AI Programs Are Raking In Profit, but Who Is Reaping the Rewards?

Lon Harris
Lon Harris is a contributor to dot.LA. His work has also appeared on ScreenJunkies, RottenTomatoes and Inside Streaming.
AI Programs Are Raking In Profit, but Who Is Reaping the Rewards?
Evan Xie

One perhaps under-scrutinized aspect of the AI revolution concerns how these various applications are trained. “ChatGPT learned about language by reading the internet” is the casual, tossed-off, shorthand version of the explanation. But the specific content that’s fed into these apps goes a long way in determining what kinds of outputs they ultimately generate. So if an AI application is only as good as the content that’s fed into it, would it then be fair to say that the creators and owners of that content deserve compensation?


This isn’t a purely academic or rhetorical question, but a pressing real-world issue that will soon require an answer. On Tuesday, news aggregation website Reddit announced plans to begin charging companies for access to its API, an early indication that it hopes to earn money in exchange for providing training materials to companies like OpenAI.

Reddit’s data is particularly appealing to OpenAI and other designers of so-called Large Language Models (LLMs). Unlike Google search results, Wikipedia pages, or other vast collections of writing and information, Reddit threads are already made up of real human beings engaged in conversations. They’re naturally going to be helpful in designing a chatbot that mimics real human speech and strives to create authentic interactions.

Additionally, Reddit content is constantly refreshed by its own users. They add headlines the moment news stories are posted and conversation threads get consistently refreshed with new commentary and real-time updates. This also helps LLMs and other AI systems to produce better, more accurate results. Both Google’s Bard and OpenAI’s ChatGPT were partly trained on Reddit data. In fact, ChatGPT cites Reddit as one of the primary sources for its training information.

It’s fair and accurate to say that Stable Diffusion and Midjourney produce original artwork, sure, and ChatGPT and Google’s Bard compose their own prose from scratch. But they’re only able to complete these tasks after scanning thousands of original drawings and millions of original sentences written by humans. In some ways, this is less “Artificial Intelligence” and more “Extensively Mashed-Up and Remixed Human Intelligence.” But that makes for a less appealing acronym.

From the perspective of an independent site like Reddit, or an image hosting service like Shutterstock, AI applications represent not just a way to squeeze additional financial value out of their pre-existing content libraries. Over time, these applications could emerge as potential rivals. ChatGPT could certainly one day power its own version of Reddit, scraping the web for fascinating news stories, writing attention-grabbing headlines, and posting them in forums to encourage reactions and discourse. OpenAI’s DALL-E is already used as an illustrator for web content. Obviously, a sufficiently advanced image generation tool could replace a stock photo library. So by charging up-front for their data, Reddit is also preparing early for a future in which its human users square off against automated rivals.

That said, Reddit’s not alone in their concern about being scraped, and efforts to potentially do something about it. Elon Musk has threatened to sue Microsoft over the use of his Twitter data. In January, Getty Images filed a lawsuit against Stable Diffusion creators Stability AI, alleging that the company “unlawfully copied and processed millions of images protected by copyright” in order to train their AI systems. Researchers from the University of Chicago have introduced Glaze, a beta application that adds imperceptible “perturbations” to artwork, thus preventing AI applications from scraping them and learning to copy that artist’s style and aesthetic.

According to emails obtained by the Financial Times, Universal Music Group – one of the industry’s largest labels – has asked streaming services like Spotify and Apple Music to limit AI access to their content, in an effort to prevent apps from scraping their songs and artists. This of course is no longer purely academic either. That “Heart On My Sleeve” AI-generated song that appears to feature both Drake and The Weeknd was only possible to create because the app had trained on Drake and Weeknd songs. As well, a number of tools and tutorials to stop ChatGPT from scraping your content have been released on the web.

From a legal perspective, issues around AI remain largely unresolved, including who can copyright the results of a human working with a generative AI application. Training adds yet another level of complexity to this question. Even if we one day establish that a person can copyright a piece of art that they created with help from an AI application… what if that AI application trained on work produced by a different human? Does the original artist whose creation was used to develop the software also own a piece of the final result? How are they compensated, if at all?

A Forbes editorial from February, written by a legal expert in AI, warns that generative AI is “rife with potential ethnical and legal conundrums,” particularly when it comes to plagiarism and copyright infringement. Perhaps, over time, these issues will simply be worked out by judges and juries to everyone’s mutual benefit. But it’s also possible this could present a genuine roadblock for either artists and creators or the future of AI development. If AI companies are allowed to scrape whatever they please without compensation, and build the next generation of internet applications without input from humans, that leaves a lot of individual artists, writers, and creators out in the cold.

