Welcome to the Techmeme Ride Home for Monday, September 30, 2024. I'm Brian McCulloch today, that controversial AI Bill in California has been vetoed by Governor Newsom. Is even Apple now thinking that its vision-pro strategy might need a rethink? What really is open AI situation right now, and this time I'm talking money-wise, and the strange resurrection
of the point-and-shoot camera? California Governor Gavin Newsom has vetoed AI Safety Bill SB 1047, saying it applies only to large AI models and doesn't account for if deployment is high risk. This was that AI Bill that a lot of the AI community and AIVCs were very worried about. All other models sometimes handle critical decision-making involving sensitive data such as electrical grids and medical records, while bigger models at times handle low-risk activities such
as customer service. Had Newsom signed the bill into law, it would have laid the groundwork for how AI is regulated across the U.S. as California is home to the top companies in the industry. Proposals to regulate AI nationally have made little progress in Washington. The governor announced that he is working with leading AI researchers, including Phi Phi Lee, a Stanford University professor who has worked at Google, and recently launched a startup called World
Labs to develop new legislation he is willing to support. Newsom signed other AI-related bills into law this year. They include one requiring AI developers to label content created by their technology and others, regulating election-related deepfakes and giving performers more control over digital replicas of themselves.
The bill he vetoed SB 1047 would have required developers of large AI models to take, quote, reasonable care to ensure that their technology didn't pose and, quote, unreasonable risk of causing or materially enabling a critical harm. It defined that harm as cyber attacks that cause at least $500 million in damages or mass casualties. Developers also would have needed to ensure their AI could be shut down by a human if it started behaving
dangerously. The bill applied to AI models that met a certain computing power threshold and cost at least $100 million to train the estimated cost of OpenAI's biggest model GPT-4. Any company doing business in California regardless of where it is headquartered was covered. Google met a Microsoft and OpenAI raised concerns about the bills saying it imposed
vague standards in the name of safety. Many smaller companies joined them arguing the bill would chill innovation by discouraging large developers from making their models available to the public, fracturing a startup ecosystem that relies on such openness to innovate. The bill would have prohibited developers from releasing large AI models, quote, if there is an unreasonable risk that the technology will cause or materially enable a critical
harm. Tech companies said the language opened a legal minefield. Nobody knows what that means. So you're basically leaving it to a court that's non-technical said Martin Cassado, a partner overseeing AI investments at Venture Capital firm Andres and Horowitz. One more real quick though, it's not quite related. Governor Newsom also signed the California NeuroRite Act into law that treats neural data as personal sensitive information aiming
to protect brain data from misuse. Quoting the Times. On Saturday, Governor Gavin Newsom of California signed a new law that aims to protect people's brain data from being potentially misused by neuro technology companies. A growing number of consumer technology products promise to help address cognitive issues, apps to meditate to improve focus and to treat
mental health conditions like depression. These products monitor and record brain data which encodes virtually everything that goes on in the mind, including thoughts, feelings and intentions. The new law which passed both the California State Assembly and the Senate with no voter opposition, amends the state's current personal privacy law known as the California Consumer Privacy Act by including neural data under personal sensitive information.
This includes data generated by a user's brain activity and the mesh work of nerves that extends to the rest of the body. Mark Garmin Newsletter Monday, this weekend, Mark took a look at the fallout from the demo of those meta-erion prototype smart glasses. Mark straight out came out and said, even though it was just a demo, it made even him think that Apple's strategy with the Vision Pro might be a mistake.
Apple seems aware that it needs to rethink its approach to headsets, but there isn't consensus on how to do that I'm told. As of now, the company's Vision Products Group is evaluating a few different options including the status quo route. This would involve keeping the Vision Pro more or less the same but focusing on a less expensive version. Apple could bring down the cost with cheaper materials, lesser internal technologies and lower quality displays.
