Disney Slapped with Lawsuit After Allegedly Misleading Investors About Billion Dollar Losses
There is more bad news for Disney.
The Hollywood Reporter reported that the company is facing a lawsuit from investors over claims that they were misled about the financial health of the company’s troubled streaming service, Disney+.
Among the concerns of the investors is the company’s stock price, which is currently at its lowest level since 2014.
According to Forbes, the lawsuit alleged Disney executives “repeatedly misled investors” about the company’s losses and that these “wrongful acts and omissions” brought about the “precipitous decline in the market value” of Disney’s share price.
Among their complaints is that the company’s executives, including former CEO Bob Chapek, his right-hand Kareem Daniel and former CFO Christine McCarthy, used promotional deals to boost subscriber numbers and incurred “staggering costs” in the process, the Hollywood Reporter noted.
“The company also reported a decline in its average revenue per Disney+ subscriber, as more customers subscribed through a discounted bundle with the company’s other services,” the complaint said.
As Disney stock hovers at its lowest levels in nearly a decade, the company was hit with another lawsuit alleging it misled investors about the success of Disney+ https://t.co/w5FRFgnTcn
— The Hollywood Reporter (@THR) August 29, 2023
“Notably, the bundled offering made up about 40 percent of domestic subscribers, confirming that Disney was relying on short-term promotional efforts to boost subscriber growth while impairing the platform’s long-term profitability.”
The lawsuit also outlined how the company aggressively reorganized its operations in a “dramatic departure from Disney’s historical reporting structure that was hugely controversial within the company because it took power away from creative content-focused executives and centralized it in a new reporting group.”
Disney+ has struggled to turn profits since its inception back in 2020, while its original programming has struggled to compete with the likes of Netflix and Amazon Prime.
Earlier this month, the company announced a price hike from $10.99 to $13.99. The move led to a massive spike in searches for “Cancel Disney Plus” on the Google search engine.
‘Cancel Disney Plus’ searches surge worldwide after streaming service’s price hike announced
Searches for ‘Cancel Disney Plus’ increase by 510% in just a few hours. It is the biggest spike seen worldwide in the past seven months.
In the latest price change by a major streaming… pic.twitter.com/vm0uEogwlF
— Zelda Darling 🫠 (@nerdsleaze) August 14, 2023
Last November, long-time CEO Bob Iger returned to the company after his successor Bob Chapek stepped down following a short but unsuccessful tenure that was defined by left-wing corporate activism. Iger has repeatedly stated his main aim is to return the company to profitability.
According to a report back in June, the company lost an astonishing $1 billion between June 2022 to June 2023.
In March, the company also laid off 7,000 employees as part of an effort to cut $5.5 billion in expenses.
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