Disney and Universal sue AI company Midjourney
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Hello and welcome to World Business Report from the BBC World Service. Thanks so much for joining. I'm Rahul Tandon. Coming up, we'll continue our analysis of those trade talks between the US and China. We have worked hard over these last two days. Obviously, the team stayed at it until it was done late into the year.

And is the Musk-Trump bromance back on? But we're going to start the programme by talking about an issue that's proving to be quite a challenge for some of the world's largest entertainment companies. We are talking about AI and copyright as two of Hollywood's largest studios have taken legal action on this issue for the very first time. Let's bring in our tech correspondent, Lily Jamali-Savage.

who's in San Francisco. Lily, as always, a pleasure speaking to you. Give us the details. And who are these two companies we're talking about? And what action have they taken?

Well, these are names that I think a lot of our listeners will be very familiar with. Disney is one and NBC Universal is the other. These are the first Hollywood players to take on this issue of copyright having to do with AI. We've seen other companies in the publishing space like the New York Times do this. Some authors have sued and the like. But

These are the biggest players in Hollywood. And, you know, this AI issue has festered for really a couple of years now. At times it's placed the studios at odds with their writers. Now we see the writers actually on side with the studios who are saying that this company, Midjourney, has stolen their characters. They're alleging copyright infringement of characters, some of which were developed a century or more ago.

Yeah, Midjourney hasn't commented themselves yet. We talked to you a lot about AI, don't we, driving the stock exchange. How big an issue is this becoming in the entertainment industry, Lily?

It's huge. If you recall, I think it was late 2023, there was a writer's strike that shot Hollywood down for a couple of months. And this was one of those central issues. I actually was on the picket line interviewing writers and other people that were affected. And I think for a lot of them, they were just learning how significant the AI revolution was going to be, how dramatically it had the potential to change their jobs and

And I think that the writer's strike was really an educational moment for them. Fast forward a year and a half, you know, my sources inside of Disney, I've talked to them about how not only are they trying to stave off this threat from the outside, places like Mid Journey, but inside of places like Disney, there's also efforts to try to get out in front of this. And that can be a very fraught issue.

thing in a studio like that, which has a lot of creatives within it to think about, OK, from a business development perspective, what are we going to do to try to monetize some of this so that a company like Midjourney doesn't do it first? Stay with us, Lily, because I want to bring in Robert Jacobs now, leader of entertainment litigation with Manit Phelps and Phillips, a law firm based in

in Los Angeles, not too far away from Lily. Robert, thanks so much for joining us on this case. You know, we were sort of scratching our heads before and we've talked a lot about, you know, music cases, you know, music studios, music companies bringing cases when it comes to AI. This one, Hollywood Studios, happening now, has it surprised you it's taken so long?

No, it hasn't. I think that they were waiting for the right opportunity, the best opportunity, and perhaps on the face of it, one of the more egregious opportunities to strike.

So I think it's been in the offing. It has been in the offing. Here we are then with this case. It seems a complicated issue. How does the law deal with something? You know, because laws are in place when we have the emergence of something new like AI.

That is an excellent question and one that we are seeing the courts have a difficult time with. The whole concept of training large learning machines and the interplay between that and fair use rules under the copyright laws and the byproducts of users using ELLMs and what comes out of it is something that is very much in process as we speak in the courts.

Because copyright itself is a complicated issue, isn't it, in terms of what is influence, what is pure copying? And when you bring in AI, that whole equation becomes a little bit more complicated than it already was. That's exactly right. And when you look at the training, there isn't really much of a dispute that the LLMs are being trained on pre-existing work.

The rub really becomes, you know, what about the byproducts of, you know, using the AI machines and what users are creating and doing with that? And that's where it gets a little sticky, I think, here in this case, which is probably why they decided to pull the trigger on a lawsuit.

Stay with us, Robert. Let's bring in Thomas Hayes, now chairman and managing member of Great Hill Capital based in New York. And Thomas, you know, this could have serious implications, couldn't it, for companies and their ability to earn, which is why we're probably seeing cases like this now being bought by the likes of Disney and Universal.

Well, there's no question about it, Rahul. And I think the question is following the money. To your point, why haven't we seen the lawsuits earlier? I think what they wanted to do was, number one, be able to collect some money if they're going to go through all the effort. And number two, prove that

In their case, claiming theft had happened. And in the case of Midjourney, we find out that this startup reportedly earned $300 million last year from 21 million users through subscriptions that range between $10 to $120 monthly. So there's some money there now. And the case...

It could redefine copyright law in the AI era, not just Hollywood, but gaming, music, publishing. And that's a big deal. It is a huge deal. Lily, we're using this, you know, we're talking a lot about mid-term. What do we know about them?

