The Walt Disney Co. and former CEO Bob Chapek were named in a class action lawsuit brought on Friday for allegedly engaging in a “fraudulent scheme” to make Disney+ appear more successful than it was.
The defendants, which also includes ex-Disney exec Kareem Daniel and CFO Christine McCarthy, are accused of “inappropriately” moving Disney+ originals and their marketing budgets to legacy platforms like The Disney Channel, and thus misrepresenting the success of the newly launched streaming platform.
“As part of a scheme to make Disney+’s financial performance appear more successful than it was, 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+,” the suit alleges.
The suit, which was filed on behalf of Local 272 Labor-Management Pension Fund in California Central District Court by Robbins, Geller, Rudman, & Dowd and Pitta LLP, zeroes in the Chapek-created (and now defunct) Disney Media and Entertainment Distribution (DMED).
“Specifically, defendants used the newly created DMED to inappropriately shift costs out of the Disney+ platform and onto legacy platforms… under the direction of Chapek and Daniel and with the knowledge of McCarthy.”
It also alleges that “Disney’s subscriber figures provided to investors and such estimates lacked a reasonable basis in fact…. to conceal these adverse facts, 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.”
“We are aware of the complaint and intend to defend vigorously against it in court,” Disney responded in a statement to TheWrap.
Chapek was unexpectedly replaced in October 2022 after a number of publicity nightmares, including hedging on opposition to Florida’s “Don’t Say Gay” bill and the lawsuit brought by Scarlett Johansson over her share of “Black Widow” streaming revenue. Daniel, formerly Disney’s Film and TV Distribution Head, left shortly after Bob Iger’s return.
