Disney's Character.AI deal: $20 million for the tech, $180 million for the people

Disney is putting roughly nine dollars into the people for every dollar it puts into the company, and it is all in writing.

According to PPC Land, a binding term sheet filed in the US Bankruptcy Court for the District of Delaware says Disney expects to spend about $180 million over three years on compensation and retention for roughly 65 Character.ai employees it has hired. Character Technologies Inc., which filed for Chapter 11 on October 12, receives a $20 million stalking-horse bid. For that, Disney gets a perpetual, worldwide, non-exclusive license to Character.AI's technology code and nine patents. Consumer apps, trademarks, user data and finished models are excluded.

Here is the elegant part. The term sheet says employee pay is payable directly to employees, so the estate's creditors have a claim on the $20 million, not the $180 million. WIRED reported that a draft "363 Free and Clear Order" would leave any liability with Character.AI, including legal claims. Separately, PPC Land reports that Character.AI faces investigations by a coalition of 46 state attorneys general. Our earlier coverage of the staff move has the headcount.

According to PPC Land's account of the bidding procedures, rivals have until November 20 at 5:00 p.m. Eastern, and bidding starts at $21.7 million.

My take: a magnificent piece of deal architecture. Disney collects the talent and the code, and the bill for the past stays where it was. Everything is historic. Especially today.