Conversely, if AI companies are not allowed to use anyone’s work to train their system without payment, we could be looking at the end of the lightning-fast development we’ve come to expect from the entire field. As we’ve seen repeatedly, AI applications are only as good as the library of content on which they’re trained. This is why China, with its internet pockmarked by banned content and censorship, has yet to create a true ChatGPT rival.

⚖️FTC’s "Click to Cancel" Rule and Its Ripple Effect on Tech

🔦 Spotlight

Happy Friday Los Angeles,

The FTC’s new “Click to Cancel” rule is shaking up subscription-based tech. Now, instead of navigating a maze of cancellation hurdles, users can cancel subscriptions as easily as they signed up—with a single click. This shift is a wake-up call for SaaS, streaming, and app-based companies, where once-hidden exit options often kept users around simply because canceling was a hassle.

The rule also requires businesses to send regular renewal reminders, ensuring customers stay informed about upcoming charges. It's more than a cancellation button—it’s about transparency and giving users control over their decisions.

For startups, the impact goes deeper than UX adjustments. Many have relied on "dark patterns," which subtly discourage cancellations by hiding the exit. Now, companies must shift toward building genuine loyalty by delivering real value, not by complicating exits.

While this might affect retention rates initially, it could lead to more sustainable business models that rely on satisfaction-driven loyalty. Investors may start prioritizing companies that emphasize transparent, long-term engagement over those that depend on dark patterns to maintain retention metrics.

The rule opens the door to more ethical UX design and a truly user-centered approach across the tech industry. It may even set a precedent against manipulative design in other areas, such as privacy settings or payment methods.

Ultimately, the “Click to Cancel” rule presents an opportunity for the tech industry to foster trust and build stronger customer relationships. Startups and established companies that embrace transparency will likely stand out as leaders in a new era of customer-centric tech, where trust—not tricky design—is what retains users.

As the tech landscape continues to evolve, LA Tech Week 2024 offers a chance to explore these shifts in real-time. Check out the upcoming event lineups to stay informed and make the most of your time:

For updates or more event information, visit the official Tech Week calendar.


🤝 Venture Deals

LA Companies

  • Ghost, a company supporting top brands and retailers with streamlined logistics and fulfillment solutions, raised a $40M Series C funding round led by L Catterton to fuel its continued growth and innovation. - learn more

LA Venture Funds
  • Assembly Ventures participated in a $27M Series A round for Monogoto, a provider of software-defined connectivity solutions that enable secure, cloud-based IoT and cellular network management on a global scale. - learn more
  • Angeleno Group participated in a $32M Series C round for REsurety, a company that recently launched an innovative clean energy marketplace aimed at providing better financial and operational insights to support renewable energy transactions. - learn more

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    🌴🧑‍💻 Your Guide to LA Tech Week 2024

    🔦 Spotlight

    Happy Friday Los Angeles,

    As many of you know, LA Tech Week is right around the corner, kicking off next Monday October 14th bringing together founders, creatives, investors, and engineers for a week of immersive events, panels, and socials across the city. From blockchain and AI to biotech and design, LA Tech Week is a chance to dive into the ideas shaping today’s technology landscape.


    What to Look Forward To

    Insights from Visionary Leaders: Hear firsthand from industry trailblazers as they share stories, challenges, and key lessons from their experiences. Expect fresh perspectives on AI, venture capital, biotech, and the ethical questions around emerging technologies.

    Interactive Panels: This week isn’t about watching from the sidelines; it’s about engaging directly with the tech community. Participate in hands-on panels discussing everything from startup scaling to ethical AI, with honest insights from those actively shaping these fields.

    Networking Mixers & Social Events: Meet and connect with founders, VCs, developers, designers, and fellow techies across LA. Rooftop mixers, lunch meetups, and creative gatherings offer the perfect chance to spark ideas and collaborate.

    Plan your week with the daily lineup, organized by location for easy navigation:

    For updates or more event information, visit the official Tech Week calendar.

    Enjoy LA Tech Week 2024!!


