Disney investors file lawsuit alleging misleading claims surrounding Disney+

Disney Investors have filed a lawsuit against the company, alleging that the House of Mouse misled them about its losses and engaged in a fraudulent scheme to hide the costs of its streaming service, Disney+. The suit claims that ousted CEO Bob Chapek implemented a "cost-shifting scheme" by airing certain shows on legacy TV networks instead of Disney+ to conceal the platform's declining subscriber growth, losses, and cost overruns. Disney's pivot to prioritise streaming during the pandemic led to a major reorganisation of its media and entertainment operations, centralising distribution and commercialisation into the Disney Media and Entertainment Distribution (DMED) arm.

This reorganisation, led by Chapek lieutenant Kareem Daniel, drew controversy within the company for centralising power away from creative content-focused executives. The lawsuit alleges that Chapek and Daniel repeatedly misled investors about Disney+'s success, concealing its true costs and overstating its projected profitability with 230 to 260 million paid subscribers by 2024. The suit also claims that certain shows, intended as Disney+ originals, were fraudulently aired on TV networks, shifting costs away from the streaming platform.

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“By doing so, a significant portion of the marketing and production costs of the shows were shifted away from Disney+ and on to the legacy platform,” reads the complaint.

Disney's fiscal second-quarter earnings in 2022 showed missed estimates, including a significant operating loss for its direct-to-consumer arm, which includes Disney+.

After Bob Iger returned as the company's leader, he emphasised returning power to creative executives. The lawsuit argues that these events confirm the unrealistic nature of Disney's 2024 Disney+ targets. The complaint names Chapek and Daniel as defendants, and Disney has not yet responded to the allegations.

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