OpenAI, Perplexity secure more publisher licensing deals

The news: OpenAI and Perplexity each penned licensing deals with big publishers this week.

• Perplexity’s revenue-sharing program added the Los Angeles Times, Adweek, The Independent, and others to its roster, which already included Time and Fortune.
• OpenAI partnered with Future, the owner of Marie Claire, Tom’s Guide, PC Gamer, and Tech Radar, to include their content in its ChatGPT search product.

Zooming out: The two AI companies are facing scrutiny and legal challenges over the information used to train their generative AI (genAI) models.

• In October, The New York Times (NYT) sent Perplexity a cease-and-desist letter for using its content without consent, and Wired and Forbes have denounced the startup’s data scraping practices.
• In November, OpenAI defeated a copyright lawsuit filed by news outlets Raw Story and AlterNet, though scrutiny continues from NYT and others.

Who benefits? For the AI companies, these deals help them improve their offerings and avoid copyright lawsuits. For publishers, they get the ability to recoup some revenue lost to AI search engines and stay afloat in a struggling news industry.

• OpenAI gives partner publishers a flat-rate licensing fee, rather than a share of revenue, while Perplexity offers a “double-digit” cut of revenue.
• 57% of US adult support compensating news and media publishers when their content is used to train AI, per News/Media Alliance.

Startups at both ends of the spectrum: Both companies have seen their share of PR snafus, but OpenAI has the benefit of being larger and more stable.

• OpenAI is already an AI behemoth with $3.4 billion in annual recurring revenue. Its licensing deals give publishers some control over how their content appears in ChatGPT search’s results as well as a stream of passive revenue.
• Perplexity’s annual recurring revenue was about $50 million as of October, per The Wall Street Journal. As it continues to grow, switching to a flat-rate offer for publishers could help it avoid cutting into profits needed for model development and deployment.

Our take: News outlets are facing layoffs and growing threats to web traffic from AI chatbots and search engines. These partnerships could help them keep the lights on and give them a piece of the booming AI industry.

Companies like Perplexity and OpenAI are hungry for content to improve their offerings. Brokering partnerships now is safer than waiting for AI publicly available model-training data to run out.

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