How the NYT and other publications could scale the AI trend

The New York Times (NYT) shares are trending higher after opening a copyright infringement lawsuit against Microsoft (MSFT) and OpenAI for using its articles to train its artificial intelligence models.

Evercore ISI predicts that this case will lead to AI licensing deals for the newspaper with “each worth low tens of millions of dollars of revenue per year that largely flows through to AOP [Annual Operating Plan]."

Yahoo Finance’s Brian Sozzi and Brad Smith weigh in on potential revenue the New York Times and other publications could stand to gain in the case that said licensing deals take place.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

BRAD SMITH: And another story that we're tracking here this morning. Got to get to our trending ticker. "The New York Times" cracking down on OpenAI and Microsoft in a lawsuit yesterday. But could sentiment surrounding the impact of AI chatbots be shifting?

In a new note from Evercore ISI analyst said that investors have begun to view this as a potential growth opportunity, writing, "We believe the most likely outcome is that "The Times" signs several AI licensing deals over the next few years that are each worth low tens of millions of dollars of revenue per year that largely follows through to AOP here."

One of the things that I had found when I went back and did a deeper dive actually into this filing yesterday was what "The New York Times" was alleging here. They said the defendants Microsoft, OpenAI here engaged in wide-scale copying from many sources, but gave "The Times" content particular emphasis when building their large language models or language learning models, their LLMs, revealing a preferences that recognizes the value of those works.

And so now, "New York Times" is essentially just saying on top of that, they want to be able to be-- they want to be able to monetize their work because they've spent so much in the journalism. They've spent so much in making sure that they build up what is more reputable as ranked when it comes to the generative AI and LLM models.

BRIAN SOZZI: Well, Brad, I go on to the Yahoo Finance platform, and I play around with our new compare feature. And you go to "New York Times" and it's trading as if these deals, these licensing deals that you mentioned that Evercore was talking about, this is a done deal. This is definitely going to happen. The stock has gone through the roof. It's trading about 45 times. Trailing earnings on a key multiple basis. Market cap over $8 billion.

Now, Evercore does bring up this good point and I think underscores why these deals ultimately need to get done and will likely get done. Evercore noting decreases in search volume presents a risk to "New York Times" 50 to 100 million average weekly digital audience, presenting a direct risk to digital advertising revenue.

It really, it falls I think both parties here-- big tech and then ultimately the publishers. They have to work together. And you can see that chart there from Evercore, really breaking down how much these companies like a "New York Times" are, in fact, reliant on search advertising and just search on the internet broadly.

Deals have to get done. It will benefit big tech, but also, of course, benefit the publishers that are working really around the clock to put a lot of this absolutely amazing content into the hands of users.

BRAD SMITH: And so it's a question of where else could this kind of raise the tide in revenue for some of the other news publications that are publicly traded right now? You think about one that has leaned fully into generative AI, at least on the publishing side and BuzzFeed. I mean, this is a stock that's trading below, what, $0.27 a share right now. And is unfortunately probably on the pathway to some type of delisting notice.

But at this point in time, BuzzFeed, News Corp-- is what "New York Times" putting out there so powerful and precedent-setting that it could open up or unlock some type of additional revenue for other publications out there as well.

BRIAN SOZZI: Yeah, I'll be surprised if you start seeing these deals really begin to funnel in the first half of next year.