Interview with Character.AI CEO Karan Anand: From AI Companion Chatbot to AI Entertainment Company?
Can The Controversial Company Successfully Pivot to Being an AI Entertainment Company Focused on Fandom?
Today, I feature my exclusive interview with Karan Anand, CEO of Character.AI — the controversial “AI companion chatbot” company that has been at the center of the AI storm (including tragic stories of teens who commit suicide after having established deep relationships with their chatbots).
Likely surprising to many of you (it was to me), Character.AI is now pivoting to be first and foremost an AI entertainment company — courting major studios and creators alike to build and monetize fandom. This is Anand’s elevator pitch:
“Think if Roblox, TikTok, and Wattpad had a baby ... this is what Character.AI is rapidly evolving into.”
But can Character.AI successfully make this pivot? What’s the convincing pitch to IP holders? And how credible is its pitch on the critical issue of teen safety? Can the company gain the trust of major studios, IP owners and celebs/influencers from whom they'd like to license content for fandom?
I ask Anand the hard questions. And to his credit, he doesn’t shy away from any of them.
It’s an important, fascinating, and candid conversation. We cover a lot of ground in 60 minutes, every minute of which is newsworthy. The full interview is here via this link or the buttons below (you can watch or listen):
Some Interview Highlights
1. Character.AI’s Strategic Pivot to Entertainment
“In the last 16 to 18 months that I’ve been involved with the company, we have a very clear focus that we are the AI entertainment app ... I envision a completely new world of entertainment which is natively powered and built with AI as opposed to AI being latched on later.”
Context: Anand clarifies that Character.AI is moving away from being seen primarily as a “companion” app toward becoming a holistic multi-modal entertainment platform that features immersive stories and is focused on fandom.
2. Its Unique “Roblox Meets TikTok” Vision
“Think if Roblox, TikTok, and Wattpad had a baby ... this is what Character.AI is rapidly evolving into.”
Context: Karan lays out the “elevator pitch” for the company’s new identity, combining user-generated worlds (Roblox), short-form engagement (TikTok), and fan-fiction/storytelling (Wattpad).
3. Its “Fan-First” Monetization Strategy
“The fandom is far larger than the franchise itself. More people end up interacting with the fandom than the original content from the franchise ... These [IP] studios are seeing this and they don’t want to miss out on this generational shift.”
Context: Anand explains why major Hollywood studios now seek partnerships with Character.AI. He argues that AI allows studios to monetize the massive engagement happening in fan communities that traditionally occurs off-platform. It’s the Disney “Frozen” model — when that film became the most successful animated movie of all time, largely credited to the fact that for the first time, Disney lawyers took a hands-off approach to fans creating their own videos with the film’s music and IP. That “experiment” ultimately delighted kids & parents and drove a massively successful viral marketing campaign — and ultimately a lasting multi-billion dollar franchise.
4. Child Safety and AI Companions
“Last November ... we entirely shut down chatbots for under-18 ... for minors, they can still use the app and do stories and read books … but you have to be age-verified 18 and above to be able to chat with the bot.”
Context: Anand explains the company’s strategic policy shift, and says he and the company fully support Senators Hawley’s and Blumenthal’s new GUARD Act legislation that would ban “AI companions” for all minors. But Anand also discusses why he believes that Apple and Google’s App Stores should be the first line of defense for age verification.
5. The “Google Deal” and Operational Independence
“Google’s deal with us was purely a backward-looking tech licensing deal to help them build their Gemini models better, versus anything to do with Character.AI as the app or the use case or any of the newer vision that we have on entertainment.”
Context: Addressing the major deal where Google hired Character.AI’s founders and licensed its technology, Anand insists the move actually provided the company with “insane clarity” to pursue its entertainment focus. Interestingly, Character.AI has no outside investors anymore, after reportedly having initially raised nearly $200 million.
IMPORTANT POST-SCRIPT: In our conversation, I asked Anand about the company’s latest lawsuit filed by the state of Pennsylvania alleging that Character.AI chatbots have engaged in the unlawful practice of medicine. After the interview, the company asked me to include its formal statement about that lawsuit. Here it is:
“We do not comment on pending litigation. Our highest priority is the safety and well-being of our users.
The user-created Characters on our site are fictional and intended for entertainment and roleplaying. We have taken robust steps to make that clear, including prominent disclaimers in every chat to remind users that a Character is not a real person and that everything a Character says should be treated as fiction. Also, we add robust disclaimers making it clear that users should not rely on Characters for any type of professional advice.
Character.ai prioritizes responsible product development and has robust internal reviews and red-teaming processes in place to assess relevant features.”
Let’s Meet @ AI On The Lot (May 27-28)
AI on the Lot is the most important “AI meets entertainment” gathering of the year. It’s now in its 4th year — and is a rare “must attend” event. This year’s version takes place on May 27th and 28th in Culver City, California. I’ll be there, as always.
Reach out to me at peter@creativemedia.biz to schedule some time together.
My firm, Creative Media, and I are at the forefront of AI’s transformation of the worlds of media and entertainment, representing leading innovators who leverage the power of AI. We know the issues. In fact, we’re ahead of them. We define real world, practical solutions — and do it far more responsively and cost-effectively than others. We specialize in high impact business strategy & consulting, entrepreneurial legal services. We can be your fractional business team or General Counsel.
Reach out to me at peter@creativemedia.biz to learn more.
I am STRUCK and moved by the tenor and cadence of this interview from start to finish. And if trust, security, and guardrails could indeed be assured (with active parental involvement/awareness for the under-18 user), I might welcome an AI tool for creative expansion with appropriate supervision and transparency. I do appreciate that you, Peter, said 45 minutes in that, "I'm quite the flag-waver in terms of IP holders need to get paid and need to have consent compensation..." And, Karan sounds genuine when he speaks of his own young daughter being his inspiration (my paraphrase). The ills of social media are being recorded and audited with more granularity--but it was years of free rein till regulation was ever suggested, pushed back against, and I (occasionally) fondly recall the early days of FB (when it was a community builder for me in my narrow ecosystems.) As one trying to peacefully coexist with technology since I was 19 (beginning my journey as a typesetter for my college paper in 1984), I have had a complex relationship with "advancement" from time to time.
I'll keep working at finding the Middle Way to live with and use with intention and discernment. And, Peter, I really enjoyed your host style. You have in me a new fan. And, if you ever need a guest who is aligned with your thinking on consent compensation, I have a suggestion. Appreciate your Substack, a lot. ~Deborah