For the most part, the contract’s AI protections are meaningful, setting critical guardrails on issues like replicating actor images, likenesses and voices without consent before the AI genie generates itself completely out of the bottle. 

But a gaping AI loophole exists in the settlement’s section about “Generative Artificial Intelligence” — a hole that is sure to be exploited by motion picture and television producers and, therefore, presents a real ongoing risk to the creative community, not to mention how we create art itself. 

Specifically, there appear to be no real guardrails to prevent producers from replacing human performers with AI-generated “Synthetic Performers” — a digitally created assets that appear to be “natural performer[s]” but are “not recognizable as any identifiable natural performer.” According to SAG-AFTRA’s post-settlement “Summary of Tentative Agreement” (the full 128-page agreement has yet to be made public), the producers’ only relevant obligation is to give notice to the union “and an opportunity to bargain in good faith over appropriate consideration, if any, if a Synthetic Performer is used in place of a performer who would have been engaged under this Agreement in a human role.” 

In other words, SAG-AFTRA’s membership is relying upon producers acting in good faith when considering casting us instead of synthetic humans that look and act exactly like us.

But let’s keep it real. “Synthetic” performers, unlike the real thing, require no negotiations, no contract, no fees, no perks, no care and feeding of any kind. Not even sleep! Many producers across film and television — certainly those that are budget constrained (which means essentially all of them) — will be tempted to take that AI plunge. And once they do, all bets are off.

Sure, the strike-settlement summary expressly acknowledges “the importance of human performance in motion pictures and the potential impact on employment.” But that provision has no real teeth, other than a loose agreement “to meet regularly to discuss remuneration, if any,” for use of guild member personas to train the AI that may generate their replacements (note the words “if any” in that provision). So the settlement’s feel-good “good faith” edict most certainly anticipates a new Hollywood version 2.0 in which productions can run 24/7 and AI-generated synthetic performers star in movies and series at the expense of human performers — on a meaningful scale. 

Of course, we’re not quite yet in a place where the synthetic performer technology is strong and convincing enough to replace the real thing (one recent 12-minute film, “The Frost,” illustrates the current state of play for AI-generated film). But make no mistake, the time it will take to significantly narrow that gap is shorter than you think. If there is any doubt, just check out the hundreds of 100% synthetic Influencers that already boast massive numbers on social media. 

Take the very human-looking synth “Miquela,” who has more than 3.5 million followers on TikTok and 2.7 million on Instagram. “She” describes herself on Instagram as being “a 19-year-old Robot living in LA.” Miquela is not just some CGI or animated character to which we have grown accustomed in Hollywood movies. “Her” (a la the movie “Her”) goal is to double as a real human influencer, and so her profile highlights very human traits. It also showcases her starring roles in high-end, real world BMW commercials and Prada ads that generate piles of very real cash for her human software coders – roles that otherwise would have gone to her humanoid friends (with whom “she snaps” pictures all the time). 

Miquela is not alone of course in “her” motivations and photorealism. Check out Lu do Magalu “from Brazil” (6.6 million followers on Instagram), Imma “from Japan” (395,000 followers), and Shudu “from South Africa” who calls herself “The World’s First Digital Supermodel” (fun fact: Tyra Banks praised Shudu, thinking “she” was the real thing). 

All of these “synths” work with leading luxury brands. Yes, all still carry that “uncanny” air about them (much like “The Frost” short film mentioned above). But the rapid pace of technology certainly will do its best to close that gap. So expect any one of them to star in a major film or television production near you in the not-too-distant future. Their fictional friend “Barbie” points the way.

SAG-AFTRA’s negotiators certainly did their best to draw some lines to keep humans from being overrun by the synths. But generative AI’s continuing threats to Hollywood talent are meaningful, and they are real. Ultimately, U.S. copyright law serves as Hollywood’s essential AI guardrail, since producers know that the Copyright Office gives no protection to fully AI-generated works (at least not yet). 

But we humans ourselves are the most effective guardrail to not only demand our spot at the top of the creative food chain, but to cherish and nourish the notion that humanity is uniquely capable of creating an almost divine connection that can never be fully and authentically replicated.

For those of you interested in learning more, visit Peter’s firm Creative Media at creativemedia.biz and follow him on Twitter/X @pcsathy.

The post ‘Synthetic Performers’ Win Big in SAG-AFTRA Agreement With Studios appeared first on TheWrap.

Biden’s Order is deceptively sweeping and certainly provides fodder to support many of the positions taken by the creative community – including those related to content provenance, copyright infringement, content “safety” and industry job security.

The Order’s first principle is that “artificial intelligence must be safe and secure.” A primary goal is to protect consumers from AI-enabled content deception and reduce “the risks posed by synthetic content.” It calls for the development of new standards and best practices to “help develop effective labeling and content provenance mechanisms, so that Americans are able to determine when content is generated using AI and when it is not.” 

One specific example is the labeling of AI-generated “synthetic” content with new “watermarking” technology. The most obvious goal here is to address the daunting new reality of “deep fakes” — like the now-infamous “fake Drake” song “Heart on My Sleeve,” which was created with generative AI — that not only can change the course of elections and potentially even topple governments, but also threaten creative works — and the names, images, likenesses, voices and styles of the creators who created them. 

This burgeoning new industry of watermarking and other “AI forensics” can also be used to identify copyrighted works that have been used for AI “training” purposes, and the Executive Order expressly gives notice that the President may step in again to specifically address the issue of “the treatment of copyrighted works in AI training.” 

I recently wrote about ongoing major copyright litigation that is beginning to answer fundamental questions about how much “scraping” of copyrighted works will be enough for courts to find infringement (even as every bit of it technically creates a copy). Biden’s Executive Order brings forensic AI tech to the fore, and the “My Art My Choice” initiative supported by Intel Labs is one that focuses on watermarking in what its authors calls “adversarial protection against unruly AI.” (Intel Labs also backs the related “My Face My Choice”initiative.)