The company would also follow up with a second generation version of the original higher-end Vision Pro that has a new chip and Apple intelligence. The smart display route, in this scenario, Apple would remove the onboard computer and external battery from the Vision Pro and shift many of the internal functions over to
the iPhone. This would make the iPhone more valuable, reduce the weight and heat of the headset and more importantly, eliminate several hundred dollars worth of components to bring down the price. Then there's the smart glasses route. This would mean developing a product that's closer to Meta's hit collaboration with Rayban, smart glasses without AR. Apple could use its expertise and chips and audio as well as its growing collection of AI tools
to make a compelling device. This would essentially be a me too product but also something akin to an AirPods on steroids and Apple fans would probably eat it up. There's then the AI and AirPods route. Apple is working on a new version of the AirPods Pro that uses external cameras and artificial intelligence to understand the outside world and provide information to the user. This would essentially be the smart glasses path but without actual
glasses. Finally, there's the holy grail route. The ultimate goal is standalone augmented reality spectacles that come with high performing lenses, a battery system, onboard computer, cameras, eye tracking and other components built in all while still being the size and weight of normal glasses. This has long been chief executive officer Tim Cook's dream but Apple previously paused development of such a product because it was just too big
a challenge. Apple could ultimately release some or all of these products but it's going to need to accelerate its work and fast. If not, Apple will risk losing out on a product category that could transform the way people use technology. Speaking of Apple, the journal says that Apple is no longer in talks to participate in OpenAI's funding round that is expected to raise as much as 6.5 billion dollars and
close as soon as next week. Not sure we can or need to make anything out of that particularly right now but it seems like that round is coming which is making people take a hard look at where OpenAI is at the moment financially. The New York Times has been working their sources and say OpenAI had $300 million in monthly revenue in August up 1700% since early 2023. They had $350 million monthly active users in June and expect around $3.7 billion
in annual sales this year but also of course $5 billion in losses. Reuters worked their sources to report that OpenAI expects its revenue to grow to $11.6 billion next year. Chat GPT has 10 million paying users and could bring in $2.7 billion in revenue this year up from 700 million in 2023. But again the question really is, is that growth sustainable
if the cost of providing the product you provide is so expensive? So the journal took a look at the challenges OpenAI is facing if it indeed becomes a for-profit company which I guess it needs to do to address all of that. This includes the complexity of splitting assets with the nonprofit arm which I hadn't thought of this might continue to exist.
The chat GPT maker is in the midst of raising $6.5 billion from backers including Microsoft and Nvidia along with venture capital firms and a United Arab Emirates state-backed company. An essential provision of talks is that OpenAI currently governed by a charitable nonprofit must within two years become a public benefit corporation. That means its mission is to earn
profit while creating social good if it doesn't investors could take back their money. To get there it will have to deal with regulatory requirements in at least two states, determine how to award equity in the for-profit company and split assets with the nonprofit entity
which will continue to exist. This kind of transaction is incredibly complex and would involve a large number of legal and regulatory hurdles that would need to be navigated said Karen Blackenstone, General Counsel at the Investment firm Hanger Management and an attorney specializing in technology and tax exempt organizations. OpenAI is a Delaware based corporation and would need to change its structure legally under that state's law.
Given Delaware's business-friendly legal regime making that change would be the easiest part of the process said Jill Horowitz, a law professor and founding faculty director of the Laul Milkin Center for philanthropy and non-profits at the University of California Los Angeles. The more complicated part is what would happen to OpenAI's assets when such a conversion takes place. It can't simply shift assets from a nonprofit to a for-profit.
The nonprofit is legally required to end up with assets including any cash and securities at least as valuable as those it turns over to the for-profit. In effect, OpenAI's operations would likely be sold to the for-profit company or its investors with the charity retaining the proceeds. Assets quote previously donated to the public benefit cannot be repurposed to private benefit without compensating the public for the loss said Alexander Reed,
a partner at the law firm Baker Haustetler. It couldn't be determined how much the remaining nonprofit would receive in such a transaction given that OpenAI is expected to be valued at around $150 billion after the current fundraising round. The amount could be immense. That determination is particularly complicated because the nonprofit might own some of OpenAI's
patents on AI technology which would need to be valued in the conversion. Because most of OpenAI's operations are in California, that state's attorney general would have jurisdiction to ensure its charitable assets were protected according to legal experts. OpenAI hasn't said what the continuing nonprofit would do once a profit-seeking company takes over all of its operations. The current nonprofit has supported research on universal basic income
programs and made charitable grants focused on technology and social equality. According to its website, it could continue to fund such work in the future using its stake in the for-profit OpenAI as a source of income. One important issue OpenAI will have to resolve in the conversion is what rights the nonprofit will have to AI technology that the new company develops.
