Disney Sued Over Streaming Losses, How Bad Is Disney+ Doing?

Disney is facing a lawsuit from a shareholder who alleges securities law violations during ex-CEO Bob Chapek's tenure.

By Charlene Badasie | Updated


Former Disney CEO Bob Chapek is facing a lawsuit from a shareholder who alleges securities law violations. The complaint, which also includes former executive Kareem Daniel, current CFO Christine McCarthy, and the entire company, accuses them of making misleading statements regarding the health of the streaming business.

The lawsuit was filed by the Local 272 Labor Management Pension Fund in the U.S. District Court for the Central District of California on May 12. According to Deadline, the suit aims to identify a lead plaintiff for a class action lawsuit on behalf of individuals who purchased Disney shares between December 10, 2020, and November 8, 2022.

bob chapek fired
Bob Chapek

This period marked a significant drop in earnings guidance and a major decline in stock value following a tumultuous year for Disney. Seeking a trial by jury, the complaint states that the “defendants throughout the Class Period made false and/or misleading statements and/or failed to disclose that Disney+ was suffering decelerating subscriber growth, losses, and cost overruns.”

Responding to the lawsuit, a Walt Disney spokesperson says the company is aware of the complaint and intends to “defend vigorously against it in court.” The lawsuit also seeks a slew of unspecified damages. When stock prices experience a sharp decline, class action lawsuits often follow. However, not all of them move forward.

These cases are typically initiated by specialized law firms on behalf of one or more shareholders. In the case of Disney, the lawsuit still needs a more prominent shareholder to participate as the lead plaintiff and others to join the suit. The case also needs to be approved for class action status by a judge.

The crux of the lawsuit stems from a November 8 earnings call, during which the Walt Disney Company said it had not met revenue expectations for Disney+ and Hulu. At that time, it was revealed that the streamer had incurred an operating loss of approximately $1.47 billion during the quarter.

In its latest call, Disney revealed that its subscriber numbers have continued to drop, with the service losing approximately four million users in the past three months. While this may seem like an alarming loss, the metrics confirm which subscribers have left. Most users lost in the first quarter came from Disney+ Hotstar – the version of the app that operates in India.

The subscriber loss in 2022 was attributed to the same region. This is primarily due to a loss in local programming, specifically the streaming rights to cricket matches. Disney previously lost out on securing the Indian Premier League rights when the new season began, resulting in users that subscribed to live sports canceling their memberships.

Upon examination of Disney+ subscribers in every other region, the company has experienced comparatively modest losses. Disney+ lost 300k paid subscribers in the United States, down just 1%. In territories that are not linked to Hotstar, the streaming service gained 900k new subscribers.

As of the fourth financial quarter of 2022, Netflix has over 231 million subscribers worldwide, making it the biggest streaming service in the world. HBO Max had about 81 million subscribers in the same timeframe.