But Biden’s Executive Order goes beyond the realm of copyright and ways of supporting claims of infringement. It goes directly to the heart of other fundamental issues that we face in the media and entertainment industry. Notably, the potential harm of content generated by AI is akin to the well-documented harm that has been caused to young people by social media. The Executive Order calls on Congress to establish new privacy legislation “to protect all Americans, especially kids,” as well as testing and safeguards against “unsafe” content. Examples include “independent evaluation of [company] claims concerning both the effectiveness and risk mitigation of their AI offerings.” 

On that issue, the Executive Order requires that developers of “the most powerful AI systems” share their safety results with the U.S. government. And while it uses the concept of “safety” primarily in the context of national defense, the Executive Order’s accompanying “Fact Sheet” requires all companies that develop “any foundation model that poses a serious risk to … national public health and safety” to notify the government when training its model. Those companies also “must share the results of all red-team safety tests” (i.e., tests that generate problematic outputs) before those foundational models are unleashed to an unsuspecting public. 

Consumer advocates should demand that AI-generated content follow this lead, rather than fall prey to social media’s sordid history of impacting the mental and physical health of kids and young people. So Big Tech take note: The Feds are far more on top of things this time with AI, especially in light of Big Tech’s AI arms race as reflected in the headlines of virtually all recent quarterly earnings calls.

Finally, President Biden’s Executive Order is also directly relevant to the current SAG-AFTRA strike and now-settled WGA strike. In its section titled “Supporting Workers,” it calls out both AI’s power and promise to improve worker productivity, but also the dangers of AI “job displacement.” 

One of the President’s guiding principles is to give workers “a seat at the table, including through collective bargaining, to ensure that they benefit from these [AI] opportunities.” That seat is especially top of mind in Hollywood right now as SAG-AFTRA just responded yesterday to the studios’ “best, last and final” offer and highlighted AI as being “an essential item” on which “we still do not have an agreement.”

Biden directs his Secretary of Labor to “develop and publish principles and best practices for employers that could be used to mitigate AI’s potential harm to employees’ well-being and maximize its potential benefits.” No mandatory edict is given about the current strikes, but the overall zeitgeist supports creators of all stripes. 

Much of the Executive Order’s direct impact on the media and entertainment industry – and the overall creative economy in general – is implicit rather than directly explicit. But the clues and cues are there for creators to use it to add further support of the need to develop basic guardrails in our industry to protect both the “inputs” of copyrighted works into AI’s black box, as well as the “outputs” that those black boxes create. That alone should be applauded.

And that is precisely what the Human Artistry Campaign did after Biden issued his Executive Order. That coalition – which represents the interests of over 170 members of the creative and tech communities – calls it an “effort to craft a responsible, ethical AI policy that will promote innovation and allow both AI and human creativity to strengthen each other and thrive.” 

That kind of focus, advocacy and overall commitment to humanity is exactly what this AI “moment” needs. That and the U.S. Copyright Office’s continued refusal to grant copyright protection for AI-only generated works.

For those of you interested in learning more, visit Peter’s firm Creative Media at creativemedia.biz and follow him on Twitter/X @pcsathy.

The post How President Biden’s AI Executive Order Impacts Media and Entertainment appeared first on TheWrap.

It’s a tale as old as time. An endless sequel of game-changing technology drives tech-tonic shifts in the media landscape that ultimately also drive major Hollywood/Silicon Valley litigation. Universal Music’s lawyers played a leading role in key litigation during tech’s earlier streaming revolution, so maybe we can use those lessons to anticipate what happens next for all sectors of media.

Let’s take our litigation time machine and go back a little less than 20 years ago to a simpler age largely devoid of video streaming and social media. That’s when a then little known startup called YouTube rocked and roiled the entertainment industry seemingly out of nowhere, much like generative AI did less than one year ago. 

YouTube, of course, breathlessly deployed technology that enabled anyone to “broadcast yourself” across the Internet. The problem was that the exuberant young upstart also enabled anyone to upload copyrighted works, such as clips of SNL’s iconic “Lazy Sunday” video that first sounded the alarm to Hollywood in late 2005 that we had entered an entirely new kind of tech driven media world order. 

Most people forget that at that same time, YouTube faced real competition from Veoh, a company backed by Disney CEO Michael Eisner that scaled massively itself. In fact, there is reason to believe that Veoh actually developed the ground-breaking concept and technology first (I was there at the time and have personal knowledge about it, but that’s another story). Universal Music took Veoh to court for enabling mass-scale copyright infringement, while Viacom took YouTube to court for its “brazen” actions. And those two pioneering (yet equally guardrail-less) tech-fueled Hollywood disruptors suffered entirely different fates. 

Universal Music sued Veoh into oblivion, whereas YouTube … well YouTube. It  withstood Viacom’s legal onslaught because, in the tech deal of the century, Google bought it for a mere $1.65 billion, financed YouTube’s defense, and bailed it out. The rest, as they say, is history. Alphabet’s market cap now stands at about $1.73 trillion and YouTube’s contribution to the company’s overall revenues exceeds 10%. That means that a good case can be made that YouTube’s stand-alone valuation would be about $200 billion. 

Due to the pressure and bad optics of litigation, Google was, shall we say, “incentivized” to develop and deploy new technology to rein in its otherwise unbridled copyright-agnostic YouTube technology (it’s amazing what pressure, new priorities, and focused resourcing can do). That magical elixir is its “Content ID” system, first launched in 2007, which automatically detects whether uploaded content contains copyrighted material (i.e., music, television, film). If it does, and depending on the copyright owner’s wishes, YouTube either takes down the infringing content, or instead pays the rights holder). It’s certainly far from perfect. But hey, it’s something.

Now let’s take this little tech-shocked entertainment industry history lesson back to the present day with Universal Music’s fresh lawsuit against Anthropic AI. Anthropic feels a lot more like YouTube than Veoh in this new scenario, since Amazon intends to fuel the company with its endless billions much like Google did with YouTube. That means that Anthropic’s coffers are rich enough to fight Universal and other big media players in the courts. 

And if Anthropic is more like YouTube than Veoh, then we can anticipate a similar fate here. Anthropic will cop to its past “misdeeds” and settle by paying an undisclosed sum of money that will appear to be massive to “insiders” at the time, but will be seen as being a trifle in the long-run. 

