Disney is turning to artificial intelligence to revitalize its struggling streaming engagement, announcing a groundbreaking partnership with OpenAI to create AI-generated video content featuring iconic Disney characters. Despite nearly doubling its streaming subscriber count over the past five years, Disney’s viewership share has remained stagnant, with Disney+ and Hulu combining for just 4.7% of US TV viewing according to Nielsen data—far behind Netflix’s 8.3% and YouTube’s leading 12.9% share.
The entertainment giant’s streaming business faces a critical challenge: while subscriber numbers have grown and the direct-to-consumer segment generated $1.3 billion in operating income in fiscal year 2025 (up from $143 million the previous year), actual engagement has barely moved from its 4.4% mark in May 2021. This stagnation may explain why Disney’s stock has risen only 3% over the past year, compared to the S&P 500’s nearly 17% gain.
Disney’s AI strategy centers on user-generated content. Starting in 2026, fans will be able to create short video clips featuring beloved Disney characters through the OpenAI partnership, initially viewing them on Disney+ with plans to eventually enable creation directly within the app. CEO Bob Iger described this as an opportunity to participate in the “breathtaking growth” of AI technology.
Beyond AI-generated videos, Disney is implementing a comprehensive engagement strategy. The company plans to fully integrate Hulu into Disney+ in 2026, creating a “super app” that combines Marvel, Star Wars, and Hulu content in one destination. ESPN content will also be added to attract sports fans to bundled subscriptions. Iger envisions Disney+ becoming “a portal to all things Disney,” incorporating AI and commerce features to transform the streaming platform into an “engagement engine” that drives real-world visits to theme parks and cruises.
The moves come as paid streaming services face slowing viewership growth industry-wide, while free platforms like YouTube continue expanding their TV screen presence. High engagement is crucial for reducing subscriber churn, especially as Disney has raised Disney+ prices annually for five consecutive years.
Key Quotes
a portal to all things Disney
CEO Bob Iger described his vision for Disney+ during the company’s latest earnings call, explaining how the platform will evolve beyond a simple streaming service to become an integrated ecosystem connecting all Disney properties and experiences.
an engagement engine
Iger outlined how Disney+ will incorporate AI and commerce features to transform the streaming app into a tool that drives real-world engagement, including visits to theme parks and cruises, rather than just digital content consumption.
an opportunity to play a part in what is really a breathtaking, breathtaking growth in AI
CEO Bob Iger told CNBC about Disney’s OpenAI partnership, emphasizing his enthusiasm for AI technology and positioning Disney to capitalize on the rapid expansion of artificial intelligence capabilities in entertainment.
Our Take
Disney’s AI strategy reveals both desperation and innovation. The company’s stagnant engagement metrics despite subscriber growth suggest that simply accumulating customers isn’t enough—viewers need compelling reasons to actually watch. The OpenAI partnership is a calculated gamble that user-generated AI content featuring beloved characters will drive the engagement that traditional content hasn’t achieved. This approach could fundamentally shift entertainment from passive consumption to active creation, potentially solving the engagement crisis. However, it also raises questions about brand control, content quality, and whether fans actually want to create their own Disney content or simply enjoy professionally produced stories. The success or failure of this initiative will likely influence how other major studios approach AI integration, making Disney an important test case for AI’s role in mainstream entertainment.
Why This Matters
Disney’s embrace of AI-generated content represents a pivotal moment for both the entertainment and AI industries. As one of the world’s most valuable entertainment brands, Disney’s partnership with OpenAI validates AI’s potential to transform content creation and audience engagement at scale. This move signals that major media companies view generative AI not as a threat but as an essential tool for competing in an increasingly crowded streaming landscape.
The initiative addresses a critical challenge facing the entire streaming industry: converting subscribers into engaged viewers. With free platforms like YouTube dominating viewership, paid services must innovate beyond traditional content libraries. AI-generated personalized content could revolutionize how audiences interact with entertainment, potentially creating millions of unique experiences rather than passive consumption.
For the broader AI industry, Disney’s involvement brings mainstream legitimacy to AI-generated video technology, which has faced skepticism and concerns about quality and authenticity. If successful, this partnership could accelerate adoption across entertainment, advertising, and social media sectors, potentially creating a multi-billion dollar market for AI video generation tools.