Former Disney CEO, Other Execs Sued for Allegedly Attempting to Inflate Success of Disney+
Former Disney CEO, Other Execs Sued for Allegedly Attempting to Inflate Success of Disney+
If Mickey Mouse has any lawyers in his close circle of friends, they may be needed by the Disney legal team soon. According to The Wrap, the company is headed back to court, this time to combat a class-action lawsuit brought on behalf of Local 272 Labor-Management Pension Fund in California Central District Court.
The suit alleges that under the guidance of former CEO Bob Chapek, departed executive Kareem Daniel, current CFO Christine McCarthy, and Disney “inappropriately” shifted titles it advertised as Disney+ Originals to linear TV platforms like the Disney Channel, Freeform, FX, and more. This allowed the company to shift the marketing budgets for those shows to its linear segment, which misrepresented the success of its streaming platform.
“As part of a scheme to make Disney+’s financial performance appear more successful than it was,” court filings claim, “defendants aired certain shows that were supposed to be Disney+ originals — such as the mystery show ‘The Mysterious Benedict Society’ and the medical drama ‘Doogie Kameāloha, M.D.’ — first on legacy television networks such as the Disney Channel. By doing so, a significant portion of the marketing and production costs of the shows were shifted away from Disney+.”
Disney obviously has the right to show its own content on whichever of its own properties it wants. The company frequently uses linear networks to promote shows on Disney+ that it feels need more publicity. Last November, for instance, Disney put the first two episodes of its new Star Wars series “Andor” on various cable channels it owns. But the lawsuit claims that moving the marketing budgets for shows like “The Mysterious Benedict Society” away from Disney+ made the financials of the streaming platform appear rosier than they actually were.
In addition, the suit claims that Disney+ gave investors estimates of subscriber numbers that lacked a reasonable basis in fact. Subscriber numbers used to be the most important metric for a streaming service to announce publicly, and while Wall Street is now more intent on rewarding profitability, Disney+ has complied the most subscribers of any streaming platform besides Netflix. At last count, Disney+ had 161.8 million global users.
“To conceal these [artificially inflated subscriber numbers], defendants engaged in a fraudulent scheme designed to hide the extent of Disney+ losses and to make the growth trajectory of Disney+ subscribers appear sustainable and 2024 Disney+ targets appear achievable when they were not,” the suit alleges.
In a statement to The Wrap, Disney said: “We are aware of the complaint and intend to defend vigorously against it in court.”
Disney has had to vigorously defend itself in court quite a bit in the past few months. In November, the company was sued by a group of YouTube TV users in several states for essentially forcing live TV streaming services to raise their prices. That suit claims that because Disney charges such a high carriage fee for ESPN, and because it forces companies like YouTube TV to include ESPN in their lowest-priced subscription tiers, providers are compelled to raise the prices of their services in order to make a profit.
Now, Disney’s latest legal troubles await the ruling of the court. They may wind up as nothing more than a nuisance lawsuit, but if the judge in the case sides against Disney, it will likely end up costing the company some pretty hefty fines that it would rather put toward the improvement of its streaming platforms Disney+, Hulu, and ESPN+.
Disney+
Disney+ is a video streaming service with over 13,000 series and films from Disney, Pixar, Marvel, Star Wars, National Geographic, The Muppets, and more. It is available in 61 countries and 21 languages. It is notable for its popular original series like “The Mandalorian,” “Ms. Marvel,” “Loki,” “Obi-Wan Kenobi,” and “Andor.”