Universal Music’s litigation, together with the mountains of other related industry lawsuits in the courts right now, also will ultimately force Anthropic’s hand. The company will need to either develop new tech that enables copyright holders to “opt in” to having their content scraped, or new forensic AI tech a la Content ID that leads to some new — but ultimately unsatisfying — royalty scheme for creators and copyright owners (Intel Labs for one is creating some AI forensic tech with its “My Art My Choice” initiative). Neither path mitigates Anthropic’s unlicensed, non-consensual scraping of copyrighted creative works to date, of course.

And through it all, Anthropic will make dire “fair use” pronouncements that cause the courts to draw some erratic and ambiguous lines about how much “scraping” of the works in question is too little to find infringement. But ultimately, Anthropic and the other major tech gorillAIs will have no choice. 

And if YouTube’s Content ID past is AI’s prologue, Silicon Valley’s giants will use their largely uncontrolled, copyrighted content-trained generative AI tech to generate accelerating billions (and ultimately likely trillions) to their bottom lines and overall market caps largely on the backs of creators. The end result, as we used to say in law school, is Q.E.D. – i.e., Latin for something akin to “the thing speaks for itself.” AI copyright litigation just becomes another cost of doing business for these tech behemoths. 

So how do artists, creators and copyright owners who now unwittingly train the AI tech in the first place make out? Sure, many will learn to use generative AI as a tool to create cool new works (just like they learned to use YouTube). But let’s keep it real and look at today’s transformed industry economics and media company valuations for clues about who really wins. The WGA was essentially forced to punt the training issue down the road to end writer pain — the studios reserved their rights to “train” AI on pre-existing material — and actors continue to be on strike to set some basic guardrails. Meanwhile, mighty Disney, the fairest traditional media company of them all, sits at a nine-year low $150 billion market cap, while tech giant Google/YouTube’s is nearly $2 trillion and Apple’s is nearly $3 trillion. 

You do the math. Big tech is the big winner here once again. And I’m no anti-tech guy; I’ve led several tech-forward media companies. This is no mere “Lazy Sunday” take-down situation where copyrighted works are easily identifiable. Here we have endless “Fake Drake” songs and deep fake videos, each capable of auto-spawning endless AI iterations, coming to a screen near you. And generative AI itself offers up few precise clues as to how it actually artificially creates. 

Just ask the CEOs of Google, Microsoft, and Chat GPT unleasher OpenAI, who concede they are equally puzzled by how exactly their generative AI black boxes work, but have no intention of slowing down their collective gravy trAIn. And as for Anthropic, which markets itself as being the white knight amongst the others for creating “moral” and “ethical’ AI, oh yes, Google is an investor there, too.

For those of you who push back and argue that humans “train” on pre-existing copyrighted works all the time when they create works inspired by (or “in the style of”) of others, let’s be clear. They typically aren’t plagiarizing or making actual copies. Big tech’s generative AI, on the other hand, most certainly is when it “scrapes” each and every word.

[NOTE: I’ll be hosting a free “AI & Entertainment” webinar tomorrow, October 25th, at 9 am Pacific (12 noon Eastern). Register here via this link.]

For those of you interested in learning more, visit Peter’s firm Creative Media at creativemedia.biz and follow him on Twitter/X @pcsathy.

The post Spoiler Alert: Universal Music v. Anthropic Is a Movie We’ve Seen Before appeared first on TheWrap.

And while live video chat certainly gives us communications power, productivity and convenience, we spend far less time meeting together face-to-face in person. Lost in that equation is the unique power of human interaction and potentially game-changing serendipity that comes from connecting with one another in the same physical space.

This became obvious to me at TheWrap’s recent annual TheGrill conference in Los Angeles, where I moderated two panel discussions and spent the day speaking with attendees without a webcam. Throughout the day, I quietly marveled at the number of people I bumped into with whom I have communicated regularly via Zoom, sometimes for years but had never actually met. 

And here’s the thing. Because we actually did share the same physical space for the first time, our conversation veered into a broader range of topics than it would have had we only scheduled a 30-minute Zoom —and then rushed off to our next one. Our casual “bump in” at TheGrill turned into a sit-down meeting that lasted for nearly one hour – one that may lead to entirely new mutually beneficial business opportunities.

This was no one-off event. Similar experiences happened throughout the day both with executives I knew, and with attendees who had either watched my panels or read my weekly column. Once again, these entirely new and unplanned live in-person interactions identified areas of potential mutual professional benefit. Equally importantly, those live conversations led to mutual learning about not only the topics at hand, but others that never would have crossed our minds.

For years, and for the sake of convenience, I’ve increasingly set aside the in-person meeting in favor of the virtual. It was already something with which I was very comfortable, since nearly two decades ago I served as CEO of SightSpeed, a company that pioneered simple video chat over the Internet well before Zoom. (We ultimately sold the company to Logitech.) I ate what we sold at the time, significantly reducing my travel from San Diego (where I live) to the Bay Area (where SightSpeed was based) by using our own video service. And since that time, because I live and work in San Diego, I now rarely travel up to LA or elsewhere for business, even though my professional life is essentially centered in the hearts of Hollywood and Silicon Valley. 

Yes, I can take far more meetings virtually and save on all the hassle of travel – and that brings plenty of positives. But that convenience also comes with a downside – the lost power and serendipity —and frequent new opportunities— that would have come from doing the work and making the time for in-person meetings.

And if anyone doubts the power of the potentially game-changing serendipity that comes from face-to-face interaction, I offer you this personal example. Thirty years ago, I represented notorious rap group N.W.A. in a major First Amendment case. One Tuesday night back in the day, my main contact – the group’s manager – invited me to dinner. Given my workload at the law firm, my first reaction at the time was to reject the offer. But ultimately, I decided to go, and it was that evening that my now, and then future, wife Luisa just happened to be working at that restaurant (Mezzaluna in Beverly Hills). And it was because I went out that night that met my life partner, who transformed my life. Had I stayed home, my life would be entirely different.

One of my main pieces of advice to my two kids (one works at WME and the other is studying at NYU Tisch to become a filmmaker) is to inject themselves into the bloodstream of life. Just like Forrest Gump, you never know what you’re gonna get. 

