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Have you noticed how LLMs are more like this now? My older starting context stories don't work any more, but I can start cold with one sentence and get into the same spaces fluidly.
I think people will like something that is even more immersive in their interactions than just a window into a show like program. AI really needs to be grounded in collaborative interaction. I don't picture that changing. The show becomes more of a friends around a campfire meta-dynamic in a context of your choosing. I do a lot of this already with my own science fiction universe and a LLM.
I absolutely think this will be very popular, but I (and many others, I'm sure) often like to just sit back and mindlessly watch- I don't always want to participate in the entertainment.
Especially if we get FDVR though- it could be like blending video games with TV/movies
I know what you mean about tuning out. For me, even with engagement, I'm still able to largely tune out. I use text models a little differently in that I am in a full text editor like setup. The model will continue my character's part of the interaction. The more I change and alter this, the more it shapes what it generates for me. Eventually it becomes so collaborative that I am only making small changes to all characters. It becomes both disconnected and entertaining for me very quickly. I've been doing this a whole lot for over a year and have developed the language to interact well with alignment patterns and behaviors. I see that learning curve decreasing with time and making this more main stream. We really need better compute hardware though so that multi modal interaction is more feasible.