Netflix Adds Generative AI to Competitive Risk Factors in Its Annual Report

In a change that reflects AI’s growing influence — and potentially disruptive power — in Hollywood, Netflix added generative AI to the list of risk factors in its annual report filed with the SEC.

In Netflix’s 10-K report filed Friday, it added this new part to the long section of risk factors (which are required under SEC rules) in the section about video competition: “[N]ew technological developments, including the development and use of generative artificial intelligence, are rapidly evolving. If our competitors gain an advantage by using such technologies, our ability to compete effectively and our results of operations could be adversely impacted.”

Netflix also added this wording: “In addition, the use or adoption of new and emerging technologies may increase our exposure to intellectual property claims, and the availability of copyright and other intellectual property protection for AI-generated material is uncertain.”

Aside from those two sections, the risk factors on Netflix’s 10-K for 2023 — totaling some 10,000 words — remained largely the same. There was another notable change: The company removed sections from the 2022 report about risks posed by COVID (which were also in the 2021 and 2020 10-Ks) including under the heading, “The ongoing coronavirus (COVID-19) pandemic disrupted our business, increased our costs, led to delays in content releases and may again impact our business and results of operations.”

To be sure, the changes inserted about generative AI are very small, in the grand scheme of things. And keep in mind that these are all the potential risk factors that companies like Netflix must communicate to investors.

But the use of AI by studios flared into a hot-button issue for the two Hollywood unions that went on strike in 2023, WGA and SAG-AFTRA, concerned about the technology hurting their livelihoods. The WGA’s deal includes guardrails around the use of generative AI in the creative process, including a provision that gives the union itself the power to challenge the use of writers’ existing work to train AI software programs. The SAG-AFTRA agreement with the studios includes some, but not all, of the union’s demands on AI; for example, the deal allows AI models to “train” on actors’ performances to create synthetic characters and actors will be able to prevent that only if the final output includes the actors’ recognizable facial features.

During the writers strike, Netflix generated ire on the picket lines over its job listing for a product manager in the company’s machine-learning group with a salary range of between $300,000 and $900,000. Striking union members railed about Netflix’s posting — even though the job in question centered on AI developments for content personalization and optimizing payment-processing systems, not generative-AI projects per se.