Given my own recent experience at TheGrill, I now plan to heed my own advice to them and spend more time scheduling in-person meetings. I also plan to add a sense of community by curating an ongoing series of intimate roundtable discussions where leading artists, creators, entrepreneurs, executives and influencers in the worlds of media, entertainment and tech can break bread together and discuss pressing issues of the day – and also, simply to let the serendipity flow. I’ll call these “Fearless Media” roundtables (named after my weekly newsletter of the same name).

If you’d like to apply to be part of my new “Fearless Media” roundtable group, reach out to me at peter@creativemedia.biz and let me know a little about you, why you are interested and the unique perspectives and passion you can bring to the table for the benefit of others. I anticipate quarterly dinners at first of not more than 10 people representing a cross-section of media, music, entertainment and tech.

For those of you interested in learning more, visit Peter’s firm Creative Media at creativemedia.biz and follow him on Twitter/X @pcsathy.

The post In the Age of Zoom, the Forgotten Power of the Face-to-Face Meeting appeared first on TheWrap.

With those opening words to the 5,000-plus in attendance this past Friday night, acclaimed director Darren Aronofsky unveiled his new film “Postcard From Earth” at the new Las Vegas venue, the Sphere. 

“Film” is the wrong word, of course, for this awe inspiring, spherical $2.3 billion new canvas that stands 366 feet tall and features the highest resolution LED screens on the planet, both inside and out. Rather, “Postcard From Earth” is a multi-sensory cinematic experience that breaks not just new ground, but every ground possible — just as the Sphere itself did when construction first began in 2019. 

Aronofsky piloting the Sphere’s first “film” makes sense. After all, the auteur has made his deeply respected directorial name with bold experimentation and an artistic ethos showcased in some of the greatest films of the past couple decades, including “Black Swan” and “Requiem For A Dream.” It’s no surprise, then, that “Postcard From Earth” leaves the existing universe of moviemaking to go boldly where no other film has ever gone before. The end result? A triumph in all respects – and a “must see” (“must experience,” really) for the rest of us. Even Aronofsky was blown away at the premiere. “This is awesome!” he gushed to the audience in his opening remarks just before the first frames filled our senses.

“Postcard From Earth” starts rather “small” comparatively amidst the massive size of this venue. We see an IMAX-like screen before us – in traditional letterbox format – massively oversized to be sure but leaving us in the dark about whether the rest of this 360 degree-space will be fully utilized. I’ve followed the Sphere story from its beginning (always a believer, as I wrote previously), but I too wondered whether its fully immersive space could work for film or instead be best served for U2 and other immersive live acts. 

Those questions were soon answered as Aronofsky delivered his first postcards – an ongoing series of vignettes of Earth’s natural magnificence. As the visuals first expanded to fully engulf the audience in near-360 degrees, we all wildly applauded, hooted and hollered. We all knew we were experiencing a historic moment in cinema.

I subsequently sat down with Aronofsky and asked him what it felt like to see his creation appear inside this new planet of a screen. “It’s very exciting watching it with audiences, because I never saw so many jaws drop in my life,” he told me. “I didn’t know that was a real thing. That’s a cool experience as a filmmaker.”

To be clear, this is not your father’s IMAX nature film or earthly tour. As magnificent and powerful as the scenes of nature are here – shot in cinematic 18K resolution and displayed at a previously unfathomable scale – this is an Aronofsky film, so you know that happy endings are few and far between. And so, we dart back and forth between what nature brought, back to the planetary destruction and chaos that humans have wrought. It is, in the words of Aronofsky, a “sober” experience. But although “Postcard From Earth” is to a certain extent a meditation on a planet lost and a love letter to a bygone past epoch from a distant future generation of space travelers, it is not hopeless. 

And that was intentional on the part of Aronofsky. “I do think there is an illness in Hollywood of dystopian film,” he told me. “Stories that are helpless and hopeless and dark.” But Aronofsky sees a lot of hope and thinking about the future in his conversations with young and old alike. ”It’s important as a storyteller to start telling stories about protopia,” he said. Stories not of “a perfect future, or a future not based in any truths or reality,” but rather “stories that show a great future for humanity and for the planet and for our home.” It is this narrative that serves as the emotional hook that, together with the pioneering tech at work here, elevate the end result to something lasting.

We may have seen some of these lessons before in other films. But we’ve never seen them delivered  like this. This was an evening of firsts, as we flew through mountains and dived through grand canyons as if we were star troopers on our own spaceship. In one scene, an elephant steps ever closer to the camera, and then proceeds to essentially walk over it – and you, the audience, are right in the middle of it all. 

The sense of awe and immersion is magnified by seats that rumble and shake evermore with every step closer. We are experiencing haptics and the first real 4D cinema as well. The magic continues as we experience a desert storm. As we watch, wind touches your face inside the Sphere. We are no longer merely watching. We are in the storm, and we are there together. This is virtual reality without clumsy VR headsets, and ground-breaking new sound that delivers headphone sound without the headphones. The result is a shared, lasting experience, rather than further isolating technology. Special shout-out to the film’s score, which is a wonder in and of itself. 

No one, not even Aronofsky, knows whether more “traditional” Hollywood narratives will work within this entirely new kind of landscape. Aronofsky likened the process to “building an airplane while we were flying it” because much of the technology came online months after he and the crew had already commenced production. But he certainly doesn’t rule it out. 

Asked whether “smaller,” more traditional films still can play a role amidst the continuing parade of accelerating technology encapsulated by the Sphere and generative AI —which promises to rock Hollywood in the years to come — Aronofsky reflected on his own experiences. “Absolutely,” he tells me. “Independent films are where so much of invention happens.”

For those of you interested in learning more, visit Peter’s firm Creative Media at creativemedia.biz and follow him on Twitter/X @pcsathy.

The post The Sphere’s Miracle of Tech Showcases the Earth’s Miracle of Life | PRO Insight appeared first on TheWrap.

