Disney to hire most of bankrupt Character.AI's workforce

Disney is set to absorb the majority of Character.AI's staff after the chatbot startup filed for bankruptcy in October 2026. According to a court filing, the entertainment company has agreed to extend employment offers to at least 60 Character.AI employees, more than half of the startup's workforce.

The filing puts the estimated annual compensation for those hires at around $60 million. It also states that the "vast majority" of employees who received an offer from Disney have accepted it.

A deal that could still be outbid

Character.AI had previously disclosed that Disney agreed to buy some of its assets for $20 million. Disney's offer is structured as a stalking horse bid, meaning it sets a floor price in the bankruptcy process and another company could still step in with a higher bid.

The two companies were already closely linked. Karandeep Anand, Character.AI's former chief executive, recently joined Disney as its first chief technology officer.

Costs, lawsuits and regulators

In the filing, Character.AI says that despite a large and engaged user base, it was weighed down by high costs as well as potential liabilities tied to litigation and its dealings with regulators.

The startup has been sued by the mother of a 14-year-old boy who said her son became obsessed with one of its chatbots before taking his own life. Character.AI is also the subject of government investigations over child safety concerns.

The outcome highlights how expensive it is to run consumer AI chatbots at scale and how legal and safety scrutiny can compound that pressure for smaller players. For Disney, the arrangement brings in an experienced AI team as the company builds out its technology leadership.