mimicking his likeness. It’s a striking example of how GenAI is being used to expand storyline possibilities.’
A new world of possibilities: opportunities and risks
Using GenAI tools, content can be created faster, more cheaply and more flexibly than ever before. ‘Whether it’s OpenAI's Sora generating videos based on text prompts, or AI creating music tracks and writing lyrics, the barriers to entering the creative market are falling away,’ Hernandez explains. ‘In gaming, GenAI can help with concept art, code generation and localisation. That streamlines production across the board.’
However, this democratisation of content creation comes with a number of challenges:

- Risk of oversupply
Lower barriers to content creation will lead to huge amounts of new content being generated on platforms. The risk of us all drowning in a sea of AI 'clutter', where even the best content from the best creators becomes hard to find, will increase.
- Catalogue risk
Investments that intellectual property (IP) owners have made in the past (e.g. film studios, music labels, etc.) may become redundant if everyone just starts consuming AI content.
- Conflicts between content owners and distributors
Since distributors such as YouTube or Spotify pay content owners a significant portion of their revenue for the right to distribute that content, these distributors could start to prioritise AI content in order to reduce their costs, which would hurt current content owners.
Yet these tools can also add a lot of value:
- Efficiency gains for content creators
Creators who become adept at using these tools and apply them to their craft will be able to create more and better content - be it video, audio or anything else - than those who don't use them.
- More variety and personalised offerings for consumers
If content creators are able to improve their processes and output, consumers will benefit through more and better films, music, video games, etc.
‘Superstar’ markets: Taylor Swift vs 'The sound of rain'
‘Media consumption in different formats has never followed a 'normal’ distribution pattern. It’s very skewed towards the top creators, followed by a long tail of creators who barely make ends meet or who only create content as a hobby,’ says Hernandez. ‘This is the 'Power Law' dynamic. Economist Alan Krueger defined it as a 'Superstar Market', where the very best people in their field - think of people like Taylor Swift, Bad Bunny or ABBA in the music world - receive infinitely more attention than probably any peer below the 95th percentile, such as a local band or a track that reproduces the sound of rain.’
A few examples in different media formats:
- On YouTube, the top 1% to 2% of videos dominate in terms of user engagement.
- On Spotify, a small proportion of tracks (also 1-2%) get the vast majority of plays, despite more than 100 000 new tracks being uploaded daily.
- On Netflix, viewing time is concentrated around the top 1000 titles, despite many thousands being available.
- When it comes to concerts, the top 1% of events generate more revenue than the bottom 99% combined. ‘The Eras Tour - to return to Taylor Swift - generated record revenues of more than 2.077 billion USD from worldwide ticket sales. This officially makes it the most profitable concert tour of all time,’ adds Hernandez by way of illustration. It’s more than double Coldplay's previous record, which was around 1 billion USD.’
‘Not all content is equal. The big money always seems to be made by the top artists, whatever the format. GenAI tools that enable artists to produce more and better content will raise the bar for becoming a 'superstar', but I think it is safe to assume that the 'superstar' dynamic will continue.’
Jose Hernandez, Portfolio Manager at KBC Asset Management
Looking ahead: experiential growth, with GenAI as the unavoidable blueprint

‘Media & Entertainment is a big industry today and it’s becoming increasingly important as the global economy advances and people have more free time and income to spend on things like Netflix subscriptions or concert tickets,’ Hernandez says. ‘From immersive concerts and binge-worthy series to interactive gaming and personalised content, the appetite for high-quality, engaging media is greater than ever, with users increasingly prioritising experiences over possessions.’
‘Given our view that top content usually wins out over all the rest, companies that own or distribute the best content libraries will in all likelihood make a mark on the industry.’
We can find examples of this in different media formats:
- Netflix and Disney on video and TV
- Meta and Alphabet with platforms for user-generated content, such as Instagram and YouTube
- Spotify and UMG in music
- Nintendo and Games Workshop in games (not just video games).
‘GenAI is accelerating the pace of content creation, but the basics have not changed: top-notch content still wins out over all the rest. The next wave of 'superstars' will be those who master technology to enrich their content.’
Jose Hernandez, Portfolio Manager at KBC Asset Management
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The information contained in this publication is for information purposes only and should not be considered as investment advice.