Just six months ago, OpenAI was touting the latest version of its generative AI video model Sora as “the beginning of a completely new era” for creators, one it said would bring “a lot of joy, creativity and connection to the world.”
But Sora — a platform that could generate breathtaking videos of the long-extinct Woolly mammoth just as easily as it could whip up a shampoo ad starring Hitler — was born to a different company than the one that exists today.
OpenAI decided this week to shut it down, citing a need to focus on other priorities. It also scaled back some shopping features in ChatGPT and paused development of the much-maligned “erotic chatbot” it had promised for sexually explicit conversation.
The changes offer a revealing look at a company that was once the disruptor-in-chief of the AI world, but is now experiencing something of an identity crisis as it struggles to pick a lane on the busy road to profitability, according to experts who spoke with CBC News.
“Everybody looks at them as a supremely talented organization with first-rate technology that perhaps lacks the focus of some of their AI frontier counterparts, like Gemini, like Anthropic,” said Sheldon Fernandez, the Toronto-based co-founder of AI technology company Darwin AI.
OpenAI is on the path to a public offering, and Fernandez says that means they need to raise billions of dollars to pay for things like employees, data centres and the computational power required to train and run AI.
“To do that, you need to present some financially coherent story to investors and the public.”
So far, that story has taken many twists and turns.
Initially an open-source non-profit, OpenAI has since shifted to creating closed-source models through its for-profit arm. CEO Sam Altman once called ads a “last resort for us,” but introduced them in ChatGPT last month.
After a year of valuation-boosting, equity-pumping deals that sent Wall Street soaring, OpenAI’s partnerships with the likes of Disney and Nvidia have either fizzled out or failed to live up to their initial promise, with Nvidia CEO Jensen Huang reportedly frustrated by OpenAI’s lack of business discipline.
It recently lost a massive deal with Apple to Google; and its relationship with Microsoft has grown increasingly tense.
And ChatGPT’s instant checkout feature, which led OpenAI to partnerships with Shopify, Walmart, Etsy and PayPal, is now being rolled back.
While it’s normal for a technology startup to switch directions, Fernandez says OpenAI has developed a reputation for “capricious behaviour” — and it has struggled to juggle and monetize the consumer-facing products wrapped into those deals.
The decision to scrap Sora, which was first released in December 2024, came swiftly: just a day earlier, OpenAI had updated its safety policy for the video generation app.
While Sora debuted to much hype and was, for a time, the king of the hill on app stores everywhere, Fernandez noted, rival platforms like Google’s Veo, xAI’s Grok and Chinese-owned Kling AI have since emerged to produce video that’s on-par with or better than Sora’s offerings.
“It was almost like a TikTok for AI-powered videos,” said Carmi Levy, a technology analyst and journalist based in London, Ont. “And as it turns out, that doesn’t have much appeal to people. There’s no virality, there’s no community. It is the anti-social social media.”
The platform was also, by some accounts, an expensive flop. In November, one analyst suggested that it cost OpenAI $1.30 US to generate a single 10-second video. Based on the 11.3 million daily videos he estimated Sora produced, the analyst said this would cost the company about $15 million every day.
Just a few weeks before that, Sora head Bill Peebles admitted that the platform’s economics were “completely unsustainable.”
Sora’s demise was reportedly a surprise to Disney, which announced in December that it would invest $1 billion US into OpenAI, giving Sora users the power to generate videos involving their favourite characters from the House of Mouse.
To that end, OpenAI now seems to be taking notes from its main rival Anthropic, explained Levy, by focusing on a suite of products that it can sell to businesses and developers.
That could put it on a path to profitability that it will sorely need ahead of a planned initial public offering (IPO).
“It’s very difficult for a company like OpenAI to make money off of consumer products like Sora or Instant Checkout,” Levy said.
“It’s a lot easier for them to appeal to the enterprise market.”
The firm is aggressively preparing for an IPO that could happen as soon as the end of 2026 — racing to the finish line against Anthropic, which is also planning a public offering.
But OpenAI needs to clean up its financial house before it can do that, said Levy.
Most importantly, investors need to be confident that OpenAI can actually deliver on its blockbuster deals and justify what is now a $730 billion valuation.
Sam Altman and the OpenAI power struggle, explained
“So get rid of projects that aren’t making money, get rid of anything that isn’t growing, get rid of anything that isn’t core to the mission or that will cause investors to doubt the very future of the company,” Levy explained.
A public offering, which would allow the company to list on public markets and sell its stock to everyday investors as an asset, would mean a lot for OpenAI “in terms of their financial viability,” Fernandez said.
But it would also make the business accountable to its shareholders, forcing more discipline in spending.
“It requires a level of prudence that you haven’t completely seen from OpenAI up to this point,” Fernandez said.
