Disney has agreed to make job offers to at least 60 employees of Character.AI, the majority of the chatbot company’s workforce, according to a legal filing in the startup’s bankruptcy case reported on October 18. The offers come alongside Disney’s $20 million bid for a license to some of the company’s technology, and the filing says most of the people who received offers have accepted.

What the filing says

TechCrunch, citing a filing first spotted by Bloomberg, reports that Disney will pay an estimated $60 million a year in total compensation to the employees it hires. The filing describes Disney’s arrangement as a “stalking horse” bid. In bankruptcy sales, a stalking horse is the first bidder to set a floor price, and other buyers can still come forward with a better offer. So the Disney deal is not yet final, and the company that ends up with Character.AI’s assets could be different.

Ars Technica reports that the $20 million offer is for “a non-exclusive perpetual license” of certain intellectual property owned by Character Technologies, the legal name of the company. The press release did not specify which assets Disney wants. It did suggest that Disney could even take over the platform itself, in a transition that Character.AI employees would manage at first. Character.AI told users that the platform will stay online during the sale and that existing subscriptions will continue to be charged unless services change. It expects the sale to finish by the end of November or early December 2026, and warned that the platform would have to shut down if no buyer is willing to take on the potential liabilities.

Why the company is selling

The bankruptcy filing says that despite a “large and engaged user base,” Character.AI has been hobbled by high costs and “potential litigation-related liabilities and regulatory engagement.” The company said last year that its services attracted more than 20 million monthly active users. It has faced a wave of legal and regulatory pressure over child safety. It settled a widely publicized lawsuit from the mother of a 14-year-old who died by suicide after becoming obsessed with one of its chatbots. Two US states are currently suing the company: Kentucky alleges its chatbots encouraged self-harm, and Pennsylvania alleges they illegally posed as licensed doctors.

An unexpected buyer

The deal is surprising because of its history. In September 2025, Disney sent Character.AI a cease-and-desist letter, as reported by Axios, accusing it of using Disney characters in chatbots that Disney said were harmful to children. Character.AI removed Disney-owned characters from its platform afterward. Since then, Character.AI’s former chief executive, Karandeep Anand, has become Disney’s first chief technology officer.

Deadline reported, as summarized by Ars, that Disney has been looking for ways to “get in the AI game and profit from its boom” since a planned partnership with OpenAI fell through after the abrupt shutdown of Sora. A chatbot platform with a proven fan base is one possible route, though Disney has not said whether it plans to use the technology in products for children. Disney did not respond to Ars’ request for comment on that point.

Why it matters

The episode shows several trends at once. First, “acqui-hires” are increasingly the exit for AI startups that cannot cover the costs of running consumer chatbots, with the buyer paying mainly for people and a license rather than for the whole company. Second, legal liability is now a line item in AI valuations: the filing itself names it as a reason for the sale. Third, media companies that once confronted AI firms over characters and copyrights are now buying from them, a pattern also visible in licensing arrangements covered in our explainer on AI content licensing deals.

For startups, the lesson is that a large user base does not guarantee a viable business when inference costs and safety obligations are high. For parents and regulators, the open question is who inherits responsibility for the chatbot products and their safeguards if a new owner takes over.

What to watch next

  • Whether another bidder tops Disney’s stalking horse offer before the sale closes.
  • Which specific assets and characters the license covers once the terms are public.
  • Whether the sale resolves or transfers the pending Kentucky and Pennsylvania lawsuits.
  • How Disney describes any consumer products built on the technology, and what safeguards it promises for younger users.
  • Whether other struggling chatbot startups pursue similar team-plus-license deals.

Key takeaways

  • Disney will offer jobs to at least 60 Character.AI employees, with an estimated $60 million in annual pay.
  • The deal sits beside a $20 million offer for a non-exclusive perpetual license to some technology.
  • It is a stalking horse bid, so the final buyer is not settled.
  • Character.AI cites costs and litigation exposure as reasons for the sale.
  • Disney had accused the company of misusing its characters just over a year ago.

Frequently asked questions

Is Disney buying all of Character.AI?

No. The reported offers cover a license to certain intellectual property and employment offers for most staff. The press release said Disney might take over the platform, but nothing is final until the court approves a sale.

What happens to Character.AI users in the meantime?

The company says the platform stays online during the sale and subscriptions continue as before. It also warned that the service would have to shut down if no buyer accepts the liabilities.

What is a stalking horse bid?

It is an initial offer in a bankruptcy auction that sets a minimum price. Other parties can still bid higher, which is why the outcome remains open.