Disney Bids on Character.AI Assets in Chapter 11 Bankruptcy

Summary

Character.AI, the chatbot company known for letting users create and interact with fictional and user-generated characters, has filed for Chapter 11 bankruptcy and begun a court-supervised sale intended to maximize value. Disney Worldwide Services has agreed to pay $20 million to become the stalking horse bidder for a non-exclusive perpetual license covering certain company intellectual property and claims. The arrangement also provides for former Character.AI employees hired by Disney, including former CEO Karandeep Anand, to offer limited transition services so the platform can remain operational during the sale. Character.AI expects the auction to conclude in late November or early December. The company said it had faced significant legal, regulatory, and operational headwinds and that maintaining a safe user experience remains a priority. Founded in 2021, the platform became known for fictional-character chatbots but drew criticism over allegedly unlicensed characters, claims involving self-harm and impersonation of medical professionals, and multiple mental-health lawsuits that it settled in January. The company recently launched platform-native microdramas. Disney’s bid follows its broader interest in AI entertainment, including hiring Anand as chief technology officer, a previous short-lived agreement with OpenAI to license characters for Sora, and its 2026 AI Accelerator program.