Disney expects to spend about $180 million on the Character.ai staff it hired

What the filing shows

Disney expects to spend about $180 million over three years on the Character.ai employees it hired, according to a binding term sheet attached to the bidding procedures motion that Character Technologies, Inc. filed on 13 October in its Chapter 11 case in Delaware. The bankrupt company itself is set to receive $20 million. PPC Land read the 295-page document set on the day it was filed. Business Insider reported the pay figures on 16 October, and Bloomberg followed on 17 October, which is when the numbers reached a wide audience.

The term sheet is part of the Exclusivity and Prepayment Agreement that Disney and Character.ai signed on 18 September 2026, before the bankruptcy. It is the first document in the case to put a price on the people rather than the technology. Our earlier report on the Chapter 11 filing and Disney’s $20 million stalking-horse bid covered the license and the sale timetable; the employee terms add the part of the deal that never passes through the estate.

The case is No. 26-11603 before Judge Brendan Linehan Shannon in the US Bankruptcy Court for the District of Delaware, according to the debtor’s claims agent, Stretto. A bankruptcy judge still has to approve the bidding procedures and any sale.

How the $180 million breaks down

As quoted by PPC Land, the term sheet says: “Based on a preliminary review of approximately 65 Offered Employees, Disney estimates the annual run rate total compensation of the Offered Employees to be approximately US$60 million.” On top of that, Disney “will also provide an aggregate retention pool in an amount equal to US$30 million,” paid in portions on the first and second anniversaries of hiring and only to people who stay. The document then states that “the estimated total compensation and retention over years 1-3 is estimated to be approximately US$ 180 million.”

Pay is set under Disney’s own practices, a mix of salary, bonus and Disney stock-based compensation. The term sheet required up to six “Key Employees,” including the chief executive, to accept offers within ten days of the September agreement, and Disney committed to offer jobs to at least 60 others.

The most important clause for creditors is that none of the $180 million is consideration for the company. “Employee compensation, retention payments and equity incentives will be payable directly to employees and will not constitute consideration payable to the Company,” the term sheet says. Creditors can look to the $20 million; they have no claim on the money flowing to the people who left.

PPC Land worked out that the run rate averages roughly $923,000 per employee per year. That is its own arithmetic, not a filing figure, and an average across 65 people will hide a wide gap between the chief executive and junior engineers. Disney has not disclosed what it pays Karandeep Anand, the former Character.ai chief executive who became Disney’s first company-wide chief technology officer in September.

Who moved and who is still waiting

Business Insider reports that 66 Character.ai staff accepted Disney offers, that 56 had already resigned from the startup, and that the other 10 are waiting for the US government to update their work visas. AI Weekly’s summary of the filings says the company had about 86 full-time staff on 30 September and that the 10 hold H-1B, TN or F-1 status. That leaves Character.ai with roughly 20 people of its own.

To make the move possible, Character.ai agreed to waive notice periods and not to enforce non-compete, non-solicitation, confidentiality or invention-assignment covenants against anyone joining Disney, according to PPC Land’s reading. It also agreed to release those employees, including the chief executive, from claims such as breach of fiduciary duty, and not to try to rehire them for three years. At closing, Disney would also buy any remaining claims Character.ai holds against them; the motion says the debtor does not believe those claims have any value.

The motion acknowledges that Disney hired an insider of the debtor, the former chief executive, but argues the court should still apply the usual business-judgment standard because the deal was run by independent committees and former insiders had no meaningful input into the case.

What Disney gets for the $20 million

The money that does reach the estate buys a perpetual, non-exclusive, royalty-free license. According to PPC Land, the schedule of licensed technology lists code and tooling in 25 areas, including the post-training stack and reward model, a model safety stack with fallback classifiers, the inference and serving stack, a long-horizon safety monitor called Guardian, an age prediction model, red-teaming frameworks and the multimodal image and video stack. Nine patents and applications are included, among them issued US patents on audio turn understanding and on optimising the key-value cache for large language model inference.

What Disney does not get matters as much. The license excludes the Character.ai app and brand, its domains, user data and chats, training data and the finished models. Character.ai keeps ownership of the technology and may license it to others, so a buyer of the app could get the same code Disney is licensing, subject to Disney’s permanent rights.

Disney has already paid $7.5 million of the $20 million: a $5.5 million non-refundable payment and a $2 million deposit on 18 September. The remaining $12.5 million is due at closing. Until then, Disney’s new employees keep the app running under a no-fee transition services agreement that runs until 18 February 2027 at the latest and caps each person’s transition work at 20 percent of their week.

Why the deal is structured this way

The arrangement is a familiar acqui-hire shape: take the team, license the technology, leave the company and its liabilities behind. Character.ai has been here before. In August 2024 Google signed a licensing deal worth a reported $2.7 billion that brought Character.ai’s founders to Google. Two years later the company is set to receive $20 million while the people hired from it are valued at about nine times that amount in pay over three years.

The gap reflects what is hard to sell. The app carries a heavy litigation load from families who say their teenagers were harmed after using its chatbots, and the motion, as quoted by PPC Land, says feedback from about 28 parties approached by an earlier banker was that “the litigation and regulatory overhang on Character was too great.” Forty state attorneys general have also put the court on notice about children’s data in any sale. By licensing code instead of buying the platform, Disney avoids the user data and the lawsuits tied to it.

It also fits a wider pattern in AI labour. Companies are paying heavily for small teams of experienced model builders while cutting elsewhere: Business Insider notes the hires came two weeks after Disney laid off several hundred workers, including some tech staff. At the frontier labs, Anthropic’s own research on agent hours and falling junior hiring points the same way, with experienced people in demand and entry-level roles shrinking.

Limitations and what happens next

Several caveats apply. The $60 million run rate is an estimate based on a preliminary review, and the $180 million is Disney’s own projection, not a contract value. The term sheet speaks of about 65 offered employees while later reporting counts 66 acceptances. We have not been able to read the motion on the public docket ourselves; the figures here come from PPC Land’s quotations of the term sheet and Business Insider’s report, which agree on the numbers. Disney did not respond to Business Insider’s request for comment.

The calendar is short. The debtor asked for a hearing on the bidding procedures on shortened notice, around 26 October. If they are approved, bids are due on 20 November, an auction would follow on 23 November and a sale hearing on 24 November. Any rival must top Disney by at least $1.7 million, a $700,000 break-up fee plus $1 million. If Disney loses, it must let the winner interview and make offers to the staff it hired, though it can wall off up to 20 percent of them.

If no one else bids, Character.ai says its platform will be wound down. Watch for objections from creditors or state attorneys general to the employee releases, whether any buyer emerges for the app and its users, and whether the court asks for more disclosure about the insider hire.