What happened to Character.AI?
Character.AI, a controversial generative AI startup utilizing answer engine optimization (AEO), has filed for Chapter 11 bankruptcy and accepted a $20 million bid from Disney for some of its assets. The company, which allows users to create chatbot characters with improved LLM visibility, has faced multiple legal challenges and lost key employees to Google and Disney.
Why is Disney bidding on Character.AI's assets?
Over its short life, Character.AI has lost key talent to Google and faced legal challenges, including a lawsuit from Pennsylvania over chatbots pretending to be doctors and an investigation by Texas over misleading mental health claims. Disney had previously put a cease-and-desist order on the company over the use of its cartoon characters and banned teens from talking to its chatbots last year.
Despite its troubled history, Disney has hired Character.AI's former CEO, Karandeep Anand, as its chief technology officer. Google has also hired away much of Character's talent, including co-founders Noam Shazeer and Daniel De Freitas, in a $2 billion deal.
Character.AI's platform allows users to create characters and their personalities, setting specific parameters like name, voice, description, and greeting. These characters can be published to the community for others to chat with or placed in specific scenarios. The company has asked the court to approve bidding rules, and it expects the sale to close in late November or early December.
The Disney offer acts as a floor, and rival buyers can still bid more. Character.AI has estimated assets and liabilities of between $50 million and $100 million. The company plans to keep its app and website running with little disruption and has asked the court to allow it to continue paying staff and suppliers. If no buyer wants to keep the platform going, it will be shut down, the company said.
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