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Disney Slapped With Second Lawsuit For Chapek-Era “Cost-Shifting Scheme”

Bob Chapek Disney Plus lawsuit
Credit: Disney

In February 2020, Bob Iger stepped down as CEO of The Walt Disney Company and Bob Chapek took over the role. To say that things did not go smoothly would be an understatement. Less than three years after taking the job, Chapek was fired “without cause.” Bob Iger came back to take over as CEO once again and was only supposed to stay through 2024, but his contract was recently extended through 2026. Unfortunately for Iger, things have not gone smoothly upon his return, and he is not as popular as he once was.

bob iger ruining disney

Credit: Disney

One of the biggest issues facing Iger and Disney is the company’s streaming platform Disney+. Despite its initial success, Disney+ has cost Disney billions of dollars and is losing millions of subscribers every quarter. In the third quarter alone, Disney+ lost approximately 11 million subscribers. They are also at risk of losing a lot more due to another price hike and the extreme purging of content that is currently happening.

Disney Plus

Credit: Disney

Chapek may have been gone for almost a year, but he is still causing big problems at the company he once ran. For years, Chapek touted the success of Disney+, its millions of subscribers, and the fact that it would be profitable by the year 2024. However, it seems that his nose may have been growing and that it was all a lie.

In May 2o23, a group of investors filed a lawsuit against Chapek, former Disney CFO Christine McCarthy, and Chapek’s right-hand man Kareem Daniel for lying about Disney+. The investors claimed that Chapek and company lied about the costs to run Disney+, its actual subscriber numbers, and how long it would actually take for Disney+ to be profitable.

Bob Chapek Disney Integration

Credit: Disney

And now, it looks like those investors aren’t the only ones who are angry. According to a report from The Hollywood Reporter, a second lawsuit has been filed against Disney and Chapek with regard to Disney+.

The new lawsuit, which was filed on August 23, claims that Disney and Chapek created a “cost-shifting scheme” to defraud investors. That scheme was breaking up a deal between TSG Entertainment Finance and 20th Century Fox. This was done because Disney owns 20th Century Fox and wanted to use 20th Century “prop up” Disney+ and increase the company’s stock value.

Bob Chapek

Credit: Disney

Per THR:

The suit claims that company executives hid the expense and difficulty of maintaining subscriber growth as it suffered “staggering costs” to create content. In an effort to hide losses, the complaint claims, former chief executive Bob Chapek, his lieutenant Kareem Daniel and former CFO Christine McCarthy aired The Mysterious Benedict Society and Doogie Kameāloha, M.D. — which were supposed to be Disney+ originals — on the Disney Channel to make the streaming service appear more successful than it actually was.

Doogie Kamealoha Canceled

Credit: Disney

The lawsuit specifically pointed to comments Chapek made about Disney+ and how wonderfully it was performing, when it wasn’t close to the truth.

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.

Disney CEO Bob Chapek

Credit: Disney

Since Iger has taken over as CEO, he has seemingly been more honest about the struggles Disney+ is facing. In 2021, Iger admitted that subscriber growth had slowed. Then, in the second quarter of 2022, Iger revealed that Disney+ had lost $630 million. Iger has been trying to stop the bleeding with massive budget cuts, but Disney+ is still losing hundreds of millions of dollars a quarter.

Mysterious Benedict Society

Credit: Disney

The suit acknowledges how much things have changed because of the pandemic, but Chapek’s handling of the company was problematic. With Disney’s theme parks and cruise ships shut down, and being unable to release films into theaters, Chapek decided to go “all in” on Disney+. He completely restructured the company’s entertainment division and put short-term gains ahead of long-term profits.

Bob Chapek

Credit: Disney

Chapek’s restructuring took the power away from the creatives and the creative divisions and placed it in the hands of Kareem Daniel — another person named in the new lawsuit. Daniel and Chapek then “exerted near complete control” over Disney’s content development. It also meant that, instead of each division reporting honestly about its profits and losses, Chapek and Daniel took the numbers and manipulated them.

Bob Iger was also named in the lawsuit, but not much was specifically said about him. Iger has said that he is going back to Disney’s old structure and giving the creative power back to the creatives. It is possible that he was named in the lawsuit simply because he is the CEO.

Neither Iger, Chapek, nor Daniel have commented on the new lawsuit.

About Krysten Swensen

A born and bred New England girl living the Disney life in Southern California. I love to read, to watch The Golden Girls, and love everything to do with Disney and Universal. I also love to share daily doses of Disney on my Disney Instagram @BrazzleDazzleDisney!

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