AI video market to hit $847M as production costs collapse

The industrialization of AI video marks a transition from experimental pilot programs to core enterprise production workflows. Immediate implications include a massive increase in volume for 'disposable' content—internal training, sales outreach, and daily social updates—that were previously cost-prohibitive. For the broader ecosystem, this puts immense pressure on mid-market production agencies to justify fees that are hundreds of times higher than AI outputs. As large enterprises now command over 50.9% of the market share, the industry move toward 'orchestration' over 'execution' is solidified. Watch for the convergence of high-end VFX and AI as professional tiers begin integrating these models for storyboarding and first-pass rendering.

The acceleration of AI video in 2026 follows several high-profile product sunsets and pivots among major tech players. Per OpenAI, April 2026, the company officially retired its Sora consumer-facing app to focus on enterprise APIs and robotics, marking a strategic retreat from direct social-integrated video platforms. This followed the late-2025 release of Sora 2, which had briefly dominated headlines with its 30-second high-fidelity motion capabilities. In its place, competitors like Kling AI and Luma AI have gained significant traction; per PRNewswire, January 2026, Kling AI reached a $240 million ARR milestone, servicing over 60 million creators globally.

Concurrently, legacy creative suites have solidified AI's role in professional post-production. Per Adobe, October 2024, the Firefly Video Model entered public beta with a focus on 'commercially safe' generations, integrating directly into Premiere Pro via features like Generative Extend. This integration has bridged the gap for established media houses that remained wary of the copyright risks associated with other models. Furthermore, per Gartner, June 2026, nearly 63% of marketing budgets are now funneled into conversion and awareness campaigns that increasingly rely on high-volume, AI-assisted video assets to meet rising consumer demand on platforms like LinkedIn and TikTok.

Market-wide, the shift is moving toward precision and control. Per Skywork.ai, 2025, Luma AI’s 'Dream Machine' updates introduced subject-aware editing and natural-language refinements, allowing filmmakers to modify specific objects within a scene without traditional masking. This technological maturation coincides with a broader enterprise spending trend; per Gartner, May 2026, total AI-related outlays are projected to hit $2.52 trillion, with infrastructure and software representing the largest shares for organizations navigating the 'Trough of Disillusionment' while maintaining competitive pressure.