In November 2019, The Walt Disney Company launched its own streaming platform, Disney+. Disney+ was the ultimate streaming service for Disney fans; a place where they could watch classic Disney films and television shows, along with newer content, including some made just for Disney+! Bob Chapek took over as CEO of Disney in 2020 and became the lead person to go to for Disney+ answers. At every earnings call and shareholders meeting, Chapek was optimistic about Disney+ and said that it would become profitable in 2024.
Even though Chapek painted a pretty picture for Disney+, allegations are coming forward that it was all a lie. On May 12, a lawsuit was filed by some Disney investors, claiming that they were lied to about the stability and profitability of Disney+. The lawsuit targeted three Disney executives — the now-fired Chapek, his right-hand man, Kareem Daniel, and current Disney Chief Financial Officer, Christine McCarthy. The investors were working to see that the lawsuit would become a class-action one and Chapek, McCarthy, and Daniel would have to pay for their lies.
Well, the lawsuit is moving forward, and it is looking for people who have suffered “substantial losses” to join. The lawsuit, which is being headed by the law firm Robbins Geller Rudman & Dowd LLP, reads:
As the Disney class action lawsuit alleges, defendants throughout the Class Period made false and/or misleading statements and/or failed to disclose that: (i) Disney+ was suffering decelerating subscriber growth, losses, and cost overruns; (ii) the true costs incurred in connection with Disney+ had been concealed by Disney executives by debuting certain content intended for Disney+ initially on Disney’s legacy distribution channels and then making the shows available on Disney+ thereafter to improperly shift costs out of the Disney+ segment; (iii) Disney had made platform distribution decisions based not on consumer preference, consumer behavior, or the desire to maximize the size of the audience for the content as represented, but based on the desire to hide the full costs of building Disney+’s content library; and (iv) Disney was not on track to achieve even the reduced 2024 Disney+ paid global subscriber and profitability targets, such targets were not achievable, and such estimates lacked a reasonable basis in fact.
The lawsuit also claims that Chapek, Daniel, and McCarthy handled Disney+ so poorly that it caused Disney shares to drop by 13%, costing them a lot of money. During Chapek’s less than 3 years as CEO, Disney stock reached near all-time lows, even well after the Parks reopened after the COVID-19 pandemic.
Disney, Chapek, Daniel, and McCarthy have not commented on the lawsuit.