And how about Fox and News Corp now that Rupert Murdoch stepped down? That media company with the hilariously ironic name (why quibble with “news” when you can simply give your audience “alternative facts”?) seems ripe for the picking. Elon Musk anyone? It’s the right constituency for the far out galaxy to which Musk has rocketed these days — and a natural one-two gut punch with X/Twitter, if you think about it. New putative CEO Linda Yaccarino would most certainly approve of that move, based on her performance at the recent annual Code Conference.

These and other issues will be discussed and hotly debated Wednesday at TheWrap’s highly anticipated annual “TheGrill” event in West Hollywood, which draws movers and shakers from all sectors of media, entertainment and tech (you can still register here). Yes, it’s that time of year again, and for the second year in a row, I’ll be moderating the conference’s M&A panel. This year’s great lineup features top M&A savvy executives and entrepreneurs Stephanie Horbaczweski (who previously sold her media company StyleHaul to RTL for over $100 million and now runs entertainment analytics company Vody) and Olivier Chastan (CEO of music IP M&A and branding firm Iconoclast), private equity’s Jason Sklar of Shamrock and leading media and tech investment bankers Ed King of BTIG, Charles Johnson of Truist and Ethan Sawyer of Guggenheim. 

Importantly, my expert panel will discuss the overall M&A environment and whether dealmaking will heat up now that the writers’ strike is over, even as the SAG strike continues — not to mention seemingly endlessly rising interest rates and the most active antitrust regulatory environment in memory. 

The backdrop to all of this is streaming, of course, which has changed the game completely in the world of entertainment. On the film and television side, the new Hollywood moguls are the CEOs of tech-first, trillion-dollar-plus valued behemoths with Silicon Valley DNA. That means Tim Cook of Apple, Jeff Bezos of Amazon, Sundar Pichai of Google and Mark Zuckerberg of Meta (OK, Meta falls below the $1 trillion mark) — all four of whom have now been sued by the Feds for antitrust. Where does leading streaming fish Netflix fit in? I have long predicted that it will be swallowed up by a much bigger fish (most likely one of those other juggernauts), and will explain my reasons why. 

Meanwhile, on the music side, Daniel Eck of Spotify rules the streaming roost, yet still can’t find a path to profitability, which makes him ripe for the picking. And through it all, and precisely because of the impact of streaming, musicians large and small continue to find buyers who value their songs richly. That’s the power of IP ownership. So who will be broken up? And who will make up and marry? THAT is the question.

Of course, it’s not just about film, television and music. All aspects of the increasingly tech-driven media and entertainment world — across all global territories — are on the table for enterprising entrepreneurs, and Wednesday’s savvy panelists will discuss other sectors where they anticipate active dealmaking. Certainly, artificial intelligence — that’s AI for you and me — will be (and should be) a hot topic on which to build your chops. Microsoft has invested over $10 billion in OpenAI (the company that opened the floodgates to a largely unsuspecting public with ChatGPT), and Amazon just invested $4 billion in rival Anthropic. It’s natural to think that both gorillas ultimately may seek to become controlling buyers. Meanwhile, Google just Bards along, with its newly expanded AI offerings going off on their own little hallucinogenic tangents, giving new meaning to the slightly modified phrase “buyer bewAIre.” Will Google and others buy their own AI startups in their rabid and unbridled quest for AI dominance?

So come join me Wednesday to connect, break bread and get the insider’s scoop on all of the headline speculation, as well as M&A expertise, insights and tips that you will not find anywhere else. I’ll even ask everyone on the panel to give a personal “under the radar” M&A prediction. All of this will be presaged by a lunch in which I host an informal M&A table discussion open to all attendees, at which you can ask whatever questions you have on your mind, including whether there is more to it than money when buyers and sellers are at the table. 

For those of you interested in learning more, visit Peter’s firm Creative Media at creativemedia.biz and follow him on Twitter/X @pcsathy.

The post Why M&A Is on Everyone’s Radar Right Now | PRO Insight appeared first on TheWrap.

The reaction followed OpenSea’s Feb. 17 announcement that it was making enforcement of resale royalties optional on a swath of NFT collections — more like a tip if buyers felt like paying for it. Imagine essentially being promised, and relying upon, an ongoing 10% royalty on every resale of your creative work, but then having that pulled away. Many creators felt that OpenSea had reneged on a fundamental tenet of their deal, and the blowback was swift. After all, the blockchain’s promise of continuing royalties represents the single most critical benefit of NFTs to creators. 

In a recent conversation, OpenSea’s chief business officer Shiva Rajaraman told me he regretted this reality, but chalked up most of the hate directed toward it to confusion. Impacted NFT collections were those without OpenSea’s “operator filter” — “a couple lines of code” that enable on-chain enforcement and are apparently easy to add. But those creators who launched their collections at a time when they had no reason to believe that on-chain enforcement was necessary — and when no operator filter code was even available to them — are now, for the most part, simply out of luck. 

Rajaraman reassured me that OpenSea remains absolutely committed to preserving royalties on all new collections coded with its operator filter, or alternative enforcement tools from companies such as Manifold — code that basically designates which other marketplaces can sell collections created on OpenSea. But when I later asked the company whether its latest assurance to creators was now ironclad, it seemed to hedge its bets. Yes, a company spokesperson told me, so long as its commitment was coupled with a way to ensure that NFT collections couldn’t be sold royalty-free on other marketplaces — an answer that seemed to take us right back to the type of thinking that got the company into hot water with creatives in the first place. 

To its credit, the company openly acknowledged that it changed its resale royalty policy in direct response to competitive headwinds. Competing marketplace Blur, which uses 0% transaction fees as its calling card, is reported to have leapfrogged over the market that OpenSea created. According to The Information, Blur now holds approximately 80% of global NFT trading volume, using its race to the bottom no-fee strategy as its way to the top. In a tweet, OpenSea bemoaned the fact that “the majority of volume… has moved to a zero-fee environment” and that this unfortunate new reality “required” a change to its own policies.

I asked OpenSea how many creators are impacted by this change. The company responded that it doesn’t share that data, and ultimately the precise numbers are less important than what OpenSea’s new policy represents. Creators who had invested their time and trust in OpenSea based on what they believed to be a guaranteed, locked-down stream of resale royalties now abruptly found themselves dependent on the good graces of resellers. And in a nascent Web3 world populated by significant numbers of profit-maximizing speculators, “good graces” can be hard to come by. 

