Character.AI Seeks a Buyer as Paid Subscriptions Continue

Oct 19, 2026

Disney is seeking long-term rights to Character.AI's technology as the bankrupt chatbot company looks for a buyer. Paid subscriptions remain active, but the service's future is uncertain.

Character.AI, a service that lets people chat with AI-generated characters, filed for Chapter 11 bankruptcy protection in Delaware on October 12. Its paid subscriptions remain active, and the company says billing is unchanged for now.

Whether the platform will remain available after the sale is less clear. Character.AI hopes to find an offer that allows the service to continue operating. If no such proposal emerges, the company says it will wind down the platform.

The company says it intends to give subscribers advance notice if paid features change. Its bankruptcy update doesn’t explain how unused paid access would be handled if the platform closes. Character.AI also says its privacy practices remain unchanged and that users can export their data or delete their accounts.

Disney Seeks Technology Rights, Not the Consumer Platform

Disney has proposed a $20 million transaction that would give it a permanent, nonexclusive license to certain Character.AI technology. The licensed assets include technology developed for areas such as AI models, training infrastructure and trust and safety. The consumer apps and users’ data, including their conversations, are excluded from the license.

The proposed agreement also gives Disney protections around continued access to that technology. The licensed rights are written to survive changes in ownership or another bankruptcy, while Character.AI would have no obligation to maintain, support or update the technology after the transaction.

Disney has already hired most of Character.AI’s workforce under an arrangement reached in September, including employees who can temporarily help keep the platform operating during the sale process. Other bidders can make competing offers, and Disney’s proposed transaction still requires court approval.

The Business Was Still Losing Money

Character.AI’s court filings show a business that had grown its revenue but was still spending considerably more than it brought in.

Subscriptions generated about $2.8 million in August, while advertising contributed about $2.5 million, according to CEO Colin Adams’s court declaration. Operating expenses were about $13.3 million that month, excluding legal fees. The company had already reduced costs by cutting staff and moving computing workloads to less expensive infrastructure.

Those figures cover the full business, including its free service, and come before the September staffing agreement with Disney. They don’t tell us whether Character.AI’s paid subscriptions were profitable on their own.

Adams said the company’s legal and regulatory exposure had also made it difficult to raise new capital. Character.AI had spent more than a year looking for an investor, buyer or strategic partner before turning to the current bankruptcy sale.

Regulators Raise Concerns About the Sale

A coalition of 40 attorneys general filed a notice on October 14 seeking protections for children and consumers as Character.AI sells its assets. Their concerns include sensitive user information, private conversations and safeguards around harmful chatbot behavior.

Character.AI says it has restricted open-ended chat for users it identifies as under 18. The attorneys general argue the protections remain inadequate. A Character.AI spokesperson told WIRED that the filing did not accurately portray the safety of its platform.

The attorneys general’s filing does not decide those allegations or impose conditions on the sale. It preserves their ability to object as the bankruptcy proceeds, including if a broader sale involves assets or data outside Disney’s proposed technology license.

A hearing on the proposed bidding procedures is scheduled for October 30. Character.AI expects the sale process to finish in late November or early December.

Insider Take

Disney is negotiating for technology rights designed to survive a change in ownership or another bankruptcy. Character.AI's paying subscribers still don't know whether the service they pay for will survive the sale.

Disney's proposed license excludes the consumer app and its users' data. The technology could continue serving Disney even if Character.AI shuts down. Meanwhile, the company is still billing subscribers and has promised advance notice of changes, without explaining what happens to unused paid access if the platform closes.

For other subscription operators, a similar problem arises when an outside AI tool becomes part of a paid offer. A feature that starts as an experiment can quickly become something customers expect. If the provider disappears, replacing the software may also mean dealing with stored information, customer preferences and a disrupted experience.

Character.AI may yet find a buyer who keeps the service running. But the proposed Disney deal shows how rights to a technology can be protected while the people paying to use the service are still left wondering what happens next.

Related Member Resources

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