So fans have fan fiction because they love certain worlds and characters and want more of it, or to riff on the base to take stories in new directions. We have things like TV tropes so it is no small stretch to, say, generate sitcom-type stories from Harry Potter or GoT that can continue forever. But where does all of this lead?

Music has sinilar issues, but I think of this like the compression/loudness issue in music production. Everything gets amplified so the range of everything is compressed. And then it gets boring and people slowly jump ship for something else.

I think there will be a wave of AI slop that improves and might actually be exciting on some vector, but we will get bored eventually. Humans crave newness, even if that new thing is worse in exactly the ways that defined good previously, like punk in response to complex rock albums.

AI can combine ideas in interesting ways, but it is by design a predictor of what is most likely. This is directly odds with the concept of newness (and arguably, human-ness) which is baked in to what we consider interesting and relevant.

Humans may crave newness, but it only needs to be new to them and also still mostly recognizably familiar. So artists who spent too much time steeped in the output of prior artists ended up with Dadaist literature and abstract paintings, while the average person still enjoys conventional novels and paintings that look like something.

I'm not sure whether Harry Potter pioneered the "school + wizards" mashup, but the school has many aspects you would expect of a school (save for the wizards) and the wizards have many aspects familiar from previous fictional wizards (save for the school part.) The novelty comes from combining the concepts in more or less straightforward ways.

Even a writing AI that is only capable of taking an existing plot and adapting it for a different setting could produce enough reading material to last a lifetime by taking all existing novels in the public domain and putting each in a different random mashup for modern audiences. And I think many people wouldn't tire of this at all.

I don't get your point. Do people not get bored and move on to something else one way or the other? What exactly is different?