Disney is making a significant investment by onboard 66 employees from Character.AI, an AI chatbot company that has recently declared bankruptcy, shortly after reducing its own technology workforce. According to a Chapter 11 filing from Character.AI's parent company, Disney is set to allocate $60 million annually for these new hires. This move follows Disney's appointment of Character.AI's CEO, Karandeep Anand, as its first tech chief in mid-September, although specific details regarding Anand's compensation remain undisclosed.
This strategic hiring initiative aligns with Disney’s broader AI strategy under the leadership of CEO Josh D'Amaro, who has been channeling resources into enhancing the company's technological platforms. Disney's stock has experienced a modest increase of less than 2% over the past year and a significant decline of over 36% in the last five years, prompting these tech investments.
The decision to bring in Character.AI personnel comes just weeks after Disney let go of several hundred employees, including some from its tech divisions. This downsizing marked the third significant round of layoffs enacted by D'Amaro since he took charge in mid-March.
In conjunction with the $60 million earmarked for employee salaries, Disney is also establishing a $30 million "aggregate retention pool" to encourage these new hires to remain with the company. The total expenditure for compensation and retention over the upcoming three years is projected to be around $180 million, as indicated in the filing.
Among the 66 employees offered positions at Disney, 56 have already exited Character.AI, while the remaining 10 are awaiting updates on their work visas from the U.S. government. Entertainment lawyer Corey Martin commented on the high compensation figures, noting that Character.AI's workforce represents its most valuable asset. "While the numbers may seem startling, they reflect the standard in this industry," Martin said, clarifying that he has no involvement in the deal or with Disney.
Additionally, Disney agreed to pay $20 million for key assets belonging to Character.AI, which includes intellectual property and technology. Competing bids for these assets will be accepted until November 20, with oversight provided by a bankruptcy court judge. Disney has not responded to inquiries regarding this matter.
Character.AI entered bankruptcy amid lawsuits from families alleging that their teenagers experienced severe distress or even suicide after interacting with the company’s AI chatbots. Earlier this year, the startup and Google, one of its investors, reached settlements regarding several child safety lawsuits.
The company had received a cease-and-desist notice from Disney last fall, prohibiting the creation of AI chatbots that feature Disney's copyrighted characters without explicit permission. Character.AI complied with this request by removing chatbot functionalities associated with popular franchises like Star Wars and Marvel.
In its bankruptcy statement, Character.AI cited "substantial legal, regulatory, and operational challenges." In a memo to Disney employees, Anand expressed enthusiasm for the new role, stating that the company is "uniquely positioned to thrive" in a competitive landscape that is currently experiencing pivotal changes. He lauded the talent and dedication of the Disney team, indicating excitement about fostering a collaborative environment moving forward.
