Disney CEO Josh D’Amaro has barely completed his first week in office and has already seen two billion-dollar technology bets go wrong — one of them falling apart for good.
An agreement considered historic, reached between Disney and OpenAI at the end of last year, fell apart abruptly this Tuesday (24), when the artificial intelligence startup announced that it will close Sora, its video generation application, as part of a movement to streamline its product line. As a result, a three-year partnership, which included an investment of US$1 billion and provided for the use of around 200 Disney characters — from Star Wars, Marvel and other brands — in short videos generated by AI, in addition to content for Disney+, went down the drain.
Earlier in the same day, Epic Games had announced the dismissal of 1,000 employees after new versions of its Fortnite phenomenon did not catch on with players. D’Amaro was the main coordinator of the US$1.5 billion investment in Epic, announced by Disney two years ago, which involved the creation of a new digital universe based on the company’s characters and stories.
Upon taking over from Bob Iger on March 18, D’Amaro presented a vision of a Disney closer to fans, in part through the intensive use of new technologies. According to him, Disney+ should become a portal not only for films and series, but also for games and interactive experiences. The goal was to “deliver a more connected, personalized and immersive experience for our consumers – wherever they are and whenever they want to connect with us”.
The partnership with Sora was seen as the kickoff of this strategy. The deal was among the first forays by a major Hollywood studio into the new generation of AI technologies, which many in the industry fear could kill jobs and facilitate the misuse of intellectual property.
“Disney will likely take the biggest hit from OpenAI’s Sora shutdown,” wrote analyst Geetha Ranganathan of Bloomberg Intelligencein report. “We expect Disney to seek a new partner to increase the monetization of its franchises among younger audiences while also creating a funnel for the development of new franchises.”
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Disney shares fell less than 1% at the beginning of trading this Wednesday (25) in New York.
In a statement released after the announcement about Sora, Disney stated that the field of AI is still embryonic and undergoing rapid changes. The company said it valued the collaboration with the Sora team and that it will “continue to connect with AI platforms to find new ways to serve fans.”
D’Amaro may yet find another partner in AI. Runway AI, Pika AI and Google are among the companies developing solutions similar to Sora.
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Still, OpenAI’s decision to pull back from video “goes against the idea that AI-generated video will dominate video content consumption habits,” Raymond James analysts led by Ric Prentiss wrote in a note to investors.
According to them, the relationship between traditional video companies — such as cinema and TV — and artificial intelligence will be “multifaceted, with countless benefits and opportunities, as well as disadvantages and risks”. “We believe that, as powerful as AI already is and may become, traditional media companies that do not adapt and act on both defense and offense may face significant threats,” they wrote.
The deal with Epic was put together by D’Amaro, who previously headed Disney’s theme parks, consumer products and games businesses. When the partnership was announced, the company even showed illustrations of an online world in Fortnite that resembled a digital theme park. D’Amaro joined Epic’s board as an observer.
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In an internal statement to employees and fans, also on Tuesday, Epic’s founder and CEO, Tim Sweeney, stated that the drop in engagement in Fortnite caused the company to spend more than it earned. According to him, around US$500 million in cost cuts should prepare the ground for “huge launch plans at the end of the year”. Sweeney did not comment on the new product in partnership with Disney.
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