Yeah. So as your other guests mentioned, 300 million in revenue last year, that's really not bad for a company that got its start in 2021. They launched their AI generator shortly after that. And now, and you see this when you read the complaint filed by Disney and Universal, noting that this company is now moving into video. So therein, you have the opportunity for even more revenue. I was actually poking around on some of the samples that MidJourney has on their website, by the way, and within maybe...

You know, five seconds I saw Woody from Toy Story holding a giant pen. So you see it's really in your face. And the language in this complaint is just very accusatory, as you might expect. They call Midjourney a copyright free rider, a bottomless pit of plagiarism. And you have to remember that Disney and Universal, they are facing a really difficult time right now, given changes in the media.

So the idea that this company that says it employs less than a dozen people full time can come in and eat their lunch like this. They don't like that at all. No, they don't. Lily, as always, thank you so much for joining us. Final thoughts from you, Robert. You are the leader of entertainment litigation, you know, at a law firm there in L.A. Are you are you spending a lot more time dealing with these sorts of issues?

We are. As you mentioned earlier, you know, it's been happening in music space quite a bit for a while now. And now, you know, this development is, you know, kind of what we expected to see.

And, you know, it will play itself out, you know, quickly, I think. And I imagine that not just in music, but in film, too, there will be an effort to rationalize the process further.

develop a licensing regime so that everybody has an interest that's looked out for. Robert, thanks so much for joining us on the programme. I'm sure we'll be speaking to you about this again. AI and entertainment, one of the new stories that we're looking at. Let's go to a story, an old one that we've looked at for quite some time because child issue is something that we report often on here on the BBC World Service. Here's a snippet from a report recently on the issue from Egypt. Hello, I'm on the next one.

Back in Egypt, Hiba and her children are resting after a long night's work. You haven't seen everything, you know. You should see us when the ground's wet. The children have to crawl on their knees in the mud. And I cry for them, I really do. But we have no other choices.

Well, now the United Nations says there are nearly 138 million children working worldwide. UNICEF and the International Labour Organization has released a joint report which said that despite progress, a deadline to end child labour by 2025 had been missed. Benjamin Smith is a senior child labour specialist from the United Nations.

From the International Labour Organization, one of those behind this report. Benjamin, thanks so much for joining us. Now, those numbers sound pretty bad, but give us some context. You know, is that an increase? Is that a sign that things may be slightly getting better?

Believe it or not, that is somewhat good news. The 138 million children in child labor, I mean, it's a staggering number. But four years ago, that number stood at 160 million. And at that point, from 2016 to 2020, there had been an increase. So we're very pleased that we've turned a corner and gotten back on track

with a pretty significant reduction in child labor. But as you know, we've missed the international target for ending child labor, which was 2025. So there's a really an urgent need to accelerate progress and end this scourge once and for all. Give us a sense geographically of the areas that are concerning you the most, which are the regions where it is the biggest problem still?

Well, in Sub-Saharan Africa is really where we see the problem at its most acute. So there are 87 million children and child labor in that region, and that's two-thirds of the total, so more than the rest of the world combined. Now, Africa did see progress. Every region saw progress from 2020 to 24. And this is despite...

quite a significant increase in the overall child population. So the measures that governments are taking in Sub-Saharan Africa and elsewhere

are having an effect. The investments in education and social protection. The problem is it's just not fast enough and you have a lot of headwinds. You have the population growth, but also conflict, climate change is exacerbating the problem. So it is a significant problem

long road still to go. Now, yeah, just just sorry to interrupt you. But on that point, because I think it's a really important one, what you brought up there, because, you know, I spend a lot of time living in in India, whether you know, there has been a child labor problem getting better, but still there in some cases, and it's important to stress it. It's not parents often who want their kids to work, isn't it? It can be circumstances that families are in that sees this happening.

No, you're absolutely right, Rahul. Without a doubt, the economic needs of the household are what drives child labor in the vast majority of cases. So children work not because they want to, not because their parents want to, but they're really obliged to contribute to the household income for basic, meaning basic needs.

Stay with us. Thomas Hay is still with us. Thomas, we've seen shareholders, haven't we, making and companies, you know, really trying to get to grips with this problem, particularly, you know, companies that make a lot of clothing products in Asia in particular have tried to address this problem. And we as customers, I suppose, have a role to play here.

Yeah, there's no question that consumers have to vote with their dollars. We've seen different concerns as it relates to the apparel makers, as it relates to the low-cost labor that comes into bringing inexpensive products to dollar stores, to Walmart. Even some aspects of Apple have been under some investigation in the past.

So these are factors. And I think over time, the sunlight is the best disinfectant. And I think as more light is shined on it, I think better and better measures will be taken to help reduce that over time. And Benjamin, is that an important way of tackling the problem? Consumers in all parts of the world saying, hey, look, if we know this is something that has come from children, we're just not going to buy it.

