Disney has been hit with another lawsuit by investors who believe that the company lied about the losses its streaming division had, its subscription growth and profitability targets for Disney+, which were made by former CEO Bob Chapek.

With Disney’s stock price at its lowest in nine years, many investors are frustrated, and it’s one of the many reasons why Bob Chapek was removed from the position, and Bob Iger was reinstated.   Since then, Disney has drastically lowered its predictions for future Disney+ subscriber numbers, had a major corporate restructuring and gone on a drastic cost-cutting exercise to make sure the streaming services are profitable by 2024.

According to THR, the lawsuit was filed at the California Federal Court on August 23rd 2023, and is the third lawsuit of its kind against the company over its Disney+ predictions.  The lawsuit names former Disney employees, CEO Bob Chapek, Kareem Daniel and former CFO Christine McCarthy

Before Disney+ launched, the company predicted they would hit 90 million subscribers and profitability by 2024, but during the company’s Investor Day event, during the middle of the pandemic, which had seen Disney+ explode globally due to everyone being forced to stay home, Chapek revealed a new plan to hit between 230 and 260 million subscribers.

The lawsuit claims that Bob Chapek and his leadership team “repeatedly misled investors about the success of the Disney+ platform by concealing the true costs of the platform, concealing the expense and difficulty of maintaining robust Disney+ subscriber growth and claiming that the platform was on track to achieve profitability and 230-260 million paid global subscribers by the end of fiscal year 2024.”

The lawsuit also accuses Disney of lying about the extent of its losses on its streaming services and coming up with a scheme to shift costs for marketing and production costs from Disney+ to legacy platforms.  With the Disney+ Originals “Doogie Kamealoha MD”, and “The Mysterious Benedict Society” being shifted to Disney Channel Originals.  Similar changes were made to National Geographic shows.

During the pandemic, Disney turbo-boosted its spending on its streaming services, spending billions of dollars on new content, most of which has since been removed from the streaming platforms as an impairment charge.

Bob Chapek also restructured the company to give all the distribution control to one department, which was a “dramatic departure from Disney’s historical reporting structure and was hugely controversial within the Company because it took power away from creative content-focused executives and centralized it in a new reporting group”.

“With this new structure, Chapek removed budgetary and distribution control from the heads of Disney’s content groups (much to their dismay) and placed control in the hands of DMED’s new Chairman, defendant Kareem Daniel, who reported directly to his long-time mentor Chapek.  The new structure resulted in the duo having near complete control over the Company’s strategic decisions around content.

The lawsuit also states that Disney was using the Disney Streaming Bundle to boost subscriber numbers, stating, “Notably, the bundled offering made up about 40% of domestic subscribers, confirming that Disney was relying on short-term promotional efforts to boost subscriber growth while impairing the platform’s long-term profitability”.

Following the return of Bob Iger as the CEO, he quickly removed Kareem Daniel from the company and returned the power back to the creative executives, including distribution decisions.   This reorganisation change indicates that there was something wrong with the structure, and following the removal of Bob Chapek, there have been drastic changes at Disney+, with a strong push for profitability, with price rises, ad-tiers being introduced and a reduction in original programming.

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Roger Palmer

Roger has been a Disney fan since he was a kid and this interest has grown over the years. He has visited Disney Parks around the globe and has a vast collection of Disney movies and collectibles. He is the owner of What's On Disney Plus & DisKingdom. Email: Roger@WhatsOnDisneyPlus.com Twitter: Twitter.com/RogPalmerUK Facebook: Facebook.com/rogpalmeruk

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