Why Disney Is Investing $1 Billion in OpenAI

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So the AI that's designed to make everyone's job easier to manage, actually creates more to manage for everyone in IT? Funny how that works. IBM helps smarter businesses scale and manage their AI. Let's create smarter business, IBM.

Alex Ossola (0:18)

What Disney gets out of letting OpenAI users drop Mickey Mouse and Buzz Lightyear into AI videos.

Ben Fritz (0:24)

This gives Disney a financial stake in the hottest AI company in the world.

Alex Ossola (0:29)

Plus, after two Senate votes fail, hope is fading for a deal to extend health care subsidies for millions of Americans before the end of the year. And how Silicon Valley is giving a boost to a US push into critical minerals against China. It's Thursday, December 11th. I'm Alex Ossola for the Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that move the world today.

Disney has licensed its characters to OpenAI for three years as part of a deal the two companies announced today. Disney is investing $1 billion in OpenAI with the possibility of buying more stock. On OpenAI's Sora video platform, users will be able to generate videos of more than 200 Disney, Marvel, Star Wars and Pixar characters, including Darth Vader, Homer Simpson and Spider-Man. And some of those videos can be streamed on Disney+. A person with knowledge of the matter says OpenAI will pay Disney to use its characters in Sora. The companies didn't disclose financial terms of that arrangement. Here's Disney CEO Bob Iger in an interview on CNBC this morning.

Bob Iger (1:40)

OpenAI is both respecting and valuing our creativity, both of our characters, but also those that have created those characters. So it gives us an opportunity really to play a part in what is really a breathtaking, breathtaking growth in essentially AI and new forms of media and entertainment.

Alex Ossola (2:04)

The companies announced the deal a day after Disney sent a cease-and-desist letter to Google, saying the tech giant's AI systems violated Disney's copyrights. A Google spokesman didn't respond to a request for comment. But by partnering with OpenAI, WSJ Entertainment reporter Ben Fritz said Disney isn't letting the AI wave pass it by.

Ben Fritz (2:23)

Disney has concluded that they need to partner with AI companies, that they can't just fight them in court. The legal situation has been mixed for entertainment companies so far, in terms of what they can prevent AI companies from doing with their copyrighted material. We've seen this in the past, that like when entertainment tries to fight tech, it's a very hard battle. I think they've concluded there has to be some legal way and some way that makes money for the entertainment companies to start putting their content into AI, especially into image and video generators, rather than trying to play whack-a-mole and stop it.

Alex Ossola (3:00)

Both companies hope that making beloved characters accessible to users will be particularly engaging for younger audiences. Here's OpenAI CEO Sam Altman, also speaking on CNBC This Morning.

Sam Altman (3:11)

When it comes to putting themselves in that one lightsaber fight from Star Wars or making like a Buzz Lightyear custom birthday video for their kid, I think this is going to be like quite a big deal for our users.

Alex Ossola (3:25)

Altman added that there will be guardrails around the kinds of videos users can generate. A person familiar with the matter said that there are limits around what the Disney characters can do in Sora videos, around issues like drugs, alcohol, and sex. And the characters won't include the likenesses or voices of actors. But even so, Ben Fritz says the licensing deal does come with risks for Disney.

Ben Fritz (3:47)

AI is very unpredictable. You can't just easily program it and say never show a Disney character using drugs or smoking or in a sexually inappropriate situation or cursing. So it's inevitable that no matter how many guardrails they try to put in, you're going to start seeing some weird, funny, probably inappropriate and offensive stuff done with Disney characters in Sora. And I think Disney is signaling that they're willing to accept that risk. They probably know some of that's going to happen. And they're trusting that OpenAI will be a good partner to try to improve and change the app when these kind of embarrassing videos end up getting generated.

Alex Ossola (4:25)

News Corp, which owns the Wall Street Journal, has a content licensing partnership with OpenAI. Separately, OpenAI was sued in California today for wrongful death by the estate of an 83-year-old woman who was killed in August by her son, Stein-Erik Solberg. He then took his own life in their Connecticut home. He had been engaging in delusion-filled conversations with ChatGPT, and it appears to be the first documented killing involving a troubled person who was engaging extensively with an AI chatbot.