Inside The Lawsuit Against Bob Chapek

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Bob Chapek with Mickey and Minnie

Credit: Disney

Even if Bob Chapek isn’t the CEO of Disney anymore, he still can’t seem to escape the ire of its investors and fanbase.

Disney’s subscriber growth and profitability targets for its streaming service, Disney+, have resulted in a lawsuit from investors who claim that the company misled them about the extent of its losses. Let’s take a look at the details surrounding the suit and exactly what the investors claim.

bob chapek
Credit: Disney

A suit filed on May 12 in California federal court accuses Disney of engaging in a scheme designed to hide Disney+ costs and make forecasts that it would be profitable by 2024 believable in order to persuade investors to keep pumping money into the service. It specifically calls out former CEO Bob Chapek’s alleged “cost-shifting scheme” to first air certain shows meant to be Disney+ originals on legacy TV networks to conceal the platform “suffering decelerating subscriber growth, losses, and cost overruns.”

The suit goes on to detail where the scheme began; the early days of the pandemic, when Disney was suffering big losses as a result of the closure of theme parks and movie theaters. Because of this, Chapek made a massive push for Disney+, going “all in” and announcing a major reorganization of the company’s media and entertainment departments.

All three logos for hulu, Disney+, and ESPN+
Credit: Disney

Investors say that the reorganization represented a “dramatic departure from Disney’s historical reporting structure and was hugely controversial within the Company because it took power away from creative content-focused executives and centralized it in a new reporting group” led by Chapek lieutenant Kareem Daniel, who alongside Chapek, “exerted near complete control over the company’s strategic decisions around content,” according to the complaint.

From December 2020 to November 2022, according to the suit, Chapek and Daniel misled investors about the success of Disney+ by concealing the true costs of the platform and the difficulty of maintaining significant and upward subscriber growth, as well as claiming that it was on track to achieve profitability with over 230 million paid global subscribers by the end of 2024. Despite the platform gaining subscribers in Q4 of 2022, investors found the growth to be unsustainable.

kid watching Disney+
Credit: Disney

It also argues that Disney’s fiscal second-quarter earnings last week, which showed that Disney+ lost subscribers for the second quarter in a row, is further proof “confirming that the 2024 Disney+ targets had never been achievable.” The platform lost over 4 million subscribers in 2022.

Read the full complaint below.

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