OpenAI’s Mickey Mouse Deal

When you’re on your back foot, as OpenAI has lately been, what better way is there to take the offense than to announce a Mickey Mouse deal? Take OpenAI’s  partnership with Walt Disney Co., unveiled on Thursday morning. Disney will make a $1 billion equity investment in the ChatGPT creator and will license 200 characters from its film and TV library to OpenAI's Sora video-generation app, including Mickey Mouse, Darth Vader, Luke Skywalker and Iron Man. Sora users will be able to conjure up short videos featuring those characters—what fun! But while it’s great for OpenAI, the deal doesn’t seem so good for Disney.

What does Disney get out of this arrangement, other than the risk of having a deranged OpenAI user make an offensive video featuring a Disney character? (Both Disney CEO Bob Iger and OpenAI CEO Sam Altman said on CNBC that OpenAI would put “guardrails” in to prevent that outcome, but does anyone believe that will work?) Disney is presumably earning a licensing fee, although the announcement makes no mention of one. My colleague Sri Muppidi hears that Disney’s licensing compensation will be via the grant of equity warrants, at OpenAI’s latest valuation of $500 billion. (That’s in addition to the shares Disney is buying.) That implies Disney’s licensing payment is dependent on OpenAI’s valuation rising in the future.