The company’s shareholders are suing former CEO Bob Chapek because his way of acting caused a negative impact on Disney Plus.
In recent months, the former CEO of The Walt Disney Company, Bob Chapek, has been the subject of a lawsuit by disgruntled shareholders. Recently filed in the United States District Court for the Central District of California, it seeks an injunctive determination to become a class action lawsuit against the company. Shareholders allege the company violated securities laws by making “misleading statements.” Especially from what he had to say about the financial health of Disney Plus and the direct-to-consumer business.
It can be read in the lawsuit: “Defendants made false and/or misleading statements and/or failed to disclose that: (i) Disney Plus was suffering from slowing subscriber growth, losses, and cost overruns. (ii) The true costs incurred in relation to the platform had been hidden by executives by introducing certain content originally intended for legacy distribution channels. To then make the shows available to stream thereafter to improperly shift costs out of the Disney Plus segment.”
Bob Chapek ex-CEO Disney
The suit also includes Kareem Daniel, a former Disney executive, and Christine McCarthy, the company’s current chief financial officer. According to the plaintiffs, throughout the period covered by the lawsuit, false or misleading statements were made, or relevant information was withheld. It is claimed that the streaming platform experienced a slowdown in subscriber growth, financial losses and cost overruns that were not properly disclosed. Furthermore, it is argued that executives made content distribution decisions not based on consumer preference or maximizing audience reach. But with the intention of hiding the construction costs of the Disney Plus content library.
One of the events that led to this lawsuit was the November 8 earnings call.
During that quarter, it was revealed that the company had suffered an operating loss of approximately $1.47 billion. Also, in the latest call from the company, it was reported that the subscriber base of Disney Plus has decreased. Losing more than four million users in the last three months.
The plaintiff shareholders allege that the estimates to achieve Disney Plus’ global subscriber goals and its profitability by 2024 lack a reasonable basis. Therefore, they are not achievable. They argue that content distribution decisions and a lack of transparency about actual costs have negatively affected the company and investors.
The class action lawsuit seeks not only accountability from Disney executives…but also compensation for shareholders who have suffered losses due to the alleged deceptive practices. As the case progresses, it will be interesting to see how this situation plays out. But above all, what repercussions will it have on the reputation and future of Disney Plus.
Luckily, this streaming platform still has big franchises that are still very popular like Marvel, Star Wars or Pixar.
Disney+