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have come away disappointed. Why? Well, quoting variety. Songs by Adele, Bob Dylan, Green Day, REM, Burnaboy, Rush, and many others are currently unplayable on YouTube in the US due to a legal dispute between the platform and the performing rights organization, C-SAC. Attempts to play many, but not all, songs by those artists on Saturday met with the following
message. This video contains content from C-SAC. It is not available in your country. A similar dispute between Universal Music Group and TikTok raged on for several months earlier this year before being resolved. In a statement to a variety, a YouTube rep said, we have held good faith negotiations with C-SAC to renew our existing deal. Unfortunately, despite our
best efforts, we were unable to reach an equitable agreement before its expiration. We take copyright very seriously, and as a result, content represented by C-SAC is no longer available on YouTube in the US. We are in active conversations with C-SAC and are hoping to reach a new deal as soon as possible. Reps for C-SAC did not immediately respond to requests for comment. A source close to the situation tells variety that the previous deal actually does not expire
until next week and suggests that YouTube's move is a negotiating tactic. C-SAC is far smaller than ASCAP and BMI with approximately 30,000 members and 1.5 million compositions while ASCAP has nearly 800,000 members, but as the caliber of artists affected by the block shows, it represents a comparatively large percentage of the marketplace. Finally today, I think we've spoken about this before, but maybe not. Back in September
of 2022, the X100 series of point and shoot digital cameras went viral on TikTok. This has led to huge profits for Fujifilm. Imagine that huge profits in camera hardware that isn't a smartphone. In September 2022, the photographer and TikTok influencer Kylie Katich posted a video showing off her Fujifilm X100V. I just found a camera that will change her life. She told hundreds of thousands of followers at the time as photos of her infant flashed
by. With the warm yellowish glow, the images look like they could have been pulled out of a photo album from a generation ago. The camera itself with its jacket pocket size, aluminum body, had distinctly vintage features and came programmed with simulations that mimic the look of photographic film without any editing. It looks like a film camera. It has settings like a film camera Katich said in the video holding up the $1,400 point and
shoot. It's digital. Within a day, her posts had racked up dozens of comments. Consider me influenced, I am deaf getting. One person replied, this is the coolest thing ever said another. The endorsement and others like it reverberated through TikTok's sub-communities. Auto-enthusiast brought their X100Vs to sports car meetups. Musicians took theirs around the world to document the touring lifestyle. Tech Geeks, travel junkies and fashion influencers
all wanted in X100V. And once they got one, they let their own followers know. The effect on the company's inventory already strained by a global chip shortage was drastic. By November 2022, Fujifilm stopped accepting online orders for the camera citing its inability to keep up with demand. Buyers turned to resale platforms such as eBay, where X100Vs were selling for twice their retail value. Two years later, TikTok's obsession hasn't slowed
and the manufacturer is still reaping the benefits. Fujifilm's photo imaging segment brought in $3.3 billion for the fiscal year that ended in March, a 14.5% year-over-year increase and was the company's most profitable division for the first time since at least 2006 when Bloomberg started tracking earnings by segment. Those sales were driven in part by the X100Vs successor, sporting an upgraded sensor and other new features. The X100V1 or VI sold
out almost immediately upon its release in February. Both generations remain unavailable on Fujifilm's website. The company is embracing the camera's coveted status and a may earnings call chief executive officer Tietjeet Goethe said the X100Vi's inventory situation was normal and compared the product's resale value to that of a prestigious competitor. Like a well-known German manufacturer still maintains a very high value for both their old cameras and the
cameras they sell now and this is our goal, go to set in the call. Fujifilm, which declined requests for interviews, said in a statement that it's accelerating production to meet demand. Our goal is that every customer who ordered an X100Vi gets it, the company said and quote.