Well, Well, Well…

Breaking news. Sora, OpenAI’s AI video generation app, is shutting down. They announced it on X, thanking the community and promising more details on timelines and preserving existing work. And with it, the Disney deal — the billion-dollar investment that was supposed to let users generate AI content based on Disney IPs and even put it on Disney Plus — appears to be effectively null and void, at least for now.

I’m not doing this video as an “I told you so.” But this does speak directly to what I’ve been trying to discuss with people about AI for a while now. The economic viability of generative AI and where it sits within the marketplace has not been determined. It is yet to be determined. And while I understand people have emotional ties to their positions — pro-AI, anti-AI, somewhere in the middle — you have to go beyond the spectacle. You have to go beyond the hype. You have to look at the numbers.

OpenAI has not turned a profit. They have projections saying they should within the next few years, but as of right now, this has not been a profitable venture. Anthropic hasn’t been able to do it either. Most of the major AI companies haven’t. We talk endlessly about capabilities — what the technology can do, how impressive it looks, what it might replace — but almost nobody discusses the actual economic model. The data centers. The energy consumption. The costs. The return on investment. The efficiency. All of that is part of the equation, and it’s the part that actually determines whether any of this survives long-term.

We are on the front end of this technology, which means we’re in the speculative era. The pricing models, the investment levels, the projections — none of it is based on proven economic reality yet. It’s based on speculation. And as more time passes, these companies are going to have to adjust to be more honest about what’s sustainable. Sora shutting down is one of those adjustments. OpenAI is likely redirecting resources to areas they believe will actually generate revenue.

Just because the technology can do something doesn’t mean people want to pay for it. That distinction is everything. We’ve got a long way to go before we know what generative AI actually looks like in the marketplace. Start thinking about this from the economics perspective, not just the spectacle.