We’ve seen this movie before. When a company’s sales volume and market share drop precipitously — as OpenSea’s apparently did here — unbridled investor pressures and priorities almost always win. And here, profit-maximizing priorities of OpenSea buyers and sellers trumped those of the creators who built that value and the investors’ marketplace in the first place. 

Of course, it’s easy to Monday-morning-quarterback OpenSea’s decision to change the rules of the game while the players are still on the field. The company faced massive pressures and substantial lost sales volume being a “white knight” amidst competing “take no prisoners” players in this great NFT land grab. Undoubtedly, there were no easy (or even not-so-easy) solutions. 

Nonetheless, from the perspective of the creative community, it was incumbent upon OpenSea to do something that placed creator interests first. And I’m not sure that abruptly announcing a significant policy change on Twitter was the way to go. Real outreach to, and proactive engagement with, the creative community was what was needed. After all, if creators aren’t incentivized to play in this new Web3 sandbox, then there will be fewer sandcastles built. It’s typical short-term thinking. Zero percent fees may taste great now for buyers and sellers. But creators need, and deserve, to be fed too.

In any event, OpenSea’s rough waters serve as a cautionary tale. Web3 and NFTs continue to confuse and confound most of the world. We’re in the early innings of the commercial blockchain after all. And such confusion frequently leads to skepticism — skepticism that begets a tendency to write off the overall Web3 opportunity rather than learn and embrace it. That’s why NFT’s headline promise to creators — ongoing baked in royalties — is so critical. Royalties give creators something new and transformational. And here’s the thing: The blockchain’s unique power to deliver the goods is real. 

NFTs were never intended to be pump-and-dump, get-rich-quick schemes. Their true power and promise rest in delivering real ongoing value, connection and community — and, most importantly, a revolutionary new way for artists and creators to take back so much value lost to Web2 middlemen like Facebook, YouTube and the app stores. NFTs offer a bold new way for creators to directly connect with their audiences to enable a reciprocal exchange of value, as I wrote in TheWrap last fall. 

OpenSea, a long-time respected innovator in the world of Web3, had the power to lead here, take a stand for creators, and move NFTs closer to their ultimate promise. Instead, faced with rough seas, the captains abandoned ship.

For those of you interested in learning more, visit Peter’s firm Creative Media at creativemedia.biz and follow him on Twitter @pcsathy.

The post Why NFT Creators Are Up in Arms Over Royalties – and Rightly So | PRO Insight appeared first on TheWrap.

AI and the societal disruption it portends should be the talk of Hollywood, too. ChatGPT rocketed into our worlds late last year, and shook many of us with its game-changing ease and sophistication.

Now an unease is sinking in across the creative community and the business ecosystem that supports and profits from it.  No one knows where AI will take content creation in the years ahead, but thanks to ChatGPT we are finally seeing that the genie is out of the bottle. Already, the technology has generated lawsuits: Two were filed last week against major AI players, one in California by a group of artists seeking class action status and another in the U.K. by Getty Images.

We must embrace this reality and learn to leverage AI’s power, while preserving humanity at the center of the overall creative process. This moment of AI epiphany is even more poignant as we consider how AI’s power will grow exponentially in the years ahead.

AI can already write increasingly compelling stories, even full screenplays. Just add what technologists call “prompts” — basic plot points, characters and setting — and out pops an entire creative work. The bot won’t complain if you send notes: It will just iterate. Similarly, suggest some visual references — photographs, artworks, a style, even an artist’s name — and AI paints a canvas of images, like the one accompanying this column.

Think moving pictures are out of reach of AI? Think again. Full-length, 100% AI-created videos are coming soon to a screen near you. A purely AI-generated short, “The Crow,” recently won the Jury Award at the Cannes Short Film Festival. Soundtracks, too: AI can be your composer. Boomy is just one of the many AI-driven music-focused companies that market themselves as democratizing the music creation process. You can generate endless new songs and upload them directly to Spotify to compete with human streams.

The only problem is that none of this “creative output” is entirely new. In fact, it is inherently derivative, based on millions of existing creative works scraped off the internet. An AI like ChatGPT takes this input, studies it, and produces seemingly novel works based on that material. Much of it is copyrighted, but the authors of copyright laws never contemplated this kind of derivative work.

And that’s the fundamental question. Does this kind of generative AI infringe our copyrights, our exclusive ability to commercialize our works, on a massive scale?

The simple answer is that we don’t know yet — at least not in the courts that will ultimately decide such matters that will have transformational impacts on everyone in Hollywood and across all of creativity and the arts. But we will see answers coming soon. This year, in fact. 

The central question in the lawsuits recently filed against Stability AI, Midjourney and DeviantArt is whether these AI machinations — call them “micro infringements” — add up to actual copyright infringement that warrants significant legal penalties and consequences. Should we consider AI output to be derivative works that transgress copyright and warrant compensation to the creative community which unwittingly enabled them? Or does AI’s mass scraping of those works instead constitute a defensible “fair use”? So far, the U.S. courts have been silent on this issue, and the U.S. Copyright Office has given no guidance. 

The cases could take years to wend through the courts. But they signal that society is beginning to meaningfully grapple with these questions and their profound implications for the media and entertainment industry. 

Human authors at Scientific American recently asked ChatGPT if AI should be regulated. To be clear, the bot wasn’t speaking for its creator, OpenAI, but it conceded the point. And it even offered an unqualified “yes” when asked if human creators should be compensated. And it conceded that AI should be regulated. Here’s what it said:

“One possible solution… is to establish a system for compensating writers whose work is used in training models. Another solution could be to require companies or individuals using language models to obtain explicit consent from writers before using their work in the training process.” 

ChatGPT

In other words, even ChatGPT says it should pay up. It’s harder for OpenAI to argue that it can’t, with Microsoft’s billions rolling in and experiments apparently underway to charge some users for priority access to ChatGPT. 

But how? What kind of royalty system could we humans create that is both fair and pragmatically possible? The complexity of identifying and compensating the specific creators among millions who contributed indirectly to the generation of a single AI work boggles the mind.

