Disney dumps OpenAI deal after shock Sora shutdown shakes Hollywood

Disney has pulled out of its blockbuster deal with OpenAI after the company abruptly shut down its Sora AI video app, sending fresh shockwaves through Hollywood’s already tense relationship with artificial intelligence.

OpenAI confirmed it is discontinuing Sora just months after launch, thanking creators who used the platform and promising more details on timelines and how users can preserve their work.

The sudden move has effectively killed Disney’s $1 billion agreement with the AI company, which included plans to license iconic characters for use in Sora and eventually integrate the technology into Disney+.

A source familiar with the matter said Disney will no longer move forward with the deal following the shutdown, marking a major setback for one of the most high-profile AI partnerships in entertainment.

Sora had initially stunned the industry with its ability to generate highly realistic video, including content featuring recognisable intellectual property and actor likenesses. The launch quickly sparked concern among studios and talent, forcing OpenAI to roll out tighter controls.

While the standalone app is being scrapped, OpenAI is not stepping away from AI video entirely. The company is expected to continue developing video tools within its broader ecosystem, including integration into existing products.

Disney, however, appears to be moving on.

“As the AI field advances rapidly, we respect OpenAI’s decision to shift its priorities,” a Disney spokesperson said. “We value the collaboration and will continue exploring ways to engage with new technologies that respect intellectual property and creators’ rights.”

The collapse of the deal leaves a major gap in the evolving AI video landscape and raises questions about how aggressively studios will embrace the technology going forward.

It also reshapes the competitive field, with Google now emerging as one of the few major players operating at scale in AI video, even as it faces legal challenges over content use.

What was once positioned as a game-changing tool for Hollywood may now be remembered as a short-lived experiment, underscoring just how quickly the AI race is shifting.