Deloitte Anticipates 2024 Will Be a “Transitional” Year for Generative AI

NAB

Generative AI, sustainability and monetization are the major themes of the year ahead, with GenAI set to dominate strategies in Media & Entertainment, according to Deloitte.

article here

In its annual review of Technology, Media and Telecoms, the consultancy says 2024 will be a transitional year for generative AI as companies begin to incorporate it into their tech stacks, while being cognizant of pending legislation.

Expect to see generative AI integrated into enterprise software, with enterprise spending on GenAI anticipated to grow by 30%. The challenge will be in finding a pricing model that captures its value, covers its costs, and is embraced by customers. Deloitte anticipates a conflict between vendors who want to charge per user and IT departments that believe generative AI features should be free.

“Generative AI is poised for a breakthrough in 2024, as it begins to follow through on its promise of improving productivity, creativity and enhancing the way enterprises engage with their ecosystems,” Deloitte vice chair Paul Silverglate said in a statement.

More companies are expected to develop their own generative AI models to drive greater productivity, optimize costs and unlock novel insights. The creation of in-house AI models is intended to avoid the risk of training on public data. To that end 2024 will also see the first serious attempts to regulate AI, which is either a much-needed check on the misuse of the technology’s power or a stranglehold on innovation, depending on how you see it.

Most likely, legislators will scope a middle way that permits AI to grow while attempting to rein in the rampant impact of deepfakes, misinformation and copyright infringement.

Deloitte argues that “clear regulation” enables enterprises and vendors to “proceed with certainty,” and expects a to see a pragmatic balance between regulatory compliance and fostering innovation.

The European Union’s AI Act (perhaps not ratified until 2025) will likely be the global benchmark for regulation of generative AI. The AI Act and the General Data Protection Regulation (GDPR) address issues including individual consent, rectification, erasure, bias mitigation and copyright usage.

It is also likely that AI will keep lawyers busy for decades to come (until they too find their jobs automated out of the way).

Related is the note that the computer processors powering generative AI could represent half of the value of all semiconductors sold by 2027, valued at $400 billion.

Deloitte predicts that the market for specialized chips optimized for generative AI will be valued at more tahn $50 billion in 2024, up from close to nothing in 2022. The secure and reliable manufacture of AI chips is seen as vital for national and business specific innovation, economic success, and national security.

A Streaming Price for All

The drive to profitability is already a feature of content streamers who have switched from prioritizing subscriber numbers (with the domestic market saturated anyway) to appeasing itchy Wall Street investors.

As Deloitte puts it, M&E companies seem to be realizing how hard it is to recoup the historic profits of the pay TV business model.

Its expected market correction is the widening of the streamer business model to more paid for tiers and loyalty schemes, from an average of four options to eight. These range from cheap ad-supported offerings and gated content to premium tiers with instant access.

Deloitte predicts that the top five providers will offer a bewildering 17 SVOD tiers by the end of 2024, more than double the current number.

“Streamers are expected to shift from growth at all costs to making it easier for all their subscribers to get enough value for the price. Viewers may find it harder to wade through the options, but tiering could help them get more of what they want, and less of what they don’t.”

Related is the note that the audio entertainment market is on the cusp of “significant growth.” The global market is predicted to top $75 billion in 2024, a 7% rise across formats like podcasts, streaming music, radio and audiobooks.

Hollywood Looks to Game IPs

The success in 2023 of The Last of Us and animated feature The Super Mario Bros. Movie, not to mention the reality show Squid Game on Netflix, has convinced Hollywood that games can finally be adapted in a way that speaks to both fans of the original and lean-back newbie viewers alike.

“Hollywood is looking to games for new IP that they can expand and monetize, and game companies are eyeing TV and film collaborations to help make their IP work harder and offset soaring game development costs,” notes the consultancy.

It’s not just about capitalizing on IP, though; it’s about creating a new form of entertainment that captivates audiences across multiple platforms. High-performing game IPs are expanding across media formats, reaching broader audiences and increasing their overall franchise value.

“Gaming platforms are giving users the tools to create their own games, which could lead to a boom in quality content, but could be a threat to their own business longer term,” Jana Arbanas, vice chair of Deloitte and US TMT, noted in a statement. “And fans of top franchises will see their favorite characters and stories in both games and movies. It’s a crucial time as the industry finds new and profitable ways to keep audiences engaged.”

Further, user-generated content (UGC) in games could disrupt the industry. Platforms are projected to pay out almost $1.5 billion to content developers in 2024. The number of paid independent developers on 3D UGC gaming platforms will exceed 10 million.

“As this space grows, it risks disrupting the dynamics of the entire gaming industry by making endless cheap 3D content available, with generative AI possibly accelerating the trend,” Deloitte warns.

Green Commitments Growing and Questioned

It’s likely that 2023 will be the hottest year in recorded history, yet government leaders at climate summit Cop28 barely moved the dial on change. The Cop28 president, Sultan Al Jaber, even claimed there is “no science,” indicating a phase-out of fossil fuels is needed to restrict global heating to 1.5 degrees Celsius.

With that kind of leadership, is it any wonder that businesses in all sectors are back peddling on net-zero commitments?

Deloitte predicts that multiple regions will run short of precious metals like gallium and germanium in 2024, and may start seeing shortages of rare earth elements by 2025. If trade restrictions between China and the West escalate, the tech and chip industry could consider “bolstering supply chain resilience” by increasing investments in e-waste recycling, digital supply networks, stockpiling and sustainable semiconductor manufacturing.

According to Deloitte, modern, new greenfield plants for making AI chips could help improve the industry scorecard, but further manufacturing transformation can help both the greenfield plants and existing brownfield plants do better for energy, water and processed gas use.

What Deloitte doesn’t appear to address is the carbon impact of generative AI processing itself. Google, Microsoft and others are shy of revealing how much power in their data centers is being used to crunch through R&D on new LLM tools. The sustainability of GenAI should receive far more scrutiny in 2024.

On the plus side, and pushed by investors, regulators and employees, many more companies will likely systematize their environmental, sustainability and governance (ESG) tracking and reporting with software tools in 2024. Deloitte expects the market for these tools to rocket beyond $1 billion in 2024, growing as much as 30% over the next five years.