Log in
Character.ai’s bankruptcy is the one of the first dominos to fall in the long-foreseen AI bubble. The circumstances of its bankruptcy are exactly what critics of AI have been saying would happen: Character.ai lit a huge amount of money on fire running its product, did not bring in a lot of revenue, and faced enormous legal fees after causing harm to its users. Enshittifying its product to try to make its expenses cheaper did not work, according to a narrative filed in bankruptcy court Tuesday.
Disney has reportedly offered Character.ai $20 million to license some of its intellectual property; Last year, Disney sent Character.ai a cease and desist letter demanding it stop using its copyrighted characters without permission. In 2023, it was valued at $1 billion after raising $150 million in a round led by a16z.
Character.ai is one of the best-known AI chatbot companies that has become popular in the AI companion space. The company has faced various legal problems after being sued by the family of one of its users who killed himself after chatting with a Character.ai chatbot, and has been the target of regulators pushing for age verification tech because of its popularity with kids. In its bankruptcy filings, the company says that its enormous legal costs contributed to its bankruptcy, but that even without the legal problems, its business was wildly unsustainable.
An affidavit filed in bankruptcy court by Character.ai CEO Colin Adams noted simply: “Character’s impressive technology is expensive to operate,” and “at all times, Character has struggled with profitability and its operational expenditure has been high.”
The company said that in 2024, the company spent $13.8 million per month on AI compute; in 2025, it spent $10 million per month on AI compute. The company’s subscription revenue peaked at $2.8 million per month, but at times was less than $1 million per month. Its revenue from all sources, including ads, has peaked at $5.3 million per month.
The company spent $56.1 million on compute costs between January and August of 2026 alone and as of August was losing “approximately $8-9 million per month,” which it said was a massive improvement over the previous year. The company spent $19.7 million on employee salaries and benefits during that same eight-month time period and that a lot of employees quit because they “began questioning Character’s long-term viability,” according to the company.
Character said that its finances had improved to only be losing $8-9 million per month by taking “significant actions to reduce operational costs and improve revenues” by spending less on compute by simplifying its AI model, laying off staff, and injecting ads into its chats.
In May, 404 Media wrote that Character.ai’s changes are “what AI enshittification looks like,” with tons of ads, usage limits, guardrails, and “lobotomized” models. In the bankruptcy filing, Adams essentially admits that this enshittification was the strategy: “Character has, however, taken significant steps to reduce its operating burn, including transitioning inference workloads to lower-cost GPU capacity and post-training open-weight models rather than developing proprietary foundation models. At the same time, Character reduced its employee headcount,” he wrote. “In mid-2025, Character launched in-app advertising […] in early 2026, Character also introduced in-app purchases.”
While the lawsuits against Character are significant, they are also not unusual for an AI industry that has been plagued with legal problems relating to the theft of intellectual property and suggesting self harm or violence to their users. In other words, there is nothing in Character’s bankruptcy filings that could not be said about many other AI companies that are spending a huge amount of money on compute without having a revenue model that can support it. The difference between Character AI and behemoths like OpenAI, Anthropic, Meta, and Google is that those other companies have been able to repeatedly get injections of new cash, or, in the case of Meta and Google, have been able to subsidize their AI products with revenue from their massive advertising businesses.
The company said in a blog post that it will continue operating through the bankruptcy process: “The Character.ai platform remains up and running, and you can continue to access all services at this time. We're focused on finding the best path forward for our platform and community.”
As frontier models from the big players get better and have fewer guardrails, they will also likely continue to eat into the user base of more specialized products like Character.ai. Much of what you can do on Character.ai you can also do on ChatGPT or with Meta’s Muse, for example. It’s not clear whether AI giants like OpenAI and Anthropic, or the AI industry in general have gotten too big or too important to fail, but Character’s bankruptcy shows that the runway for second-tier players is over.
It seems as though Epic Games has gotten itself in a bit of a pickle. In March, the gaming company laid off 1,000 employees after a reported “downturn in Fortnite engagement” forced them to cut costs. But, wouldn’t you know it, those employees were actually pretty crucial in making the projects that could have helped the developer boost its engagement. The company is working on a Disney project, which will feature characters from Marvel and Star Wars, which was set to be out in March. However, according to a new report in Bloomberg, the company underestimated how many people it would take to produce the game. Now, not only is the project delayed, but it’s an “AI first” project.
