According to Forbes, OpenAI is burning through approximately $15 million per day on its Sora video generation app, which amounts to over $5 billion annually. The company reached 1 million downloads in just one week after its September 30 iOS launch and hit 4 million downloads by Halloween, with users generating millions of 10-second AI videos daily. OpenAI’s head of Sora, Bill Peebles, admitted on October 30 that “The economics are currently completely unsustainable” while the company reported losing over $12 billion last quarter despite a $20 billion annual revenue run rate. Analyst estimates suggest each 10-second video costs OpenAI around $1.3 to generate while users pay nothing, creating a massive financial drain that can’t continue indefinitely.
The math behind the madness
Here’s how those staggering numbers break down. Analysts estimate that with 4.5 million Sora users, if just 25% of them generate 10 videos daily, that’s 11.3 million videos costing $1.3 each. The high cost comes from video generation being massively more complex than text – Sora has to process four-dimensional data (three spatial dimensions plus time) across dozens of frames per second. Each video generation reportedly takes around 40 minutes of total GPU time across multiple processors running simultaneously. And honestly, when you look at what people are actually creating – farting celebrities and weird home shopping network parodies – you have to wonder: is this really worth billions?
The classic tech gamble
OpenAI is playing the oldest playbook in Silicon Valley: lose money to gain market share. They’re betting that by giving away video generation for free, they’ll build such a dominant position that when they eventually start charging, users will have no choice but to pay up. Analyst Lloyd Walmsley notes this is “a classic internet playbook” where companies focus on engagement first and monetization later. The thinking goes that GPU costs will drop exponentially – maybe five times cheaper by next year according to some estimates. But here’s the thing: we’ve seen this movie before with companies that burned through billions chasing growth that never materialized.
The unsustainable reality
Even OpenAI’s own CEO Sam Altman admits the current model can’t last. In a Stratechery interview, he specifically called out the problem of people “just making funny memes to send to their three friends” and acknowledged “there is no ad model that can support the cost of that kind of a world.” The company has already signaled that free access won’t continue much longer. Meanwhile, Microsoft investors might be getting nervous watching their AI partner burn cash at this rate – especially when you consider Microsoft’s own regulatory filings show they’re deeply invested in OpenAI’s success.
What’s the endgame?
So where does this leave us? OpenAI is clearly betting that they can either find power users willing to pay premium prices or develop some combination of advertising and subscription models that actually cover their costs. Peebles’ admission about unsustainable economics and Altman’s public comments suggest they’re well aware of the problem. The free usage does give them valuable training data – human-written prompts paired with video outputs are gold for improving future models. But at $15 million per day, how long can they afford to be everyone’s free video meme factory? Probably not much longer.
