On Tuesday morning, everything was going on as usual at OpenAI. By the end of the day, the company announced that it was discontinuing its video generation app Sora and rescinding plans for video generation within ChatGPT. The $1 billion Disney contract will be cancelled. It would involve shuffling the roles of senior executives. The company has also raised $10 billion from investors, with the latest round expected to bring the total to more than $120 billion.
OpenAI is now hell-bent on making profits, or at least cutting its losses. Since its launch, Sora seems to have consumed a huge amount of computing without any economic return to justify it. This was revealed by industry officials. The Verge That means it lags behind competing video generation models. But despite its short lifespan, it leaves behind a legacy of damaged trust in determining what is real.
While OpenAI faces questions from investors and stiff competition from Anthropic and Google, executives seem to agree that the change in direction is warranted. “We can’t afford to miss this moment just because we’re distracted by sidequests,” Fiji Simo, CEO of AGI Implementation at OpenAI (after moving from his role as Applications CEO), recently told his staff. “We really need to increase our productivity in general, especially on the business side.” This means pulling out of projects like Sora and reportedly deprioritizing the “adult mode” sexting feature it was considering for ChatGPT.
Sola was already struggling to compete in the cutthroat AI video generation industry, said Trevor Harries Jones, director of the Render Network Foundation, a nonprofit that allows creators to explore and compare AI-generated videos on the platform.
“The state of innovation and the abundance of choice means there are very few moats and it’s very easy to switch,” Harries-Jones said. The Verge. “If your model isn’t on top of anything, it’s very difficult to get a large number of users.”
Harries-Jones said he speculated that OpenAI’s decision was due to the “tremendous” rate of innovation in the video generation part of the AI industry and the intense competition from companies like Google and Kling.
“For us, there was nothing that they were winning in terms of one of our use cases,” Harries-Jones said, so Sora didn’t have a clear advantage. “After a very strong start, we stalled and were overtaken by other competitive players in the space.” He also said that while Sora’s announcement and marketing video seemed “groundbreaking,” there was a “gap” between the viral demo video and the actual launch. “As with all of these things, the devil is in the details, like the cost and how long it can be produced,” he says.
Sora’s user struggles may be reflected in download numbers from market intelligence firm Sensor Tower. Seema Shah, vice president of insights at the company, said: The Verge He said Sora was “one of the fastest growing apps when it first launched,” but “seriously declined” after a few months, likely due to competition from Google and other companies. Sora got off to a strong start with approximately 4.8 million downloads worldwide in October and 6.1 million downloads in November, but declined sharply in December (3.2 million) and in subsequent months. January was 2.1 million, February was 1.4 million, and March is just 1.1 million month-to-date.
“The most notable thing is that we’ve seen a decline in sales while expanding into new markets. That should drive growth,” Shah said, adding, “We should see that increase. Even if no one downloads it again in the U.S., there should probably be some growth.”
Video generation consumed a lot of expensive computing power at a time when OpenAI desperately needed it. At the company’s annual DevDay event in October, OpenAI executives reiterated the need to increase revenue and concerns that compute constraints could hinder OpenAI’s ability to scale. OpenAI CEO Sam Altman said at the time that the company was in an “aggressive investing” stage, adding: “Obviously we have to be very profitable at some point.”
The same day, company president Greg Brockman told reporters, “When you ask, ‘How much computing do you need?'” This is like asking, “How much labor do you want?” The answer is that you can always get more out of more. ” OpenAI teased an ad within ChatGPT Pulse at the time, which famously became a ChatGPT-wide ad last month.
The revenue boost was further derailed when the deal with Disney collapsed. Last year, the entertainment giant committed to a $1 billion equity investment in OpenAI, with an option for Disney to buy additional shares, and also stipulated that Disney would become OpenAI’s “major customer” and use the company’s products to develop new products for Disney+ and other companies, as well as make ChatGPT available to its employees. The deal also allows Sora to feature AI-generated videos of hundreds of Disney, Pixar, Star Wars, and Marvel characters, some of which will be available to stream on Disney+ itself. And less than an hour after OpenAI and Disney collaborated on a Sora-related project, Disney was reportedly blindsided by plans to cancel the app.
The rapid termination of OpenAI’s partnership with Disney, just over three months into a three-year licensing agreement, appears to have caused the most public consternation. While some online chatter suggested it represented a major failure for AI in entertainment, Dave Davis, chief content officer at Protege, which licenses audio and visual content to AI companies for model training, said it’s clear Disney remains open to licensing deals with other companies working on video-generating AI. That could ultimately mean partnering with companies like Google, Runway, Luma, Moonvalley, Kling, and Seedance.
“There’s a lot of momentum around licensing,” Davis said, adding that for big-name companies like Disney, licensing is typically a strategic move to stimulate fan interaction in new ways. “Disney’s deal with OpenAI was one example of that, and I think it’s great that Disney made it clear in their exit announcement that they’re broadly open to the business of continuing to license characters with other parties.”
News of Sora’s closure comes a day after OpenAI published a blog post about how to use Sora safely, saying the company would continue to “strengthen the guardrails of Sora” and introduce stricter protections for videos featuring children and adolescents. OpenAI also reportedly had plans to integrate Sora’s video generation capabilities into ChatGPT itself before scrapping that strategy earlier this month.
“We have made the decision to discontinue offering Sora in our consumer apps and APIs,” OpenAI spokeswoman Kayla Wood said in a statement. The Verge In the statement, it points to a post by X that promises more information about the schedule for shutting down the app and API soon. “As our focus and computing demands grow, the Sora research team continues to focus on global simulation research to advance robotics to help people solve real-world physical tasks.”
OpenAI also said that existing computing needs to be focused on the goals of AI agents, and Sora is a step toward better world simulation research, particularly the goal of robotics. Fittingly, the original Sora exit announcement post was edited to presumably lay the groundwork for OpenAI’s continued work on world simulation AI, and very likely to use the AI models behind Sora to advance their work.
Direct competition with Anthropic will become even more intense as OpenAI looks to shift its focus from a flurry of money-making efforts, including forays into social media, new browsers, new subscription tiers, new advertising plans, and new government contracts, and expand its resource output into coding and enterprise tools. The company’s rivals have built a reputation for being explicitly enterprise-focused and, at least in many ways, leading the market in coding tools.
Sam Gregory, executive director of Witness, a nonprofit that fights deceptive AI and deepfakes, said he doesn’t regret the loss of the tools to generate “AI slop.” But he rages that “without real money, real investment, and real will” things change only for business reasons and no real harm appears to be done.
“Sora launched in a big way in terms of their ability to create hyper-realistic content. What really pisses me off is that they’ve normalized in six months. I think all of these things are going to have a very long-term impact,” Gregory said. “They’ve normalized a world where within seconds people can be completely unsure of what they’re watching on their timelines, whether it’s casual comedy or footage of the Iranian conflict, both when it matters and when it doesn’t matter,” he added. “Even if the app goes away, the effects will remain.”
Altman’s statement in October that the company was “aggressively investing” appears to have turned into an aggressive attempt to placate the company’s own investors, especially since OpenAI is reportedly planning an IPO as early as this year. As billions of dollars continue to pour into the AI industry, investors are starting to take a closer look at whether they are making money and which parts of the industry are bubbles.