Read more of this story at Slashdot.
Trump says the U.S. will obtain diesel from Russia, relaxing years of U.S. pressure on Moscow, to combat prices before midterms. He said he struck the deal with Russian President Vladimir Putin in a phone call.
(Image credit: David Zalubowski)
Mike Ditka, the ferocious titan who defined the scrappy determination of the Chicago Bears as player and coach, and the football commentator and product endorser whose sharpness and good humor made Sunday afternoons feel like quality time with dad, has died at 86. An announcement was posted on X by WSCR’s Jarrett Payton on Friday, who shared a statement on behalf of the Ditka family.
“It is with profound sadness that we announce the passing of our beloved husband, father, grandfather, and friend, Mike Ditka,” the post read. “While the world knew Mike as a Hall of Fame football player, legendary coach, and leader of the Chicago Bears’ Super Bowl XX championship team, we knew him as the heart of our family. Mike will be missed beyond measure and remembered forever.”
Indeed, the world’s image of Mike Ditka as a dominant presence in the National Football League, with his push-broom mustache and wry, crinkled grin that belied a gruffness that rankled many who worked with him, is just shorthand for a life defined by as many setbacks as triumphs. Michael Keller Ditka’s storied career took shape during high school in the steel town of Aliquippa, Pennsylvania, where he was encouraged to play for the Pitt Panthers at the University Of Pittsburgh. Before he could pursue his ambition of becoming a dentist, Ditka led the Panthers for three successful seasons. Despite this versatility on the gridiron, football wasn’t Ditka’s only college interest. His bullish frame, which he would use to his constant advantage during play, established him as a three-sport varsity athlete in football, basketball, and baseball, and an intramural wrestling champion for his school.
Ditka’s belligerent prowess as a quadruple-threat was well-known: Kentucky basketball coach Adolph Rupp once referred to him as a “hatchet man” on the court, while the Panthers’ wrestling coach, Rex Peery, once said Ditka had the grit to be an NCAA wrestling champion if he’d gone for varsity. This scrappiness benefitted Ditka all his life. By the time he signed with the Chicago Bears in 1961 (as a first-round draft pick), his reputation as a heavy-hitter preceded him. He was known for his brute strength and brick-wall blocks, and a noted impatience for fellow players he felt weren’t hitting hard enough during practice. These qualities made him an asset on the field and a source of aggravation for the Bears’ owner, George Halas, who ultimately traded Ditka to the Philadelphia Eagles in April 1967 in a fit of exhaustion. “Mr. Halas made the right decision,” Ditka recalled in 2013. “I was a pain in the ass.”
Ditka considered his time away from the Bears a personal low, and took to drink during his short-lived Eagles run. “I really drank a lot,” he said in Ditka: An Autobiography, which he co-wrote with the Chicago Tribune‘s Don Pierson. “Almost killed myself drinking.” Yet, like most everything in Ditka’s life, he endured this low point with the Eagles, and that perseverance eventually led to Dallas Cowboys coach Tom Landry tossing him a career lifeline in 1969. Under Landry’s mentorship, Ditka renewed his focus, playing for the team until 1972. After he and his team defeated the Miami Dolphins in Super Bowl VI, he accepted an assistant coach role from Landry from 1973 to 1981. “[Before the Cowboys,] I was done, finished, and I had made the decision to retire,” he said during a jersey-retiring ceremony in 2013. “I was hurt all the time; I didn’t enjoy the game. I was in bad shape physically, mentally, and socially… I only came back because of a call from Tom, who told me he was willing to take a chance on me, if I was willing to take a chance on myself.”
As his reputation grew on the sidelines, where Ditka could be seen bellowing at players next to the comparatively stoic Landry, a call from Chicago would steer Ditka back to the city that he would ultimately call his home. George Halas, now in his eighties, had chosen Ditka over a heavy field of candidates—a move precipitated by a letter Ditka sent to the Bears owner in 1981, which he hoped would mend their professional and personal rifts and put him in contention as the Bears’ head coach someday. The letter seemed to have worked. “I asked [Tom], ‘Do you think I’m ready?’ and he said, ‘Yes, I think you’re ready.’ An endorsement like that from Coach Landry was all I needed,” Ditka said.
