Disney is facing yet another lawsuit from investors. A new lawsuit was filed on August 23, by Stourbridge Investments, that alleges Disney leadership misled investors about how well Disney+ was performing while hiding the significant financial burden the company was undertaking to make content for the streaming platform.
This suit also names former CEO Bob Chapek, Kareem Daniel, and former CEO Christine McCarthy. Like the previous lawsuit, this suit also claims that Disney leadership tried to hide losses by “inappropriately shifting costs.” Shows meant to be Disney+ exclusives were debuted on other Disney-owned platforms like the Disney Channel to move costs and make the streaming service look more profitable.
According to The Hollywood Reporter, the suit lists statements given by Bob Chapek in 2020 that indicated to investors that Disney+ was doing well.
“Investors take issue with statements from the executives touting gains. For example, in December 2020, Chapek said, “Disney+ has exceeded our wildest expectations with 86.8 million subscribers as of December 2” and that the “success” of the platform has “bolstered our confidence in our continued acceleration towards a DTC-first business model.” He repeatedly stated that it would be profitable by the end of 2024. This forecast represented an “astounding three-fold increase from prior estimates without any degradation in expected profitability for the segment,” the suit says.”
I will say that the issue with Disney+ being profitable by 2024 is not fair, given that the Walt Disney Company had stated since the beginning that Disney+ wouldn’t become profitable until 2024.
Another point the lawsuit mentions is that the average revenue per subscriber declined when bundles were offered. The suit argues that Disney focused on “short-term promotional efforts to boost subscriber growth while impairing the platform’s long-term profitability.”
Those involved with this lawsuit also have issues with the company restructuring under Bob Chapek that seemingly gave the CEO and his restructured DMED Chairman, Kareem Daniel, “near complete control over the Company’s strategic decisions around content.”
Unlike the previous lawsuit, current Disney CEO Bob Iger was also named a defendant.
The Hollywood Reporter added the full complaint to Scribd.
This suit is very similar to the one filed in May. Disney stock has continued to decline, and investors are demanding accountability.
Disney has offered no comment.
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