Market Design for AI: Beyond the Copyright Binary

We examine the structural transformation of creative industries under generative artificial intelligence, drawing on 374 primary sources spanning policy documents, industry data, creator surveys, and platform analytics. Beginning with the December 2024 release of OpenAI's Sora video model as a watershed event, we trace the historical pattern of creative resistance to technological disruption, then develop an analytical framework -- the Human-AI Agency Continuum for mapping the spectrum of human and machine collaboration in creative work. We present evidence for the "slop ceiling," an audience-imposed quality threshold that constrains AI-generated content to approximately 1--3% of platform streams despite comprising 44% of uploads. Analysis of the UK Government's 2025 consultation on AI and copyright (over 11,500 responses, 88% opposing expanded AI training rights) reveals deep structural tensions between technology firms and creative workers. We investigate how major studios, from Disney's $1 billion OpenAI investment to Netflix's AI-native animation unit, are positioning for an AI-augmented production pipeline. The work covers coordination collapse in creative supply chains, the emergence of new professional roles such as prompt engineers and AI orchestrators, and proposes four principles for navigating the transition: transparency, consent, compensation, and human-centred design. Eight appendices provide quantitative analysis, a glossary, topical bibliography, and deep dives into shadow AI adoption, AI stigma, and algorithmic intent.

Advances in generative AI are rapidly increasing the quality and commercial value of generated music, and this progress depends on large catalogs of creators' recordings. This raises a central question for platform design: how should creators be compensated when their work is used to train generative AI models that in turn produce commercial outputs? We develop a framework for fairly compensating creators in generative-music markets, where each creator's payment depends on a data-attribution score estimating their contribution to model outputs. Compared to past compensation frameworks, our framework has two unique considerations: (1) attribution is traced to entire creator catalogs, not individual songs, and (2) the informativeness (signal-to-noise ratio) of the attribution score is an input to the payment mechanism. The framework yields a closed-form payment rule per creator and measures the welfare cost of inaccurate attribution for both creators and the platform. Whether the welfare-optimal contract is royalty-based or takes the form of fixed-fee licensing depends on how informative attribution is for that creator's catalog. We show that better attribution translates directly into welfare gains for both creators and the platform, yet under multi-platform competition a platform only captures gains from attribution improvements when its signal becomes the most precise in the market. To ground our framework in empirical behavior, we train acoustic and symbolic music generation models and measure the informativeness of scalable attribution techniques against a leave-one-catalog-out ground truth. Our experiments reveal that noisy attribution signals push payment toward fixed-fee licensing and diminish welfare for both creators and the platform, providing an economic motivation for further research on improved attribution.

We propose incentive-aligned mechanisms for in-context credit assignment: the task of assigning credit for AI-generated content (e.g. code, news articles, short-form videos) among creators whose intellectual property appears in the context window. Our approach is based on the least core solution concept from cooperative game theory, which distributes value in a way that is as stable as possible by ensuring that no subset of creators is significantly under-compensated relative to the value they could generate on their own. We develop algorithms for approximating the least core, which leverage novel routines for constraint seeding and constraint separation. On a web retrieval credit assignment task, we find that our approaches are capable of approximating the least core using orders of magnitude fewer LLM calls compared to alternative methods.