Yet there are precedents: Something akin to a performing rights organization in the music world, where artists receive payments based on estimates of the music played in bars, restaurants and other venues across the world. 

There’s another problem in compensating creators. The commercial exploitation of creativity depends on copyright protection. And courts haven’t decided whether AI-generated works qualify for copyright. 

The Copyright Office has weighed in, though. Its current policy is to grant copyrights only to human-assisted AI works, not wholly AI-generated ones. The intellectual basis of that stance isn’t clear, since the current generation of AI works produced by the likes of Midjourney and ChatGPT start with prompts written by humans. There’s already a lawsuit pending that challenges the Copyright Office’s conclusion.

Are there any good answers? We certainly don’t have them yet, and I don’t think asking ChatGPT will get us very far. (I tried, and it offered generic suggestions about royalties or one-time payments.) Our systems of government aren’t well-equipped to address such seismic shifts in technology. But the pace of AI’s growth in both accessibility and sophistication is only accelerating, as is the disruption and transformation that flow from it.

I’ve taken a step by founding the AI Creative Forum, a think tank meant to consider these issues with leading creators, artists, executives, philosophers and technologists. I’m hoping it and other efforts like it  will spark real human conversations to match AI’s increasing sophistication. Make no mistake: AI is the central media-tech story not just of this year, but of this decade. 

If this sounds like a humanist’s call to arms to everyone in the creative community, then you are absolutely right. Consider it an AI reality check. We can stay on top of this massive wave of change, or have it crash over us. Our jobs, our lives, our identities as creative people depend on the choices we make.

For those of you interested in learning more, visit Peter’s firm Creative Media at creativemedia.biz and follow him on Twitter @pcsathy.

The post ChatGPT Is Copying Human Creativity on a Huge Scale – But How Do Artists Get Paid? | PRO Insight appeared first on TheWrap.

To help you stop the panic and help you prepare for this annual rite of passage, I’ve assembled this “cheat sheet” of five hot topics and trends to watch and discuss — all related to the worlds of media and entertainment tech — as you weave your way around the massive convention halls and overindulge on complimentary food and drink at your business colleague’s soirees. I’ve also added links to some of my recent articles if you want to explore in more depth.

Hot Topic No. 1: Humans!

Yes, the biggest tech/electronics show in the world will, as always, feature endless walls of bigger and flatter TVs (is that even possible?), not to mention and endless array of enviable new gadgets that delight in their clever ingenuity (but rarely actually see the mass market light of day). But perhaps this year’s biggest CES story of all is human (sorry Chat GPT! — although you get Hot Topic No. 2 below). This year marks the first in years to feature people on a mass, global scale in a world that continues to try to put the pandemic in its collective rearview mirror. So ditch your schleppy Zoom clothes and dust off your professional clothes of yesteryear — and get ready to mingle!

Hot Topic No. 2: Chat GPT and AI (i.e., non-humans!)

Once you hit the CES floor, the sea of post-pandemic humanity that we rejoice above will be overtaken by endless, yet understandable, chatter about the biggest tech story of 2022 — Chat GPT. OpenAI’s new publicly available and entirely free chatbot represents a jarring new level of artificial intelligence (AI) sophistication. Make no mistake, Chat GPT is no meme. For good or bad, it’s game-changing. And if you haven’t tried it before boarding your plane to Vegas, you should. In fact, you should spend hours playing with it. Then you will absolutely “get” it. And this is only public version 1. Imagine what AI will be able to do next year. Five years from now. Ten. 

Here’s my recent article that will help point the way and explain why AI is a real — very real — threat to the media and entertainment business (and what you can do about it).

Hot Topic No. 3: IRL meets URL (Humans + meta non-humans = experiential magic)

Who says that 1+1 can’t equal 3? That’s what you get when you add Hot Topic No. 1 (humans) and Hot Topic No. 2 (non-humans) to equal Hot Topic No. 3 — entirely new immersive experiences that mystify all senses. No matter what Chat GPT tells me, I continue to believe that shared “In Real Life” (IRL) experiences will dominate our memories for decades to come — and take on increasing importance, in fact, with the accelerating pace of online metaverse virtual worlds and AI (and the impending Singularity). We will spend more of our cash to commune more and rub shoulders in the physical world to experience lasting moments with our families and friends. 

Increasingly, the most compelling IRL experiences are lifted to entirely new levels of impact because of — not in spite of — new immersive technologies. Here’s my article where I write in depth about one such example: Fan-Controlled Football (FCF) and how thousands of individual online (URL) “team owners” call the plays for real football players (IRL) on a real football field in real time. You can also listen to my podcast interview (here is the Spotify link) with FCF’s CEO.

Hot Topic No. 4: Massive media M&A (and then more M&A, big and small)

When global economies and company financials are challenged, brave new M&A possibilities rise up — both for offensive reasons (the acquiring company sees a chance to leapfrog its competition and current limitations) and defensive reasons (the acquired company can’t make it on its own). And this year presents that perfect storm. Media, entertainment and tech stocks are generally battered. The forces of change and transformation are jarring (particularly in a hyper-competitive streaming world dominated by Big Tech). Scale and operational efficiency are essential to compete. So are multi-faceted business models and compelling content (especially evergreen franchise content that can be re-imagined over and over again for decades to come and come with built-in audiences). 

My bets are that Paramount and Viacom are both ripe for the picking (as I previously wrote here), as are smaller prestige boutique production companies and studios like Anonymous Content, A24 and Blumhouse (which have seen Brad Pitt and his Plan B beat them to the punch as 2022 ended – you can read more about that in my article here). Even mighty Netflix ultimately will be bought because it can’t go it alone (although that won’t happen in 2023), and as I wrote previously, Comcast is best positioned to make that happen via a merger of relative equals.

Hot Topic No. 5: Web3’s power for creators and fans (and the NFTs that connect them)

Yes, FTX crashed, burning thousands of crypto wallets along with it. But crypto is just one manifestation of the blockchain’s power of “Web3” — a moniker used to reflect disintermediation and direct connection between creators/artists and their fans/audiences. And the linkage that makes it all possible – i.e., non-fungible tokens (NFTs) — will begin to demonstrate their real lasting power this year in both film and music. 

