AI prose has been mediocre since the release of ChatGPT. My layman's interpretation is there's just no strong creativity / humor / etc signals to train on, as compared to say math or coding. Current models are "smarter" so when asked to produce eg a joke they think harder, but the end result always misses the mark just the same.
There's a difference between AI being bad at prose and storycraft. Good prose is totally achievable and it's just that it hasn't really been a priority for the tech shops, and I think they also often don't understand what makes really good prose so they're not good at optimizing for it anyhow. I expect given people's aversion to slop that the big laps will start to push hard on it soon and get their act together though.