Absolutely. It sends a very powerful symbol and signal to companies if their consumers are asking, under what conditions were these goods that I'm buying made? So it's very, very important. I would say that

According to our research, about 9% to 26% of child labor is in global supply chains. So it's not the majority of the problem, but it's a significant part of it. And unless we really get a grips on child labor and global supply chains, we're never going to reach the target and we're never going to eliminate child labor. Benjamin, thank you for joining us on the program and bringing us the latest there on that report there, which shows the problem slightly improving, but still growing.

A huge one that needs to be tackled. For months now, there has been talks out there. We've been talking about it, let's be honest. Of that trade war between the US and China, we have over the last few days been talking about those trade talks in London. Of course, they ended with what appears to be the beginning of a deal. The US Commerce Secretary, Howard Lutnick, has been speaking about it.

We're going to go back and speak to President Trump and make sure he approves it. They're going to go back and speak to President Xi and make sure he approves it. And if that is approved, we will then implement the framework that we have worked hard over these last two days. Obviously, the team stayed at it until it was done late into the year. Someone who's been keeping a close eye on this is our North of America correspondent, business correspondent, Michelle Fleury.

Donald Trump seeming to confirm all of that, basically just posting on his social media channel that there is a deal with China done. He says it is still subject to approval by himself and also Xi Jinping of China. He says that we will get full magnets and any necessary rare earths will be supplied up front by China. And he says in return, China will also be able to send its students to United States colleges and universities.

Michel Fleury there with some of the details that we have, Thomas, about this deal. But let's be perfectly honest at the moment. We don't have many, do we? You know, we had more than we had 24 hours ago. What I can say is they agreed on a preliminary framework to implement the Geneva consensus. U.S. is going to raise its baseline tariffs on goods to 55 percent, while China is going to have 10 percent on U.S. goods. And

You get the key thing, which is China's going to resume and increase the exports of rare earth materials and magnets to the U.S., which we need for manufacturing. We'll allow their students to go to the universities, which they already were. But we're also going to provide the aerospace parts and semiconductor programming technology to China, the basic technology. So, look, this is a move in the right step.

You know, it was basically an embargo. The worst case scenario had been priced in in early April. The market started to sniff out some form of resolution because it was an untenable path moving forward. And the key is that you have dialogue, you have back and forth, you have some level of cooperation that doesn't preclude trade.

competition that will continue, but cooperation and what looks like to be the beginning of a win-win arrangement. Yeah, but here's an interesting fact that has come out or appears to be coming out is that China has put a six month limit on these rare earth export licenses. So, you know, we could be back here again sooner rather than later. Yeah.

Yeah, it's the gift that keeps giving, right, Rahul? I mean, you know, effectively, they want some flexibility because there's still some uncertainty for businesses about tariffs. Certainly trade barriers is a huge factor that there wasn't a meaningful amount of explicit progress made, supply chain impacts. And so there is some ambiguity moving forward. But I

At least there is a path forward. And that's the name of the game, because just a few weeks ago, all you heard was we're going to delist all their Chinese stocks and remove their access to U.S. capital markets and all that. You haven't heard much from that from the from the China hawks in the Senate of late. You've heard some progress here and it looks like both sides have figured out.

You know, we have the ethane that they need. Imagine imagine a country unable to produce plastic. I mean, where would they be? So so we you know, they had said, well, China holds all the cards. They have the rare earths. But, you know, if they don't have plastic, they're going to have a little bit of difficulty moving forward. So both of these sides. Yeah, both of the sides have quite a few cards in the moment.

Quick thoughts on this one. President Trump is highly likely to push back his July the 8th deadline to reach deals with top trading partners. That's what Treasury Secretary Scott Besson told lawmakers on Wednesday, which is another indication that getting those trade deals done is not easy. Just one at the moment with the UK that the US has managed to achieve. Yeah.

Yeah, it's complicated with the EU in particular, 27 countries. And the problem is, is you've got to, you have bureaucrats negotiating these, these, uh, uh, agreements who are unelected bureaucrats. So their incentives are different than someone who's got to get, uh, reelected every four years or, or in the case of Congress every two years or in the Senate every six years. So you have, uh, uh,

a lot more difficulty and complication and time that's going to be required to come to some consensus agreement with our allies in Europe. And I think that's the key thing, our allies in Europe. So the objective will be again, a win-win outcome. And, and you know what, if they can take steps towards win-win with China, uh, which is, is, is, uh,

quite as well considered in the scheme of being an ally. I think Europe will take longer. It will be more bureaucratic, but ultimately we'll get there. Let us see what happens. You're with World Business Report from the BBC World News.

