AI is Moving Fast and Breaking Things: Should Publishers Negotiate Deals or Initiate Lawsuits?

“Move fast and break things” was Facebook’s motto until 2014.

This phrase has long encapsulated the approach of Silicon Valley’s disruptive startups toward innovation. Today, it is more relevant than ever, with AI companies rapidly advancing and challenging the status quo of the news industry once again.

Much like the tech giants before them, AI companies have swiftly moved forward with little regard for existing copyright laws or ethical principles, scraping the entire internet, including copyrighted material, books, and news articles behind paywalls. This aggressive approach aims to maintain momentum in what effectively is a race between leading AI companies.

We have now reached a critical juncture where AI is ever pushing boundaries with new releases, most recently OpenAI’s GPT-4o and Google’s Gemini 1.5 Pro. Publishers and the traditional establishment are struggling to keep pace, and are caught between a rock and a hard place, either:

• Accepting potentially unfavorable deals with AI companies,
• Completely losing out on compensation while fighting prolonged legal battles, or
• Taking no action and receiving no compensation while their content is still scraped and monetized by AI companies.

So, what exactly is happening with these AI deals, and what can publishers learn from them?

The publishers that choose to sign

AI companies, most notably OpenAI, are forming licensing agreements with major publishers to use their content to train AI models and provide real-time, authoritative information through AI applications like ChatGPT.

OpenAI has secured high-profile licensing agreements with publishers such as AP, Axel Springer, Le Monde, Prisa Media, and the Financial Times. Dotdash Meredith has also recently signed a multi-year deal with OpenAI, which includes content licensing and collaboration on new AI products.

These agreements involve providing AI access to extensive archives and real-time content, enhancing the accuracy and reliability of AI-generated responses while giving proper attribution when licensed material is used in responses.

In exchange, OpenAI reportedly offers individual publishers between $1 million and $5 million annually to access their archives. While this amount might not be significant for OpenAI, it could make it challenging for smaller competitors to sign similar deals, further extending OpenAI’s competitive advantage.

OpenAI’s Preferred Publisher Program, detailed in a leaked pitching deck from AdWeek, includes:

• Forming long-term partnerships emphasizing collaboration and mutual benefits.
• Shared revenue from AI-generated content and enhanced visibility for publisher content within AI applications such as ChatGPT.
• Detailed analytics for publishers to understand the value and impact of their contributions.
• Legally binding agreements to address copyright concerns and respect publishers’ intellectual property rights.

In line with its aggressive expansion, OpenAI has recently introduced GPT-4o, a more advanced model designed to further push the boundaries of AI capabilities. GPT-4o promises enhanced understanding and generation of text, live audio, and video interaction, increasing the demand for high-quality training data from trusted sources. This new development further incentivizes publishers to secure favorable licensing terms as AI technology evolves further.

The publishers that choose to sue

Another route publishers are taking is the legal one. Unsatisfied with the terms of the agreement to license its archives, the New York Times has resorted to fighting things out in court. Similarly, The Intercept and Raw Story have filed lawsuits against OpenAI for copyright infringement, claiming unauthorized use of their content for AI training.

These legal battles focus on whether AI’s use of scraped content from the web constitutes fair use or copyright violation, potentially setting significant precedents for the AI industry.  OpenAI argues that its use of copyrighted material falls under fair use, and it seems like things may drag on in court. In the meantime, OpenAI will not stop using the allegedly copyrighted material until a landmark judgment is issued.

Should publishers sign or sue? Lessons from past tech deals.

Choosing between partnering with or fighting tech giants is not a new dilemma for news publishers. Google has been siphoning traffic away from publishers for over a decade. Similarly, Facebook convinced publishers to use its platform with promises of fair compensation, only to later reduce the traffic share to external websites to a trickle. There is nothing to prevent AI companies from acting similarly, potentially leaving publishers with more traffic and revenue loss in the process.

