Disney to take on most of bankrupt Character.AI's staff

Disney has agreed to hire most of the staff of Character.AI, the chatbot company that filed for bankruptcy last week.

A legal filing, first reported by Bloomberg, shows Disney agreeing to offer jobs to at least 60 Character.AI employees, the majority of its workforce, with estimated annual pay of $60m between them. The filing says the "vast majority" of those offered jobs have accepted.

A $20m deal

Character.AI's former chief executive, Karandeep Anand, recently became Disney's first chief technology officer, and the start-up had already said that Disney would buy some of its assets for $20m.

The offer is what is known as a stalking horse bid, which sets a minimum price in a bankruptcy sale. Another company could still come forward with a higher offer.

Why Character.AI failed

Character.AI let users create and chat with AI characters, from fictional figures to companions and tutors, and built a large and engaged following, particularly among young people.

But the filing says the company was hobbled by high costs and by "potential litigation-related liabilities and regulatory engagement". It was sued by the mother of a 14-year-old boy who took his own life after becoming obsessed with one of its chatbots, and it has faced government investigations over child safety.

Running large AI models is expensive, because every conversation uses computing power. Companies that offer free or cheap chatbots have struggled to cover those costs, and several smaller AI firms have been bought or folded into bigger companies.

Why Disney wants them

Disney has been exploring how AI can be used across its business, from its films and streaming service to its parks. Hiring an experienced team of AI engineers in one go is a quicker route than recruiting them one by one, in a market where AI talent is in fierce demand.

Big technology and media companies have increasingly struck deals in which they hire a start-up's staff and license its technology, rather than buying the company outright.

Children and chatbots

The safety of AI companions has become a major concern for parents and regulators. In the UK, the Online Safety Act requires services likely to be used by children to protect them from harmful content, and Ofcom has said chatbots are covered. Charities advise parents to talk to children about the apps they use and to look out for signs that a chatbot is becoming a substitute for real relationships.

Anyone affected by the issues in this article can contact Samaritans, free, on 116 123.