Disney's $1 billion AI investment and metaverse plans hit major roadblocks in new CEO's first week

Disney's big bets on the metaverse and AI slop aren't going so well

Less than a week into his tenure as Disney's newly-appointed CEO, Josh D'Amaro is already dealing with two separate crises that have cast a shadow over the company's future plans. OpenAI is shutting down its Sora image-generation program just months after Disney announced a $1 billion dollar collaboration to bake the tech into Disney Plus. And Fortnite maker Epic is laying off 1,000 employees at a time when we've heard basically nothing about the game studio's $1.5 billion investment deal with Disney to build a metaverse. Disney could still integrate generative AI into its streaming service, and we might end up seeing some version of the company's metaversal dreams become reality. But yesterday's news from OpenAI and Epic point to an uncertain future for some of Disney's biggest bets. There have always been signs that Sora was far from being ready for the big leagues (read: used to produce studio-approved entertainment). But OpenAI's decision to shutter Sora came as a surprise, in part, because of how the Disney deal helped normalize the idea of major companies getting into bed with gen AI firms. In addition to giving OpenAI a massive influx of capital, the deal with Disney -- which would put user-generated AI content directly onto Disney Plus -- gave Sora a level of legitimacy that could have had a huge impact on how the public thinks about and engages with this kind of tech. Disney Plus would have also become flooded with AI slop that truly no one would see as a compelling reason to sign up for the service. But the legacy studio could have still patted itself on the back for being a trailblazer in the AI space and spun that to investors as a sign of it having a deep understanding of how to capitalize on tech trends. The situation reads very differently now -- especially with OpenAI currently being under fire for helping the Pentagon conduct mass surveillance. Disney seems like it wants to cut its losses by distancing itself from OpenAI, which makes sense, but that move only highlights how ridiculous it was for D'Amaro to spearhead the collaboration in the first place. You don't need a background in corporate leadership to understand how ridiculous Disney's plan to pay OpenAI $1 billion so that Sora could churn out slop featuring some of the studio's characters was. Disney appears to have figured that out now, and late is better than never, but the OpenAI deal falling apart is going to make any future AI plans the company announces feel like they might be just as misguided and doomed to fail the same way. While the Epic layoffs haven't been attributed to anything Disney-related, the sheer number of people who just lost their jobs gives us some insight into how things are changing at the company. Like every other live-service game, Fortnite has been struggling to keep its momentum going, and in-game currency price hikes could only do so much to offset lower player engagement and higher operating costs. Epic CEO Tim Sweeney told staffers that the layoffs and $500 million reduction in spending will put the company "in a more stable place," which might be true, but it raises some questions about how the Disney partnership is being prioritized. Last week, Epic announced that Fortnite creators will soon be able to build Star Wars-themed games on the platform. That was the first bit of concrete news about the Epic / Disney collaboration the company shared since releasing a batch of Disney-focused minigames last fall. But what we haven't heard about or seen is the ambitious "persistent universe" the two companies planned to build together as part of Disney's $1.5 billion investment in Epic back in 2024. While Fortnite isn't going away anytime soon, its struggles as one of the biggest online games in the world don't bode well for the idea of a Disney-branded metaverse, which would be competing in the most cut throat segment of the games industry. And now Epic will be building it with a significantly smaller team. With both the Sora and Epic deals, Disney was clearly trying to get ahead of the game by making a big bet on the future through investments in AI and the metaverse. But in a single day that future looks much less certain -- which means Disney may have made a pair of very expensive mistakes.

Disney CEO's First Week Marred by 'Fortnite,' OpenAI Woes

Walt Disney Co. Chief Executive Officer Josh D'Amaro hasn't even been been in his new job for one week and he's already seen two, billion-dollar technology bets falter -- - with one of them unraveling entirely. On Tuesday Epic Games Inc. announced that it was laying off 1,000 employees after new versions of its hit video game Fortnite failed to connect with fans. Disney announced a $1.5 billion investment in Epic two years ago that involves the creation of a whole new digital universe tied to Disney characters and stories. Just hours later, OpenAI announced it was shutting down Sora, its AI video generator. The company said it was ending a partnership with Disney that would have seen the entertainment giant make a $1 billion equity investment in OpenAI and use its technology for content creation. The move to shutter Sora coincides with a push by OpenAI to streamline its product lineup. D'Amaro took over as CEO from Bob Iger on March 18. At the company's annual meeting that day, D'Amaro sketched out his vision for a Disney that would be more connected with fans, in part by harnessing new technologies. The company's Disney+ streaming service, he said, will be a portal to engage with not just movies and TV shows, but games and experiences. His goal was to "deliver a more connected, personalized, and immerse experience to our consumers - wherever they are and whenever they would like to engage with us." Disney shares closed down 1.6% on Tuesday. The Epic deal was led by D'Amaro, who ran Disney's theme parks, consumer products and gaming businesses. In announcing the partnership, Disney showed off illustrations of an online Fortnite world that looked a lot like a theme park. D'Amaro joined Epic's board as an observer. In a memo to staff and fans on Tuesday, Epic founder Tim Sweeney said a downturn in Fortnite engagement had left the company spending more than it was making. Some $500 million in cost cuts should position the company for "huge launch plans towards the end of the year," Sweeney said. He didn't address the new Disney product. Similarly, the Sora partnership was supposed to be the start of something big. It was among the first initiatives between a legacy Hollywood studio and the new technology, which many in the industry fear will cost jobs and result in theft of their intellectual property. Disney announced plans just four months ago to let fans create short social videos based on the company's famous characters by uttering just a few words in an app. Some 200 characters from Star Wars Marvel and other brands would be available, costumes and vehicles included. Disney even planned to put some of the fan-created videos on its namesake streaming service. In a statement after Sora's demise, Disney said the artificial intelligence field is a nascent one, where change comes quickly. The company said it appreciated the collaboration it had with the Sora team and will "continue to engage with AI platforms to find new ways to meet fans." D'Amaro may still find a new AI partner. Runway Ai, Pika Ai and Google are among the companies making similar products to Sora.