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Shall we talk about that bromance once again, the Trump-Musk one? Let's be honest, it's had its ups and its downs. Could the relationship be up again? As Elon Musk has now said he regrets some of his recent posts about Donald Trump. Let's bring in Justice Palmer, founder and CEO at Fortuna Investments, who's joining us from Florida. You're a SpaceX shareholder, aren't you? So you must have been a little worried about this relationship.

What would you call it, Justice? A spat? It's been a bit more than a spat between Elon Musk and Donald Trump. It's a lover's quarrel. I think a lover's quarrel between the two is... Yeah, no, look, I think a couple of things. I think it's shaping up to be a made-for-TV moment. It's the ultimate reality show of sorts that we're all getting a chance to see firsthand and on the edge of our seats today.

I think that the two gentlemen have a high amount of respect for each other. I think you see that. I listened to that interlude there where the different clips and so forth, as we all did for the first four to six months of this administration.

And so I do think there's a high level of admiration. There's a lot of respect for each individual. I think a lot of folks also maybe predicted them going their separate ways at some point in time. Did you look at this and think, you know, as a shareholder in an Elon Musk company, did you say, oh, no, this doesn't look like a good idea? They're going to fall out at some point. And that's going to be a problem, probably a bigger problem for Tesla than the likes of SpaceX. Yeah.

I mean, look, I think if it really hits the fan, it's going to be problematic for both companies, and we can get into the reasons why. But I mean, look, to answer the question, not necessarily. I did imagine them going their separate ways because Elon's a very busy guy in the private sector. He really wanted to make a difference in the government. He truly, genuinely did, I believe. I think he sacrificed a lot to commit himself towards the government. But

What the wild and the crazy thing was is nobody, I think anybody, expected the velocity of the shakeout, the fallout, and how quickly it happened and how quickly the mud started throwing back and forth and how visible it was. This wasn't about work, was it? This is about egos here.

I think it's a little, I mean, look, I think it depends who you ask. I think there's obviously a certain level of ego. You have the world's most powerful man being the American president, and you've got the world's richest man being Elon Musk, who are both very accomplished individuals, big egos, rightfully so in a certain way. But I think that it was more...

I think it was more than just ego because if you understand the nuances or the crux of it, right? So Elon went to the government, he sacrifices private businesses to go to the government to sacrifice everything in a certain way for the country.

And what happened was, is his job was DOJ. And DOJ meaning Department of Government Efficiency. His job was to cut waste, fraud, and abuse in the government. We all know there's tons of that going around. And so he tried really hard to cut wherever he could. Maybe some of it was good, some of it wasn't good. But regardless, he was cutting. He was. He was. He was trying to make an impact. And I think what really set it off was,

when the new big beautiful bill emerged at $7 trillion, which is bigger than any spend that's ever happened in human history, he thought to himself, heck, I'm...

killing myself over here trying to he did he did but i mean look there is also the issue is now that the tesla critics let's go on to what's happened now now that elon musk has phoned donald trump and publicly also expressed regret for attacks with you know were you surprised that donald trump took the call because it got pretty heated doesn't that and you feeling a little bit more comfortable now

I'm not surprised that President Trump took the phone call. I mean, he's a very seasoned businessman. He's a politician. He's a businessman. He's 78 years old. He's lived a full life. And I only say that because he's not young and some may disagree. I don't think he's young and immature. What I do think is I think he's got admiration for Elon Musk. I think he realizes what's good for him. Does he still have it? Because he got heated, didn't he? You know, Musk said some things and Donald Trump's got a long memory.

He does have a long memory, but I think that the two things that both people have in common, they both want what's best for the country. And I think that's going to overrule any ego, any hubris, any animosity. You saw President Trump immediately take the high road. He didn't punch back. He said the odd kind of thing, but...

Relative to other folks that get into quarrels with him, he gave Elon Musk a pass. That shows you that he realizes that they do have a friendship. I personally do predict it's a contrarian perspective. Have me back when it happens. I think there's going to be a made-for-TV moment coming in the next handful of months, a re-release.

reuniting in the White House, a big hug or something like that? Let us see if that happens. Listen, Justice, thanks for joining us so much. I want to get Thomas Hayes' final thoughts. 20 seconds for you, Thomas, to end the program. The bromance, is it back on or is it going to remain off?

I'm going to follow with the same statement I made in an earlier segment, follow the money. The bottom line is Musk gave Trump campaign about 250 million bucks in return for that. The big, beautiful spending bill gutted climate subsidy, which hurts Elon Musk's business. So here's a guy who got, who helped get Trump elected. I'm going to have to stop you there. You think it's maybe let's follow the money and see if it's back on. That's it for World Business Report.

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