    🤝 Venture Deals

    LA Companies

    • Clout Kitchen, a Los Angeles and Manila based startup, has raised $4.45M in seed funding, co-led by a16z SPEEDRUN and Peak XV’s Surge, to develop AI-powered digital twins, which enables gaming creators to produce realistic virtual avatars for content and fan engagement. - learn more
    • MeWe, a privacy-focused social media platform, has raised an initial $6M in Series B funding led by McCourt Global to support Web3 integration and expand its decentralized network for 20 millions users. - learn more

      LA Venture Funds
      • EGB Capital participated in a $10M Series A funding round for MiLaboratories, which develops software that enables biologists to independently analyze complex genomic data, accelerating research and discovery in fields like drug development. - learn more
      • Crosscut Ventures participated in the $13.75M seed round for Airloom Energy, a company focused on developing airborne wind energy technology to harness high-altitude winds, with plans to accelerate a pilot project in Wyoming. - learn more
      • Overture VC participated in a $5.5M Seed funding round for Molg Inc., a company developing robotics and software for circular manufacturing, designed to disassemble electronics efficiently and recover valuable materials to reduce e-waste and support sustainable production. - learn more


        LA Exits

        • Options MD, a Los Angeles based telemedicine platform that provides care for people suffering from severe and treatment-resistant mental illness, is set to be acquired by Resilience Lab, an AI-driven provider focused on enhancing mental health care access. - learn more

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        LA Tech Week 2024: Saturday-Sunday Event Lineup
        tech-week

        Here’s what’s happening during the closing weekend (Oct 19 - Oct 20) of LA Tech Week 2024! Events are organized by location so you can easily catch the sessions that interest you most.

        SATURDAY EVENTS

        BEVERLY HILLS

        12:00 PM

        • BIG Showcase (Invite Only):

        BIG Showcase (Invite Only)

        2:00 PM

        Light Dao

        Struck Capital, Seahorse Express

        EAGLE ROCK

        12:00 PM

        Sunrise Integration, Shopify

        EL SEGUNDO

        9:00 PM

        Administratum, Valar Atomics

        HOLLYWOOD

        10:00 AM

        Passes

        MALIBU

        6:00 PM

        • Malibu Beachfront Investors Networking & Wine Tasting:See Details

        Gaya Ventures

        MARINA DEL RAY

        6:00 PM

        • Awaken Your Spirit: A Journey of Transformation (Invite Only)

        Sagos Distro, Alma Wellness

        SANTA MONICA

        7:00 AM

        Founders Running Club

        8:30 AM

        Techstars

        9:00 AM

        Magic Mind

        StartupStarter, Inc., City of Santa Monica

        10:00 AM

        Gen She

        AI LA

        Crea, Barry's, Unsubscribe

        10:30 AM

        Plantologist

        11:30 AM

        • Pickleball Palooza (Invite Only)

        YouTube

        1:00 PM

        • Realfren Games: From strangers to an inner Realfren within 52 weekends: See Details

        Office for Humanity and Circuit Works

        • Talking blockchain technology with special guests: See Details

        LadyDayDao

        5:00 PM

        KARD, What's Plots

        THE VALLEY

        7:00 AM

        Camino5

        VENICE

        9:00 AM

        Westside Yogis

        11:00 AM

        Open App

        1:00 PM

        Ripe and Teddy's Hot House

        4:00 PM

        • Fashion Forward: How AI is Redefining the Fashion Industry: See Details

        VIAVIA, BNTO.RENT, ALMA.AI

        VIRTUAL

        11:00 AM

        BLCK UNICRN

        WEST HOLLYWOOD

        7:00 PM

        Next Sequence

        SUNDAY EVENTS

        INGLEWOOD

        12:00 PM

        Entrepreneur Ventures, VCPE GROUPS

        PLAYA DEL RAY

        2:00 PM

        AI LA, DELL, NVIDIA

        SANTA MONICA

        10:00 AM

        • Women Founders, Cold Brew & Beach View, Rooftop: See Details

        Clutch Talent

        11:00 AM

        11DollarSunglasses.com, Less Litter Foundation

        12:00 PM

        Data in LA, Amplitude

        12:30 AM

        New Moon, Warner UK Innovations

        TOPANGA CANYON

        3:00 PM

        Dreamore

        VENICE

        8:00 AM

        • Surf session with founders, investors, creators: See Details

        Surfed Club, Bow Shock

        12:00 PM

        • Podcast Panel and Brunch: LA Tech Community Builders: See Details

        WeAreLATech.com, Blankspaces.com

        VIRTUAL

        2:00 PM

        BLCK UNICRN


        For updates or more event information, visit the official Tech Week calendar.

        Enjoy LA Tech Week 2024!


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