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August 7, 2023

OpenAI Opens ‘Pandora’s Box’ to New Rights Category

OpenAI recently announced deals with

The Associated Press

and

Shutterstock

that will allow the ChatGPT-maker to use the companies’ historical archives, as well as any associated metadata, to train its generative AI tools. Financial terms of the arrangements were not disclosed.

The venture backed tech company also recently announced the hiring an

intellectual property specialist

who will negotiate licensing deals with news publishers.

The news may have flown under the radar of sports industry executives. But it is significant in that it was the first time a generative AI company had publicly acknowledged it would pay for content. To this point, they have largely ingested creators' works without consent, credit, or compensation.

Former Warner Media executive and current Play Anywhere chief strategy officer Peter Scott said the OpenAI deals would likely “open up Pandora's box,” as other rights owners, including sports properties, will now be emboldened to seek fees for their AI content machine learning rights.  

“Leagues are IP holders. They’re IP creators, just like a movie studio or the AP. And they’re all looking for new revenue streams,” Scott said. “If they can package [video] in an AP news like way, and the content is meta tagged and officially sourced, there’s value in those rights.”

The question is how much are they worth?

President Biden, the FTC, and IAC chairman Barry Diller have all spoken out in recent weeks about the need for tighter controls around generative AI technology. As it stands, anyone can go to a platform like OpenAI's Dall-E, enter a prompt like ‘Spongebob holding an American flag in the desert,’ and get the image in a moments time.

And “Paramount is not getting paid for that,” Scott said.

That is why the company is

now scrambling

to figure out how to address the problem. Last month, Sarah Silverman also joined lawsuits claiming copyright infringement against both OpenAI and Meta.  

That’s not to say generative AI is a complete free-for-all. ‘Content policy’ prevented Dall-E from generating an image of ‘Tom Brady throwing a deflated pumpkin’ (mature Jets fan here).

One must imagine the government would prefer the various stakeholders work it out amongst themselves (as opposed to legal intervention). OpenAI’s recent deals with the AP and Shutterstock suggest that process is underway. Runway co-founder

Cristóbal Valenzuela

has also publicly acknowledged negotiating with movie studios.

Those developments may slow momentum for pending class action suits. But it’s unlikely to end them entirely as the AI companies are being selective with who they pay rights fees to.

“It looks like they are willing to ‘write a check’ to the premier content companies,” Scott said.

There have not been any reports of amateur creators being compensated.

Of course, many of those individuals aren’t looking to be paid. They simply want consent (i.e. the ability to opt out), and credit when their work is pulled in a search query.

An open market that compensates the most valuable IP owners and enables everyone else to opt-in or out of a given platform seems like a logical solution.

“There might even be businesses that aggregate rights and give AI engines the ability to opt-in to the content all at once,” Scott said.

Most sports properties have not been thinking about charging for AI content machine learning rights to date. But Scott argues they should be.

“Think about it this way. If someone does a query comparing one country's Women’s World Cup roster to another, who gets paid,” he asked. “Does the generative AI engine just use those videos or images that rights holders are paying hundreds of millions of dollars for? It took seven years and a few lawsuits for YouTube to finally come up with its content ID program.”

Like the AP and Shutterstock, tier-one sports properties should be able to, in time, charge for their IP rights. But they'll need to wait for standard rate card pricing to be established.

There seems to be little downside to a rights owner licensing out its library of archived content. 

“The AP has all this content sitting on a shelf and they’re not making any money off it,” Scott said. “Why not give it to OpenAI’s engines so that every time someone makes a query, it is their photos, and not CNN or Getty’s photos, that appear. The company can charge for content ingestion and then collect a secondary payment on the derivative.”

Conversely, generative AI platforms are looking to differentiate themselves (see: Dall-E for images) and an exclusive rights deal for premium IP can help to do that. 

With all the capital being invested in the generative AI space, it's reasonable to expect a sports-centric platform will eventually emerge. And because it will have licensed footage users cannot get elsewhere, people will be willing to pay a subscription fee to use it.

It’s not yet clear how much sports rights owners will be able to command, and it likely won’t be known until the first goes to market.

“Someone must put their toe in the water and say, ‘I think it is worth this’,” Scott said.

But the former Warner Media executive suggested ingestion fees would likely fall in line with what the leagues currently charge for video, photo, and logo usage. 

"You can assume [the price] starts there, with maybe a 5-10% increase on top of existing licensing fees," Scott said. "The derivative fees are an unknown, but will be contemplated within the existing parameters of number of units or eyeballs."

Expect the first few deals signed by sports rights owners to be short-term in nature, or to have a renegotiation clause that protects against under compensation relative to use.