Integrating AI into search engines and content platforms does provide new potential revenue streams for publishers through licensing but also poses a threat by eventually reducing direct traffic to publisher websites. What will happen once these deals expire in a few years? Will AI companies still be interested in renewing them, or will they, like Facebook has in the past, blacklist or completely ignore news publishers unless they agree to even more unfavorable terms?

The industry is divided on whether to pursue legal action or strike deals with AI companies, a decision that will shape the future dynamics between AI developers and content publishers.

How much is quality journalism truly worth?

Insights from a panel at the International Journalism Festival 2024 reaffirm that publishers have struggled with platforms like Google and Meta over fair compensation for the news they use and profit from. Studies suggest that Google and Meta downplay the value news provides to their platforms. Payments to publishers vary greatly, with large publishers receiving more favorable deals, while smaller and middle-income publishers get much less.

Here’s a quick recap of what is happening between publishers, Google, and Meta around the world:

• In the US, Google and Meta are estimated to owe publishers around $13 billion annually based on a fair value split.
• South Africa’s Competition Commission is investigating tech platforms’ behavior, with negotiations between publishers and Google stalled.
• Similarly to the EU’s Digital Markets Act, the UK’s upcoming Digital Markets, Competition, and Consumers Act aims to create a regulatory framework forcing tech giants to negotiate fairly with dependent businesses, including news providers.
• Australia’s News Media Bargaining Code has extracted significant funds from Google and Meta, though the process has been complex and unevenly beneficial.

What can publishers do to ensure their journalism is compensated fairly? Publishers should seek non-exclusive deals to maintain leverage and avoid being locked into unfavorable terms with a single AI company. Despite its challenges, collective negotiation might provide a better bargaining position for smaller publishers.

Transparency in deals and fair distribution of funds are essential to ensure money does not just reach the largest media companies or hedge fund-owned entities. A potential solution to this issue is TollBit, a marketplace allowing publishers to license their verified content to AI companies dynamically, based on keyword trends, helping monetize content and provide AI firms with high-quality data.

Looking ahead: when licensing deals will expire

The “move fast and break things” mentality, is once again reshaping the news industry in profound ways. While tech giants challenge the status quo and force innovation, the persistent issue of fair compensation for publishers remains critical.

What will happen once the 2, 3, or 5-year deals that are being signed now expire? For high-quality journalism to continue playing a vital role in society, several steps are essential:

1. Robust Legislation: Governments must implement and enforce strong regulations ensuring fair negotiation practices between AI companies and publishers. The EU’s Digital Markets Act, the UK’s upcoming Digital Markets, Competition, and Consumers Act, and Australia’s News Media Bargaining Code are promising steps in this direction.
2. Fair Negotiation Practices: Publishers should aim for non-exclusive deals to maintain leverage and avoid being locked into unfavorable terms. Collective negotiation could provide smaller publishers with a better bargaining position, ensuring a more equitable revenue distribution.
3. Transparency and Fair Distribution: There must be transparency in deal-making and fair distribution of funds to ensure that the financial benefits reach journalism itself and not just the largest media companies or hedge fund-owned entities.
4. Utilizing Marketplaces: Platforms like TollBit, which allow publishers to dynamically license their verified content to AI companies, offer a viable solution to monetize content effectively.
5. Collaborating with AI companies: Newsrooms can work with AI companies to develop new products, enhance efficiency, reduce time spent on mundane tasks, and improve the overall quality of journalism.

The future of journalism hinges on a balanced approach that benefits both AI companies and publishers. Large publishers can secure lucrative deals now, but they must remain vigilant to ensure these agreements continue to be favorable in the long term.  Smaller publishers should collaborate to enhance their bargaining power for fair compensation.

Ultimately, it is likely that the demand for high-quality, real-time data will still be present in the future. Publishers must be ready to negotiate and adapt, ensuring that journalism is fairly compensated. These strategies will allow the news industry to maximize the benefits of AI technology while protecting the value and integrity of quality journalism.