Disney to hire most of Character.AI staff for $60 million

Character.AI's bankruptcy filing this week sets the stage for Disney to absorb most of its workforce. The filing says that despite a large and engaged user base, the startup has been hobbled by high costs and by potential litigation-related liabilities and regulatory engagement. The company was sued by the mother of a 14-year-old boy who said her son became obsessed with one of its chatbots before committing suicide, and it also faces government investigations over child safety concerns.

The arrangement with Disney is structured as a stalking horse bid, meaning another company could still come forward with a higher offer. That leaves the final destination of the workforce — and the assets Disney had previously agreed to acquire for $20 million — open to a competing bid. For Disney, the filing points to a transfer of a large share of Character.AI's staff at an estimated $60 million in annual compensation, though the stalking horse process means the roster could change if another suitor steps in.