Earlier this month, when OpenAI CEO Sam Altman arrived in Los Angeles to attend Vanity Fair's post-Oscars party, his company was just weeks away from licensing the Sora video generation tool to major Hollywood studios.
Following the massive success of ChatGPT, Sora was hyped as the next consumer-facing AI frontier. This simple app allowed users to place themselves and their friends into various video scenes, whether dribbling like the Harlem Globetrotters or engaging in a lightsaber duel with the Star Wars character Darth Vader.
Then-Disney CEO Bob Iger was also optimistic about its prospects, agreeing to invest $1 billion in OpenAI and allowing characters from the studio's Marvel, Pixar Animation, and other properties to appear in Sora-generated videos. Equally important, amid widespread industry concerns about AI's threat to creative work, he lent the emerging technology the valuable seal of approval from Disney.
Computational Burden
However, OpenAI suddenly decided to shut down Sora.
Disney executives were shocked, many of them learning of the decision less than an hour before it was announced. What they didn't know was that Sora had quietly become a major burden for OpenAI in the months following its launch, especially as the startup was tightening its business focus ahead of its initial public offering (IPO).
At the time, OpenAI was just weeks away from completing a new AI model codenamed "Spud" and needed to free up more computational resources to support the coding tools and enterprise products running on that model. AI chips are the most precious resource for any top research lab, and at OpenAI, Sora was consuming too many of them.
Moreover, Sora was not yet profitable, and every user who "stitched" themselves into a WWII newsreel or a Hollywood chase scene was consuming finite computing resources.
Strategic Miscalculation
Today, Sora looks like a costly strategic miscalculation, and the key employees who led the project are at the center of the AI talent war sweeping Silicon Valley.
Altman described the decision to shut down Sora as a difficult but necessary sacrifice for the company to achieve its larger goals. In a memo to employees, he wrote that he was encouraged to see everyone willing to make "tough trade-offs" for the company's benefit.
Altman
The decision marked a stunning conclusion to a project Altman had once pinned high hopes on. He had dreamed of using Sora to position OpenAI as the creative pioneer of the AI era and bring in substantial new revenue streams for the company.
Two years ago, OpenAI first showcased Sora to the world, presenting dreamlike landscapes generated by the technology, reminiscent of Hayao Miyazaki's fantasy worlds or the surrealist paintings of Salvador Dalí. When OpenAI launched the standalone Sora app for consumers last September, Altman compared it to the company's initial release of ChatGPT.
However, the app never became as popular as its developers envisioned. It was more akin to low-quality AI-generated content than an AI creative marvel. By the end of last year, its usage had plateaued.
Shortly after its launch, the global user base peaked at around 1 million but never reached that level again. According to data from AI research firm Similarweb, user numbers dropped below 500,000 in the following months.
A person familiar with the matter revealed that Sora was losing approximately $1 million per day. As OpenAI tightened its purse strings ahead of the IPO, company executives began scrutinizing Sora more strictly, and the results were not to their satisfaction.
At the time, OpenAI's research team was about to begin training a new model designed to power video generation features for ChatGPT. Unlike language models that learn from text, video models need to understand the entire dynamic world, making their creation significantly more expensive. After carefully calculating the required costs, OpenAI decided to cancel Sora.
OpenAI plans to shift its focus to a new type of "super app" it is building, which will integrate so-called AI agent tools capable of autonomously performing tasks for users, such as writing software, analyzing data, and booking travel. These productivity-focused products are gradually gaining widespread adoption in the labor market, and OpenAI currently lags behind competitor Anthropic in the race for this market, posing a threat to its leading position in the AI competition.
Altman told employees that the Sora team would next focus on longer-term strategic initiatives like robotics.
An OpenAI spokesperson said the company is rigorously prioritizing computational resources based on the areas that can deliver the greatest long-term economic value. She stated: "This careful focus on where we deploy compute allows us to achieve growth, accelerate innovation, and serve businesses and developers more efficiently."
Zuckerberg's Talent Poaching
Sora was the brainchild of Tim Brooks and Bill Peebles. The two researchers became close friends while pursuing their PhDs at UC Berkeley. They joined OpenAI in early 2023 with the goal of building models capable of simulating the physical world by generating high-quality video from text.
Sora was part of OpenAI's World Simulations team, led by Aditya Ramesh. This department operated independently from OpenAI's core research team, which builds the large language models powering ChatGPT.
Last spring, Meta CEO Mark Zuckerberg launched a full-scale talent war against OpenAI, personally contacting dozens of OpenAI's top researchers with lucrative compensation packages to lure them to his new AI lab. One of his targets was Peebles, who received an offer and briefly considered joining Meta.
According to people familiar with the matter, OpenAI managed to retain Peebles by giving him a raise. Shortly thereafter, his responsibilities on the Sora project expanded. Peebles oversaw the training of a new version of the video generation model and the development of the Sora consumer app.
Disney's AI Dream
Despite Sora's daily losses of $1 million, OpenAI had tried to find a viable path for it. Last December, it announced a multi-year agreement with Disney, securing licensing rights to use over 200 characters from the entertainment giant's film library. As part of the deal, Disney agreed to become a major customer of OpenAI and invest $1 billion in it.
Iger, in an interview with CNBC, said the deal gave Disney an opportunity to participate in the rapid development of AI and new forms of media entertainment. Altman said he hoped the collaboration would offer users a new way to engage in creative expression with AI.
Then-Disney CEO Iger
For Disney, the deal demonstrated a viable business model for AI licensing around its intellectual property. Just a day before announcing the agreement with OpenAI, Disney had sent a cease-and-desist letter to Google, accusing the tech giant of "massive copyright infringement of Disney's works."
Cloud Service Solution
In February, Iger said on an earnings call that short videos generated by Sora would soon appear on the Disney+ streaming platform, which was preparing to launch a vertical video feed. According to people familiar with the matter, Disney was also in talks with OpenAI about using ChatGPT company-wide.
In recent weeks, OpenAI began piloting an enterprise version of Sora, allowing companies like Disney to use the tool with security guarantees. Disney had expected to roll out this tool as early as this spring. It would have allowed select Disney executives to use Sora for everything from marketing campaign design to special effects production, without OpenAI having access to their work.
However, OpenAI was already considering how to withdraw from the Sora project. The gap with competitor Anthropic widened further. Anthropic's recent technical progress reignited concerns that AI could replace traditional software and services, briefly causing a dip in software stocks. OpenAI realized it needed to devote more resources to building these so-called productivity tools and began deprioritizing certain areas.
After initially planning to continue offering video generation features through ChatGPT, the company ultimately decided to shut down Sora completely.
Disney's planned $1 billion investment in OpenAI ultimately did not materialize, and the relationship between the two is effectively stalled.
According to a person familiar with the matter, under new CEO Josh D'Amaro, Disney is actively discussing the application of other AI tools with more than a dozen partners.
Real-time Information Push
Disney said in a statement: "As the emerging AI field develops rapidly, we respect OpenAI's decision to exit the video generation business and realign its priorities. We appreciate the constructive collaboration between our teams and the lessons learned from it."
On Sora's X account, its team posted a message reminiscent of a digital obituary: "To everyone who ever created, shared, and built a community around Sora: thank you."
