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.

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.