(Dec 16): OpenAI is getting access to Disney’s kingdom without cutting a cheque.
The artificial intelligence (AI) company’s recent deal to license iconic characters from Walt Disney Co for its Sora video app is entirely in stock warrants rather than a cash licensing fee, according to people familiar with the matter. OpenAI will offer Disney the option to purchase shares in the high-flying start-up beyond its previously announced US$1 billion ($1.3 billion) stake.
The terms, which have not been reported, are intended to align both companies’ financial incentives if Sora succeeds, said the people, who spoke on condition of anonymity to discuss private information. Disney is effectively deferring an immediate payday from licensing its valuable intellectual property in favour of what could be a greater upside later.
OpenAI and Disney declined to comment.
Last week, the two companies announced that Disney would allow OpenAI’s Sora to draw from a library of more than 200 animated and creature characters, including Mickey Mouse, Cinderella, Ariel and Simba. Disney also agreed to take a US$1 billion stake in OpenAI at its current US$500 billion valuation.
The landmark deal represents the largest equity investment a major studio has taken in an AI model maker to date. For OpenAI, the partnership could help it gain footing in Hollywood and buoy Sora as it faces intense competition from Runway AI Inc and Alphabet Inc’s Google, which offer similar AI video generation services.
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OpenAI has also spent months talking to the largest studio owners, including Disney, Comcast Corp’s Universal Pictures and Warner Bros Discovery Inc about the creative and commercial potential of Sora, Bloomberg News has previously reported.
As part of the latest deal, Disney agreed to use OpenAI’s software to build new products and experiences, instantly turning it into one of the ChatGPT maker’s best-known customers.
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