I’m not talking about Beeples and Bored Apes here. I’m talking about real lasting investments and experiences that can continue to yield value and exclusive benefits over time — and even give creators new sources of financing (and financial participation by the fans who power their creativity and crafts). Check out my recent article where I lay out which NFTs are “real” — and another article where I discuss how Web3’s power to extract the middleman represents a real threat to even massive companies like Google/YouTube (I use actual numbers to prove my point).

So enjoy CES everyone! Sip your Cosmos as you stay at the Cosmo (my favorite Vegas hotel by the way). And remember, what trends and topics happen in Vegas, won’t stay in Vegas. They’ll be out in the open as the year unfolds.

For those of you interested in learning more, visit Peter’s firm Creative Media at creativemedia.biz and follow him on Twitter @pcsathy.

The post 2023 CES: 5 Biggest Trends Everyone Will Talking About in Las Vegas | PRO Insight appeared first on TheWrap.

But let’s go bigger, bolder — courtesy of a massive new development since I wrote those predictions, but an overall antitrust theme I generally anticipated. Just last week the FTC filed litigation to block Microsoft’s $69 billion acquisition of Activision-Blizzard. And with that game move, the Feds made Comcast the leading contender to buy (really, merge with) Netflix in the mother of all unintended media consequences. 

For years, I’ve predicted that Netflix ultimately will be bought. Its pure-play subscription only business model just doesn’t “work” in a hyper-competitive streaming world dominated by Big Tech. And Comcast is now poised to win that Netflix mega-deal that would fundamentally transform the entertainment landscape. Yes, you heard it here first. Just follow me as I add up the pieces the antitrust police just laid on the table. 

The Feds are all over Big Tech right now, right? So all of a sudden — and with Microsoft’s massive new Activision migraine — Big Tech’s usual suspects are unlikely buyers anytime soon of any major studio or streaming service, including Netflix. Microsoft is certainly out of the game to buy Netflix, at least for now, thanks to Activision. Google, like Microsoft, is also too big and too scary to the FTC (it is being closely scrutinized as we speak). Meanwhile, Amazon already squeaked by the Feds when it closed its $8 billion MGM deal. So star-gazer Jeff Bezos is fully sated. And Meta/Facebook (whatever you want to call it) is simply a non-starter. Resident alien Mark Zuckerberg is too much of a pariah, and rightfully so (as I recently wrote in yet another recent column). That leaves only Big Tech’s biggest goliath, Apple. But Tim Cook has his sights set on Disney and has no interest in Netflix (more on that below).

So that makes Comcast NBCUniversal the No. 1 contender to buy Netflix — actually, merge with Netflix because both share essentially the same $150 billion market cap. Just think about the power of a merger of these two very different, yet very synergistic, equals. Comcast would solve Netflix’s existential content-fueled subscription-only business model crisis, while Netflix would solve Comcast’s hidden-in-the-streaming-bushes Peacock predicament. Both companies desperately need each other to accelerate customer acquisition and monetization and to scale and compete in an entertainment world now dominated by far bigger Big Tech adversaries. 

Netflix would immediately play a central role in Comcast’s multi-faceted revenue-generating machine. Its global brand and content library would immediately leap off the subscription-only screen to populate (and drive transactions in) Universal Studios theme parks and merchandise. Just imagine the power of “Stranger Things” brought to IRL (in real life). And Comcast could immediately replace sputtering streamer Peacock with Netflix’s global mega-brand and customer might, adding its own customers to the mix. 

Meanwhile, critically, Universal Studios would immediately solve Netflix’s missing franchise content link that it needs to compete cost-effectively against franchise-rich Disney and Warner Bros. Discovery in the great streaming wars. On its own, Netflix can’t continue to up its annual content budget ante which now reaches $17 billion. “Less is more” in terms of content development cost efficiency and revenue impact, and imagine the re-usable power of Universal’s “Fast & Furious,” “Despicable Me” (and its “Minions”), the “Bourne” series, “Jurassic Park” and horror franchises that range from “The Purge” to classic monsters like Frankenstein. And that’s just on the film side! NBC brings “The Office,” “Law & Order” and “SNL,” among so many others that Netflix previously lost, but now would find again.

But wait, there’s more. Netflix-fueled Comcast broadband bundles would be a match made in M&A heaven, giving consumers one more massive reason to buy — and stick with — both Comcast’s high-speed internet and reduced price Netflix subscriptions. High margin broadband is Comcast’s cash cow, and it has already partnered with Netflix for years. Comcast markets Netflix as a major benefit of its Xfinity packages. So the two companies already know each other, which could ease the way for a relatively smooth post-merger integration (and the significant cost savings that would come from it). Comcast and Netflix would be a true 1+1=3 scenario. Wall Street and each company’s shareholders would love it. 

OK, now back to Disney and my last column’s bonus prediction for 2023. Apple craves Disney cheese over Netflix. It’s a mouse and pony show that’s not even close. Remember, Steve Jobs founded Disney’s Pixar and Disney CEO v2.0 Bob Iger served on Apple’s board until 2019. The companies’ shared creative and innovative DNA is undeniable. Yes, of course the Feds’ first impulse would be to block this mega-deal. But lots of chess moves and concessions could make it happen. Apple could assuage FTC angst by divesting Disney’s theme park division — and perhaps even ABC Television and ESPN — as conditions of a deal. Apple would have absolutely no interest in operating theme parks anyhow. Yet it could still have its cake and eat it too by collecting massive content licensing revenues from the buyer’s use of its now-owned Disney intellectual property.

So open your mind and imagine these possibilities as we end the year and look forward to the next. Netflix could enter theme park turnstiles just as Apple-fied Disney exits them. Yes, it could happen, and it absolutely should. Here’s my toast to you Comcast and Netflix. Cheers to you this holiday season (by the way, another classic television franchise you can find on Peacock)! It’s time to be fast and furious in the new year!

For those of you interested in learning more, visit Peter’s firm Creative Media at creativemedia.biz and follow him on Twitter @pcsathy.

The post How the Feds May Have Just Handed Netflix Over to Comcast | PRO Insight appeared first on TheWrap.