AI Ads Are Getting Better. The Pricing Crisis Has Already Begun!

Over the past few days, I’ve been noticing a series of ads on YouTube carrying the “Created by AI” tag quite prominently. The latest one I saw (screengrab below) was for Hindustan Unilever’s Horlicks. It’s neat, smooth and, at first fleeting glance, almost indistinguishable from a traditionally shot commercial. It’s only when you notice the “Created by AI” tag that you realize what you’re actually watching.

The Air India Express campaign — repeated ad nauseam during the IPL — also carries the disclaimer “CGI rendering of aircraft” in its final frame. That’s in line with the synthetic media rules notified by the Government of India earlier this year. If the quality of the Horlicks ad is any indication, such disclosures are absolutely necessary. Earlier too, HUL had released an AI-generated campaign for Closeup Purple, and that too was executed rather well.

Visually, the output is impressive. But beneath the polish lies a deeper shift that the industry needs to acknowledge. 

The production cost of this Horlicks AI film may well have been a fraction of what HUL would have paid a traditional production house and agency. The problem is that brands are not benchmarking pricing against the savings from a conventional shoot. They are benchmarking it against the prevailing market price of AI production itself. And like every procurement process, companies will take 3-4 quotes and then drive prices down to the floor. We have seen this behaviour in many companies in the Middle East as well. Having played one against the other, they simply ghost you! 

That creates a difficult situation for the business. In a traditional agency ecosystem, it’s not always easy to play one creative shop against another at scale. In AI production, it’s ridiculously easy. There are now thousands of freelancers and boutique studios producing everything from average-quality outputs to genuinely world-class AI films. We see this ourselves. Agencies are now starting up their own AI studios to retain wallet share. 

The second challenge is that brands know AI software costs are falling rapidly. As tools become cheaper and more accessible, the reference point for pricing is collapsing. One argument we increasingly hear — including from some of the largest global firms — is: “If the software is cheap or free, why should production cost so much?”

One of the worst things to happen is if the marketing manager generates his own AI film, is pleased with it, and says:" If I can do this, why do I need you?". 

What they miss is that using AI tools once is easy. Delivering consistently high-quality output at scale is not.

Like traditional agencies are paid for ideation and execution, techno-creative agencies also need to be paid for prompt engineering, visualization and workflow design. Writing prompts that generate high-quality, brand-consistent output is not some casual exercise. It requires conceptual clarity, visual imagination, technical understanding and production discipline.

The industry’s biggest advertisers will do the ecosystem a disservice if they reduce AI production pricing to merely the cost of software. Clients are not paying for cheap tech. They are paying for techno-creative delivery that is on-brand.

At the same time, freelancers and smaller AI creators are also hurting themselves by undercutting indiscriminately. This is a skill, like any other specialized skill. There has to be a walk-away price. Not every assignment should be accepted at any cost. In our own work, we’ve seen well-known brands haggle over pricing like roadside vendors, even if it means compromising on output quality to save a relatively small amount.

This imbalance is unlikely to correct itself anytime soon. At least at this stage, pricing power in AI-led brand immersion services sits overwhelmingly with the buyer!