After Character.AI filed for bankruptcy this week, Disney agreed to hire at least 60 of its employees, representing the majority of the startup’s workforce. The entertainment giant will pay an estimated $60 million in annual compensation to these employees as part of a $20 million asset acquisition deal, according to a legal filing seen by Bloomberg and reported by TechCrunch.
Character.AI’s former CEO Karandeep Anand recently joined Disney as its first chief technology officer, facilitating the transition. The filing describes Disney’s offer as a stalking horse bid, meaning another company could submit a higher offer. The majority of Character.AI employees who received job offers from Disney have accepted them, securing their positions despite the startup’s bankruptcy proceedings.
Character.AI, despite having a large and engaged user base, struggled with high operational costs and faced significant legal and regulatory challenges. The company was sued by the mother of a 14-year-old boy who became obsessed with one of its chatbots before his suicide, and it is under government investigation for child safety issues. These factors contributed to its financial difficulties and eventual bankruptcy filing.
The legal filing highlights that Disney’s acquisition and hiring plan is part of an ongoing bankruptcy process, with the potential for other bids. Character.AI’s transition to Disney marks a notable shift in the AI chatbot sector, with Disney absorbing much of the startup’s talent and assets as of this week.