Disney to pay $60 million a year for 66 Character.AI workers

Disney is also funding a $30 million retention pool to keep the new hires and expects to spend about $180 million on their total pay and retention over three years, the filing says. Of the 66 workers offered jobs, 56 have already resigned from Character.AI, and the other 10 are waiting for U.S. work visa updates, Business Insider reported. TechCrunch, citing the filing first spotted by Bloomberg, said the "vast majority" of employees who got offers accepted them.

The asset deal: Character Technologies filed for Chapter 11 on Oct. 12 in federal bankruptcy court in Delaware. Under its agreement, a Disney unit would pay $20 million for a non-exclusive, perpetual license to some of the startup's intellectual property and certain company legal claims, and would provide transition services using the former employees it hired, Character.AI said. Disney is the "stalking horse" bidder, which means other buyers can top its offer; competing bids are due by Nov. 20, according to Business Insider, and the company expects a sale to close in late November or early December.

Why the startup failed: In its filing, Character.AI said AI entertainment "has proven to be costly to develop and grow," and that "these high costs, coupled with potential litigation related liabilities and regulatory engagement" left it unable to support the business, CNBC reported. The company faces child-safety lawsuits, including suits filed by Kentucky and Pennsylvania, Reuters reported, and it and backer Google settled several family lawsuits earlier this year, according to Business Insider.

Disney's AI push: In September, Disney named Karandeep Anand, then Character.AI's CEO, to the newly created role of chief technology officer, effective Oct. 2, reporting to CEO Josh D'Amaro. Disney's announcement said "a number of Character.AI's technical team are expected to join Disney." The hiring comes about two weeks after Disney laid off several hundred workers, including some tech staff, its third major round of cuts since D'Amaro took over in mid-March, Business Insider reported. Disney did not respond to Business Insider's request for comment.

The other view: Entertainment lawyer Corey Martin, who did not work on the deal, told Business Insider the pay is not surprising because the startup's engineers are its main asset. "They're highly compensated employees. The numbers can be eye-popping, but it's not that unusual in this space," he said.

Timeline: Sept. 18, Disney names Anand its first CTO. Late September, Disney lays off several hundred workers. Oct. 2, Anand starts at Disney. Oct. 12, Character Technologies files for Chapter 11. Oct. 23, deadline to object to the proposed bidding rules. Oct. 30, court hearing on those rules and on naming Disney the lead bidder. Nov. 20, deadline for rival bids. Late November or early December, expected sale closing.

What's still unknown: Whether any rival bidder tops Disney's $20 million offer; how much Disney is paying Anand, which it has not disclosed; what happens to Character.AI's app, users and data if the platform shuts down; and what products Disney plans to build with the new team.

Pay and staffing figures come from Character.AI's Chapter 11 filing as Business Insider and TechCrunch (citing Bloomberg) described it; they are Disney's estimates, not individual salaries. The per-person average is US Brief's own arithmetic. Disney did not respond to Business Insider's request for comment. Disney's $20 million bid can still be topped by other bidders.