Disney agreed to pay $60 million to 66 employees from an AI startup that filed for bankruptcy, weeks after tech layoffs

Disney is paying up for employees from an AI chatbot startup that filed for bankruptcy, shortly after trimming its own tech workforce.

The Mouse House plans to pay $60 million per year to 66 workers from Character.AI, according to a Chapter 11 filing on Tuesday from its parent company.

In mid-September, Disney hired Character.AI CEO Karandeep Anand to be its first-ever company-wide tech chief. (The company hasn’t yet disclosed how much it’s paying Anand.) These additions are part of Disney’s AI strategy under CEO Josh D’Amaro, who’s been investing in the media giant’s tech platforms to help jumpstart a stagnant stock that’s up less than 2% in the last 12 months and is down over 36% in the last five years.

Disney’s decision to bring in these Character.AI staffers came two weeks after it laid off several hundred workers — including some tech employees.

The late-September cuts were Disney’s third major round of layoffs since D’Amaro took over in mid-March.

In addition to the $60 million in compensation, Disney is setting aside an additional $30 million for an “aggregate retention pool” to incentivize Character.AI employees to stay.

The company expects to spend $180 million on “total compensation and retention” for these staffers in the next three years, the filing said.

Of the 66 Character.AI staffers who were offered jobs by Disney, 56 have already resigned from the AI startup, while the other 10 are waiting for the US government to update their work visas.

Entertainment lawyer Corey Martin of Granderson Des Rochers, who advises companies on media transactions, said he’s not surprised by those pay figures since Character.AI’s employees are its biggest asset. “They’re highly compensated employees.

The numbers can be eye-popping, but it’s not that unusual in this space,” said Martin, who didn’t work on the deal or with Disney.

Disney also agreed to pay $20 million for Character.AI’s key assets, including some of its IP and tech.

Other companies can submit competing bids for the assets by November 20.

The entire process will be overseen by a bankruptcy court judge.

Disney didn’t respond to requests for comment for this story.

Character.AI filed for bankruptcy after facing lawsuits from families who alleged that their teenagers harmed themselves or committed suicide after using the company’s custom AI chatbots.

The AI startup and Google, one of its backers, settled several child safety lawsuits earlier this year.

Disney sent a cease-and-desist letter to Character.AI last fall, telling it not to create AI chatbots featuring its copyrighted characters without permission.

Character.AI complied, removing chatbots with characters from Disney franchises like Star Wars and Marvel.

In its bankruptcy announcement, Character.AI said that it had been facing “significant legal, regulatory, and operational headwinds.” Anand told Disney employees in a memo last Friday that the Mouse House was “uniquely positioned to win” in a competitive media business that he said was “at an inflection point.” The tech chief also said he enjoyed meeting his new colleagues and looked forward to working with them. “What stands out most is the talent and care this team puts into its work, the craft Disney has perfected, and the strong foundation you’ve built,” Anand said.