Disney has agreed to offer jobs to most employees at AI startup Character.AI, which filed for bankruptcy earlier this week. The move comes as the entertainment giant expands its technology capabilities and prepares to acquire some of the startup's assets.
According to a legal filing reported by Bloomberg and cited by TechCrunch, Disney has agreed to make employment offers to at least 60 Character.AI employees, with estimated annual compensation of USD 60 million.
Most Employees Accept Disney’s Offers
The filing states that the ‘vast majority’ of Character.AI employees offered positions at Disney have accepted them. The arrangement marks a significant transition for the startup's workforce as the company navigates bankruptcy proceedings.
Character.AI's former chief executive, Karandeep Anand, recently joined Disney as its first-ever chief technology officer. His appointment brought the startup's leadership into the entertainment company's technology operations.
Disney had also previously agreed to acquire some of Character.AI's assets for USD 20 million. However, the proposed transaction remains open to competition, as the agreement is structured as a stalking horse bid. This means another company can submit a higher offer for the assets.
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High Costs and Legal Challenges Weigh on Startup
Despite a large, engaged user base, Character.AI has struggled with high operating costs, potential litigation liabilities, and regulatory scrutiny, according to the legal filing.
The startup lets users interact with AI-powered chatbots, including virtual characters built around different personalities. Its platform attracted attention for enabling conversational experiences with artificial intelligence, but concerns about user safety have also brought legal challenges.
Character.AI was sued by the mother of a 14-year-old boy who alleged that her son became obsessed with one of the company's chatbots before dying by suicide. The company has also faced government investigations over child-safety concerns.
These legal and regulatory challenges have added pressure on the business as it seeks a path forward through bankruptcy proceedings.
Asset Sale Process Remains Open
Disney's agreement to hire Character.AI employees and acquire certain assets does not finalize the sale. The stalking horse arrangement allows competing bidders to submit better offers.
For Disney, the agreement provides an opportunity to bring in AI expertise and strengthen its technology capabilities. For Character.AI, the proceedings could determine the future of its assets and business operations.
The outcome will depend on the bankruptcy sale process and whether another bidder presents a more attractive offer.