Disney investors Stourbridge Investments filed a lawsuit against the Walt Disney Company in the summer of 2023. They claimed that Disney misled investors about Disney+’s performance and the actual cost of the streaming service’s content. Bob Chapek, Kareem Daniel, Christine McCarthy, and Bob Iger were named in the lawsuit.
Recently, the company tried to dismiss the lawsuit, but federal judge Consuelo Marshall denied the dismissal and is allowing the case to move forward.
Who could be included in the Class Action Lawsuit?
The lawsuit seeks to represent and investor who purchased Disney stock from December 2020 – May 2023.
What is the issue?
The filing from August 2023 claimed that investors felt misled by statements made by Bob Chapek, including subscriber numbers and his claim that the Disney+ service would be profitable by 2024. This was something that Bob Iger also said back in 2019. Now Iger words it as “Our streaming services are profitable.” Not just Disney+
“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 lawsuit also mentions that investors were not told how much money was being spent on the Disney+ service. It claims that Chapek would release shows like “The Mysterious Benedict Society” and “Doogie Kameāloha, M.D.” went to linear TV before launching on Disney+. It has been speculated that this was done to take money from linear TV to pay for Disney+ content.
Disney+ Pixar Films
Another issue listed in the lawsuit involves Disney’s decision to release “Soul,” “Turning Red,” and “Luca” on Disney+ for free instead of releasing them theatrically. The issue is that some of these occurred during the pandemic when movie theaters were closed or limited. Chapek was trying to gain subscribers and interest in the streaming service by releasing the films to the Disney+ platform.
Verizon and Disney+ deals
Another issue listed in the case is deals made with places like Verizon to give free Disney+ to their customers for a year. The Walt Disney Company included those subscriber numbers with the “paid subscriber” numbers. They probably were paid something for the Disney+ access, but it was not full price.
Disney still does this now by offering wholesale Disney+ to providers like Charter Spectrum.
Bob Iger offered these deals when he launched the streaming service in 2019.
Insider Trading
Another allegation in the lawsuit claims “insider trading” against Bob Iger, Bob Chapek, Christine McCarthy, and Kareem Daniel. These accusations are also allowed to proceed to the next step in the lawsuit process.
I would love to hear more about the alleged insider trading.
What do you think? Comment and let us know!
Source: The Hollywood Reporter
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