FTI Delta’s Gen AI Content Licensing Deal Tracker Reveals Hurdles for Premium Video Publishers

Authors:

Phil Schuman Senior Managing Director
Sumeet Gupta Senior Managing Director
Daniel Punt Senior Managing Director
Russell Simon Senior Consultant

Of the over 30 content licensing deals done to-date between premium content providers and Gen AI platforms, only eight have included video assets; none feature premium filmed-entertainment IP. Instead, video deals have primarily been for UGC (user-generated content, e.g., Shutterstock licensed content) and libraries of more niche video content. The recent deal between Lionsgate and Runway, while ground-breaking in signaling the intent of a Hollywood studio to explore Gen AI productivity gains, does not grant Runway access to train its primary Gen AI engine on Lionsgate video content.

On the licensing front, we believe that premium content owners may have points of leverage in Gen AI negotiations given their unique and high-quality IP. To date, Gen AI platforms have handled content more as a commodity. Gen AI platforms are attempting to claim “fair use” protection on their exploitation of copyrighted material that is scraped from the internet and tend to approach any licensing with “equal playing field” unit economics (e.g., a small, flat rate per minute of video or per word of text).

Over time, Gen AI platforms will be more dependent on high-quality content, as content informed by high-quality training data will be a major competitive differentiator. However, in these early stages, several hurdles have emerged¹ that are preventing content licensing deals on the premium video front.

1. Lack of Deal Precedents
   There are few existing deal precedents to serve as norms or comparisons, and premium video publishers are seeking to understand how data is used for training. As it stands, once video is used to train models, that IP will continue to be present in future models and cannot be “recovered” if a content deal ends, which presents further complications.
   

2. How to Value Content Licensed to Gen AI Platforms
   The most common model today is an input-based deal, where platforms value and pay based on the volume and quality of data received from an IP owner. While this is the most prevalent model today, it has been applied mostly to existing text-based and news licensing agreements but likely isn’t the ideal long-term structure to maximize value for IP holders. We have developed our internal view of the deal archetypes that can maximize value for IP holders and are advising our clients accordingly.
   

3. Concerns Around IP Rights and Protections
   Studios own the rights to license IP as “completed works,” but contractual rights likely do not extend to AI training, which may be considered a “derivative work.” Additionally, components such as soundtracks and actor likenesses will complicate Gen AI licensing and will require clearances and separate compensation mechanisms. Guild requirements and individual talent contracts play a significant role here. Based on the new SAG-AFTRA agreement, talent has broad approval rights through each step of the Gen AI process when AI is used by producers to create TV episodes and movies, and talent approval would play a role in any attempts to license content to AI platforms.
   

4. Fears of Enabling Competition
   IP owners that participate in content licensing to Gen AI platforms can harvest initial benefits, including partnership revenue, the launch of new consumer-facing products, and a voice in setting initial precedents. However, there is some concern among IP providers that allowing Gen AI platforms to train models to produce cinematic-quality outputs will enable eventual technological competitors. Our view is that multimodal Gen AI outputs, which feature video with contextual sound, are coming with or without content licensing deals, and premium IP holders have leverage now to reap financial upside in the growth of Gen AI platforms via effective licensing deals.
   

The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates or its other professionals.

FTI Consulting, Inc., including its subsidiaries and affiliates, is a consulting firm and is not a certified public accounting firm or a law firm.

This article has been updated to include attribution to Variety Intelligence Platform as the source for the content deals tracker. This information was inadvertently omitted in the original version.

¹ Variety Intelligence Platform, “Why studios still haven’t licensed movies and TV shows to train AI”, https://variety.com/vip/why-studios-still-havent-licensed-movies-and-tv-shows-train-ai-1236109292/