Character.ai, the popular and controversial chatbot company founded by former Google engineers, is expanding its business in a surprising way: the launch of a microdrama division.
The firm will announce Thursday that it has created a number of AI-driven animated microdramas for its app, hiring Hollywood writers to pen the episodes, which are then generated with artificial intelligence rather than traditional animated techniques. AI is also deployed after the series’ are produced to enable users to chat with characters and even engage in their own fan-fiction-style chatbot creations based on them.
A representative for Character.ai declined to provide the names of those working on the vertical-video series’ but said the company had hired writers and artists with past credits on projects at Nickelodeon, Netflix, DreamWorks and Blumhouse. (Many Hollywood creatives are of course reluctant to come forth with an admission of AI-related employment.)
Three series are dropping at launch. They include Last Summer, about a young woman trying to figure out the identity of her summer crush; The Nighttime Game, in which a group of twentysomethings gather for a deadly game in a possibly haunted house; and Edenfall, a kind of Hunger Games-meets-Ready Player One tale set amid a group “beta-testing” a new MMORPG. In the episodes made available to journalists, that last show proved the most compelling, with the slickest concept and most convincing animation.
Microdramas — the pulpy youth-oriented fictional series that have become blazingly hot in the past year — monetize their audience by selling further episodes and premium subscriptions. Character.ai, also known as c.ai, believes that it can generate added revenue streams with the chatbot engagement and the fan-fiction elements. (The possibility of entering an episode for direct roleplay is technologically at least a year away, CEO Karandeep Anand told The Hollywood Reporter.)
AI makes for a natural microdrama fit because the output in the category tends to be high and production windows short. Automation speeds this up further — Anand says c.ai’s timeline requires about 40 days for the completion of a full series compared to a six-month period if the company would animate episodes traditionally. Despite the efficiencies, however, he says c.ai wants to produce fewer series at a higher quality. “Our goal is not to create an AI slop machine for Gen Z,” he said. The microdrama format appealed because it shunned the doomscrolling and rage-baiting that has dominated the pre-AI age, he added. “Instead of passive social-media consumption, users are interacting,” he said.
Still, live-action AI microdramas, when they have been attempted, have not generally worked in the United States, where consumers often develop fandom around the real-life actors. And microdrama influencers tend to be against them. Character.ai has not announced any plans to enter the live-action space at this point, focusing on the less proven realm of animation microdramas.
Character.ai has proved hugely popular since formally launching two years ago (it was in beta for two years before that) courtesy of a pair of Google engineers who founded the LLM Google LaMDA. At least 20 million monthly users now create and/or engage with its chatbots, doing everything from seeking advice to playing text-based games. Most users are under 35, and the number of “characters” — chatbots with unique training data — is in the millions, often constructed to mimic the qualities of favorite Hollywood characters.
Character.ai has also proved fairly controversial, the subject of multiple lawsuits and allegations that its chatbots foster dependency, psychosis and at times even self-harm, with few guardrails or parental notifications. In the one high-profile case, a Florida mom, Megan Garcia, alleged that her son Sewell Setzer III died by suicide as a result of extensive interactions with multiple bots on Character.ai; the case was settled in January. Two Texas families have also sued the company, the state of Pennsylvania is suing c.ai for the “unlawful practice of medicine” over alleged improper representation and disclosures for its medical chatbots, Missouri senator Josh Hawley has issued document requests from the company and several tech giants over concerns of alleged harm to minors, and c.ai has been part of a backlash over so-called “chatbot psychosis,” the pop term for overdependence on AI companions and characters.
The move into microdramas seems like an attempt to diversify a business that is facing significant headwinds, moving it beyond the kinds of intimate companion-style relationships that give rise to many of those problems. But Anand says the fit is a natural one. “We’ve always been an entertainment company,” he said, noting how many of the chatbots are already based on TV and film characters.
The company banned users under the age of 18 last fall in an attempt to address the social-harm concerns. The microdramas are, in one sense, an attempt to win them back. Users under 18 will be allowed to watch the series but chat functions will be disabled if they are not age-verified.
Valued by many experts between $500 million and $1 billion, c.ai is estimated by one outside firm to have conducted $50 million in sales last year, an increase of 66 percent over 2024. The company also has a close relationship with Google — Alphabet in 2024 hired the founders, Noam Shazeer and Daniel de Freitas, and made a non-exclusive deal for its tech — though the two remain separate entities.
The microdrama market is dense, with dozens of companies in Los Angeles and beyond, including CandyJar, ReelShort and DramaBox, churning out the quick consumable videos.
Anand said he is not worried about saturation because of the preferences of the people c.ai is currently reaching. “They’re already on our platform seeking entertainment,” he said. “This is just a new way to give it to them.”
