Adding to Disney’s Chaos: Investors Challenge Amidst Poor Financial Reports Over Disney+ Disclosures and Company Restructuring

Disney Faces Lawsuit from the Investors Over Disney+ Operations and Finances

Disney is currently grappling with a lawsuit accusing it of misleading investors about the operational costs and success of its streaming platform, Disney+.

Key Allegations:

  • Disney allegedly concealed losses to achieve high subscriber growth targets for Disney+.
  • One of the central claims, brought forward by Stourbridge, suggests that Disney strategically shifted certain marketing and production expenses from Disney+ to its traditional business sectors. This tactic camouflaged the heavy investment tied to the streaming service.
  • This isn’t the first time Disney has faced such accusations. Earlier in the year, a similar shareholder-initiated lawsuit targeted the company, echoing concerns about Disney’s methods to enhance Disney+ subscriptions.

Financial Performance:

  • Disney+ experienced a decline in subscriber growth in 2021.
  • By Q4 2022, Disney’s direct-to-consumer division, which encompasses Disney+, ESPN+, Hulu, and Hotstar, reported an operating loss of $1.47 billion, a significant leap from the previous year.
  • Following these revelations, Disney’s stock value dropped by over 13%. Disney has grappled with substantial financial losses over the past year, applying downward pressure on its stock at one of its lowest points in a decade.
  • Despite this, CEO Bob Iger remains optimistic, asserting that Disney+ will turn profitable by the end of the 2024 fiscal year. The company boasts a commendable 146.7 million global subscribers across all its streaming platforms.
  • The lawsuit also highlights that Disney offered discounted bundles with other services, affecting the revenue per Disney+ subscriber.

Changes in Disney’s Strategy Amid the Pandemic:

  • As the pandemic caused closures in sectors like theme parks and movie theatres, Disney shifted its emphasis towards streaming.
  • Disney+ saw an unexpected surge in subscribers after its launch in 2019, reaching nearly 74 million subscribers in its first year.
  • Under former CEO Bob Chapek’s leadership, there was a significant reorganization, with distribution and commercialization centralized within the Disney Media and Entertainment Distribution (DMED) unit.
  • This restructuring was met with controversy, centralising power and taking it away from content-focused executives.
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Bob Iger’s Return and Cost-Cutting Measures:

Upon returning to Disney, Bob Iger stressed the need to redistribute power to creative executives, especially concerning distribution decisions. 

Alongside this, Iger introduced drastic cost-cutting measures, unveiling plans to reduce costs by $5.5 billion. This strategy involved trimming $3 billion from non-sports content and another $2.5 billion in other expenses. Disney laid off about 7,000 employees, approximately 3.6% of its global workforce, as part of these efforts.

Ragul Thangavel
Ragul Thangavel
Staff Writer

With over nine years of diverse professional experience, Ragul has made significant contributions across various domains, including Media Operations, OTT Technologies, Video Production, Ecommerce, and Social Media.

Holding an Engineering degree, Ragul's career took an unconventional turn when he discovered his passion for writing, leading him to begin his journey as a content writer.

His career has been exclusively dedicated to the growth and development of startups, where he has played a pivotal role. His unique blend of technical knowledge and creative prowess has enabled him to drive innovation and success in every venture he has been a part of.

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