Morningstar

Disney: OpenAI Partnership Validates the Value of the Firm’s Characters

This development provides further support for our wide moat rating for Disney stock.

Disney logo is displayed on a smartphone with a laptop keyboard background.
Serene Lee/SOPA Images via Getty
Securities in This Article
The Walt Disney Co
(DIS)

Key Morningstar Metrics for Walt Disney

Walt Disney DIS agreed to license many of its animated characters to OpenAI for that firm’s Sora users to create short-form videos using artificial intelligence. Those videos may then be featured on Disney+. Disney is becoming an OpenAI customer and is making a $1 billion investment in the company.

Why it matters: This deal does not alleviate concerns about AI disruption in the media and entertainment industry, but it does show the value in Disney’s intellectual property and its ability to adapt to a changing technological landscape.

  • With the Sora videos limited to 30 seconds in length and Disney not licensing voices or actors’ likenesses, they provide a different type of entertainment content. They are not a replacement for traditional video programming.
  • Whether consumers will prefer this at the expense of movies and television shows is an open question. Regardless, Disney has provided further evidence that it will have a place no matter how things evolve.

The bottom line: Disney did not disclose financial details, but we don’t expect this deal to move the needle, so we maintain our $120 fair value estimate. However, this development provides further support to our wide moat rating for the stock.

  • The demand from Sora users for Disney characters and Disney’s ability to threaten legal action for unauthorized use pushed OpenAI to work with the company.
  • Disney gets to monetize—modestly, we assume—engagement in videos that it otherwise would not have participated in, without offering OpenAI access to long-form video entertainment, where it does participate.

Long view: The licensing deal appears to be exclusive for only the first year of the three-year agreement, meaning Disney will have other chances to extract value from its characters and profit from AI-enhanced creativity.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

Sponsor Center