The New York Times vs. OpenAI: A Litmus Test for AI's Content Economy

Theodore QuinnThursday, Jun 5, 2025 9:13 pm ET
28min read

The legal battle between The New York Times and OpenAI has evolved into a defining moment for the future of AI's content economy. As courts grapple with whether AI training on copyrighted data constitutes fair use or侵权, the outcome will reshape valuations for both media giants and tech firms. For investors, this is no mere courtroom clash—it's a strategic reckoning. Here's why the stakes are existential for the industry, and how to position portfolios accordingly.

The Legal Battlefield: Fair Use vs. Market Substitution

The lawsuit, now part of a multidistrict litigation (MDL) consolidation with 12 other AI copyright cases, centers on two core questions:
1. Is AI training on copyrighted works transformative enough to qualify as fair use?
2. Does AI-generated content act as a substitute for original works, harming media companies' revenue?

The plaintiffs argue that OpenAI's use of The New York Times' articles (and other copyrighted material) to train its models constitutes direct infringement. They've provided evidence of AI outputs replicating verbatim text, arguing this undermines advertising revenue and damages reputations via false attribution. OpenAI counters with fair use, emphasizing that its models produce new outputs (not exact copies) and that liability lies with users, not the models themselves.

Recent developments underscore the high stakes:
- In the May 22 case management conference, the court lifted procedural stays, advancing the MDL toward rulings. A key focus is Kadrey v. Meta, where Judge Chhabria is weighing whether training on pirated books violates fair use due to potential market harm to authors.
- The court's focus on market substitution—whether AI outputs displace demand for original works—could redefine liability. If courts side with plaintiffs, AI firms face massive retraining costs, licensing fees, or legal penalties.

Risks for AI Firms: Overvaluation Meets Legal Realities

The lawsuit exposes critical vulnerabilities for AI startups and tech giants:
1. Data Dependency: Most generative AI models rely on unlicensed training data. A ruling against fair use could force companies to pay for licenses or retrain models, eroding margins.
2. Licensing Costs: Even if fair use holds, media companies may demand royalties. For instance, News Corp and OpenAI's licensing deal suggests a path forward—but at a price.
3. Valuation Pressures: Startups without robust copyright safeguards face a reckoning. Investors may downgrade valuations as legal risks crystallize.

The Kadrey v. Meta case highlights the perils: If courts reject fair use for training on pirated books,

could face billions in damages—and set a precedent for other AI firms.

MSFT, NYT Closing Price
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Opportunities for Media: Licensing as a New Revenue Stream

For content-heavy companies like The New York Times, Condé Nast, or UMG Recordings, the lawsuits are a golden opportunity. Key trends:
- Licensing Deals: Media firms can monetize their libraries by negotiating licensing agreements with AI firms. Reuters' deal with OpenAI—where the latter pays for training rights—is a blueprint.
- Valuation Upside: Media stocks with large, high-quality content libraries could see premium valuations as their assets become critical to AI's “raw material” supply chain.
- Long-Term Leverage: If courts side with plaintiffs, media companies gain a seat at the table for AI's future.

Consider The New York Times: Its subscription-driven model and deep content archives position it to command licensing fees while protecting its journalism.

Investment Strategy: Pivot to Media, Proceed with Caution on AI

The lawsuit's outcome will bifurcate the market:
1. Buy Media with Strong Content Libraries:
- The New York Times (NYT): Its subscription growth and historical archives give it leverage in licensing negotiations.
- Condé Nast (via Advance Publications): Owns Vogue, Wired, and other premium brands with unique content.
- Disney (DIS): Holds vast IP libraries, though its AI exposure is less direct.

  1. Avoid Overvalued AI Startups Without Safeguards:
  2. Firms like OpenAI, Stability AI, or Anthropic face existential risks if courts limit their data access. Their valuations may compress unless they secure licenses or pivot to licensed datasets.

  3. Monitor the Courts: Key milestones include rulings in Kadrey v. Meta and Thomson Reuters v. Ross Intelligence. A ruling against fair use in either case could trigger sector-wide revaluations.

Conclusion: A New Era for Content

The New York Times v. OpenAI case isn't just about liability—it's about who controls the “fuel” of the AI economy. Media companies with deep libraries are poised to gain power, while AI firms must adapt to new rules. Investors should favor media stocks with defensible content and be wary of AI valuations that ignore legal risks. The content economy's future hinges on this litigation—and portfolios should reflect that.

Stay ahead of the curve by monitoring court rulings and licensing deals. The winners will be those who own the content, not just the algorithms.