Disney Faces Lawsuit Over Disney+ Subscriber Growth
Disney is facing another lawsuit that alleges the company misled investors about the success of its streaming platform, Disney+. The lawsuit accuses Disney of concealing the true costs of operating Disney+ and using a “cost-shifting scheme” to inflate subscriber growth targets and claim that the platform was on track to achieve profitability by the end of 2024.
Investors claim that Disney executives, including former CEO Bob Chapek, his lieutenant Kareem Daniel, and former CFO Christine McCarthy, “inappropriately shifted costs” by debuting content created for Disney+ on legacy platforms to move marketing and production expenses. The lawsuit also alleges that Disney executives hid the expense and difficulty of maintaining subscriber growth by debuting original content on legacy channels to make the streaming service appear more successful.
The lawsuit points to statements made by Disney executives, including Chapek, that touted the success and subscriber growth of Disney+. For example, Chapek claimed that Disney+ had “exceeded our wildest expectations” and repeatedly stated that the platform would be profitable by the end of 2024.
However, the lawsuit claims that Disney’s reported subscriber growth slowed in 2021, and the company’s direct-to-consumer arm, which includes Disney+, reported an operating loss of $1.47 billion in Q4 2022. The lawsuit also accuses Disney of relying on short-term promotional efforts to boost subscriber growth while impairing the platform’s long-term profitability.
The lawsuit also details Disney’s shift to prioritize streaming amid the pandemic, with subscriptions to Disney+ rapidly increasing while other parts of the company, such as theme parks and movie theaters, faced closures.
Disney has not yet responded to the lawsuit. This is at least the third lawsuit that Disney is facing related to its streaming division and allegations of misleading investors.