Disney agreed to hire most of Character.AI's staff, at about $60 million a year

Walt Disney $DIS agreed to hire at least 60 employees of bankrupt chatbot maker Character.AI, the majority of its workforce, with estimated compensation of $60 million a year, according to Bloomberg.

A bankruptcy judge must approve the agreement, according to Bloomberg. Character.AI told the court that employee morale was diminishing and that the company risked a mass exodus of staff, according to Bloomberg.

Bloomberg put the pay at roughly $180 million over the first three years. Disney also reserved another $30 million to fund retention bonuses down the line, according to Bloomberg. Portions of that money would be released one year and two years after the deal closes.

The "vast majority" of staff who received Disney job offers said yes, according to TechCrunch. Disney would permit employees to explore openings at other firms, according to Bloomberg. A bankruptcy auction would occur in November should rival bids be submitted, Bloomberg said.

The filing said Character.AI had been burdened by steep costs, as well as possible legal liabilities and dealings with regulators, even though it had a sizable and active community of users, according to TechCrunch. The company is also the subject of government probes tied to worries about children's safety, according to TechCrunch.

State attorneys general argued in a court filing dated Oct. 14 that whoever acquires the platform ought to adopt safeguards such as robust age checks, according to Bloomberg. The states also asked for protections that would prevent minors from entering open-ended conversations where sexual, violent or otherwise harmful material could appear.

Character.AI filed for Chapter 11 bankruptcy on Oct. 12 and agreed to sell some assets to Disney for $20 million. Disney would serve as the stalking horse bidder, which leaves the door open for rival buyers to submit higher offers. The company said it expects the sale process to conclude by late November or early December. If the auction ends without a buyer prepared to keep the platform running, Character.AI said it would cease operations.

Karandeep Anand, Character.AI's former CEO, was named Disney's first chief technology officer in September. At the time, Disney said a number of Character.AI's technical staff were expected to move to Disney with him. Anand's hiring was tied to a wider licensing agreement under which Disney can deploy the AI company's technology, according to Bloomberg.

A Disney representative did not return messages seeking comment from Bloomberg.