A real crew made the $1.5M AI Christmas feature. The $80M is its director's estimate

In a first-look clip TW3 Entertainment has posted for Merry the Christmas Witch, a squad of elves in goggles and red flight suits sprays a pack of black cats across a candlelit stone hall, using a bottle labeled "Santa's Repellant Spray, For Biting Cats." In the same clip, living brooms with carved faces hang behind iron bars. The footage is photoreal, and director Tom Walsh says the two-hour feature it comes from cost $1.5 million to make with AI, against the $80 million he estimated a conventional version would need.

Variety ran those two numbers as an exclusive on Monday, 12 October, and they traveled fast. Both come from Walsh, neither comes with a breakdown, and the bigger one is a projection for a film that was never shot. The more useful story for anyone making work is how he says the film got made: actors, storyboard artists, a composer and a Foley team doing the jobs they would do on any feature, with generative tools filling the frames in between.

Who made it, and how

Walsh is the founder and CEO of TW3 Entertainment, an independent studio in Fort Lauderdale and Los Angeles. He co-wrote and directed the adaptation of Bobbi Hess's children's book about Merry, the first witch born on Christmas Day, who has to defeat a coven that has kidnapped Santa Claus. Walsh told Variety he was given the book in 2014 by Hess's late husband at a meeting in Los Angeles. TW3's project page credits the film to TW3 and Phatty Acid, which Variety describes as an AI studio; we could not find a website, company filing or earlier credit for Phatty Acid.

Walsh described a "hybrid AI production" to Variety, with roughly 50 people working across a 10-month production cycle, including Foley artists, editors, sound designers and a composer. Human actors recorded the script to guide how the characters move and sound, and Walsh then switched to AI voices from ElevenLabs because of syncing issues. Variety names Seedance, ByteDance's video model, and Nano Banana as the video generators. Nano Banana is Google's image model, so the likely route is stills made there and animated in Seedance, although Walsh has not laid out the workflow himself.

Part of that is on the record. Two storyboard clips on TW3's site show hand-drawn gray boards with caption cards and screenplay pages, the same prep a live-action or animated feature would get. We watched TW3's clips without sound, so we can't judge the voices or the lip-sync.

His line on why that crew mattered is the most useful thing in the interview: "The quality of your AI production depends on the quality of your traditional production staff." Without people who understand production, timing and "how shots should look," he told Variety, "it's going to look like garbage."

What the two numbers can and can't carry

The $80 million is a counterfactual. TW3's own press release, sent out on 26 August through the Los Angeles firm EKC PR, says the film was "originally envisioned as a traditional live-action production" and was "projected to require an approximately $80 million production budget." That release never mentions $1.5 million, which first appears in the Variety interview. No line items have been published, so nobody outside TW3 knows whether the figure covers the pay of those 50 people, Phatty Acid's fee or the tool spend.

Walsh's own record gives a yardstick. His last feature as director, the CG-animated Dwegons and Leprechauns (2014, 98 minutes, with Melissa Leo), is listed on The Numbers at a $20 million production budget, an unaudited figure. Against that, the $80 million is a live-action fantasy estimate at four times what his last animated feature reportedly cost. Taking his figures at face value, $1.5 million across two hours comes to about $12,500 per finished minute.

• Title: Merry the Christmas Witch (TW3, 2026). Runtime: About 120 min (studio); Stated cost: $1.5M; Per minute: About $12.5K; Who says so: Walsh, to Variety
• Title: Same film, conventional estimate. Runtime: About 120 min; Stated cost: $80M; Per minute: About $667K; Who says so: Walsh and TW3 press release (live action)
• Title: Dwegons and Leprechauns (Walsh, 2014, CG). Runtime: 98 min; Stated cost: $20M; Per minute: About $204K; Who says so: The Numbers listing
• Title: The Cully Hill Boys (Higgsfield, 2026). Runtime: 110 min; Stated cost: About $2M; Per minute: About $18K; Who says so: Higgsfield and press reports
• Title: Hell Grind (Higgsfield, 2026). Runtime: Feature; Stated cost: $500K; Per minute: Not stated; Who says so: Makers and Higgsfield

That puts Merry in the same range as other AI features this year, and the difference is who is making the claim. Hell Grind and The Cully Hill Boys were both showcases for Higgsfield, a platform that sells the tools, while Merry comes from an independent studio without a buyer. The two-hour runtime is also TW3's own description; the project page still says the trailer is coming soon, and no festival or outside viewer has seen the cut.

No distributor yet, and a rough first reception

The film has no distributor, although a spokesperson told Variety that "optimistic" conversations were underway with "a few different companies," and ComingSoon reports there is no release date. The first reaction on X was harsh. Variety's two posts on the story had drawn 218 replies and quotes against 119 likes by Tuesday morning, and the most-liked reply mocked Walsh for calling a children's picture book "an unknown property" that needed AI to get made.

Walsh isn't waiting for the verdict. TW3 says its second AI-assisted feature, Losopolis, is already in production, and the studio's site claims a library of more than 480 original characters, many of them sculpted by hand. "We would never have gotten a movie like 'Merry' made if we didn't take that chance," he told Variety.

What carries over to your next project

In practice, for anyone making work this week, the method is worth more than the price tag, and three parts of it travel.

• Hand-drawn boards with script pages give the generators a shot plan, and they give a buyer evidence that someone directed the film.
• Recorded human performances set movement and timing even when the final voices come from ElevenLabs, a voice-generation tool, so the actors still shape the film.
• A published cost needs its line items, because a self-estimated counterfactual with no breakdown is the first thing a skeptical buyer or a hostile reply thread will pull apart.

What remains open is whether anyone will buy a two-hour AI holiday film. Until a distributor signs or an audience sees the cut, $1.5 million is the cost according to the man who made it, and the $80 million is his estimate of a film nobody planned to shoot.

Timeline

• Date: 2012 to 2013. What happened: Bobbi Hess publishes Merry the Christmas Witch; reviewed July 2013; Source: Variety; Free Online Library
• Date: 2014. What happened: Walsh is given the book by Hess's late husband in Los Angeles; Source: Variety
• Date: Tue 30 Sep 2014. What happened: Dwegons and Leprechauns released (98 min, listed at $20M); Source: AllMovie; The Numbers
• Date: Wed 26 Aug 2026. What happened: TW3 press release via EKC PR: film complete, $80M live-action projection, Phatty Acid named; Source: EKC PR
• Date: Mon 12 Oct 2026. What happened: Variety exclusive: $1.5M, about 50 people, 10 months, tools named, no distributor; Source: Variety
• Date: Mon 12 Oct 2026. What happened: ComingSoon follow-up adds no release date; Source: ComingSoon

Sources and what is unconfirmed: Variety exclusive by Corbin Bolies (12 Oct 2026), the source of every Walsh and Hess quote; TW3 Entertainment project, team and home pages and studio clips (viewed without sound); TW3's 26 Aug 2026 press release via EKC PR; The Numbers and AllMovie for Dwegons and Leprechauns; ComingSoon (12 Oct); X API counts pulled 13 Oct. Unconfirmed: the $1.5M and $80M figures (director's own, no breakdown), the two-hour runtime (studio only), Phatty Acid's track record, and the exact tool workflow.

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