Disney investors allege Disney+ hype misled market, drove stock losses

Two asset managers say Disney sold Wall Street a streaming fairy tale — and they paid the price.    

Union Asset Management Holding AG and GIC Private Limited allege that Disney and three former top executives misled investors over a multi‑year period about the performance, costs and prospects of Disney+, turning the streaming service into what they describe as a “house of cards.”    

In a case filed in federal court in California, the two institutions — described as one of Germany’s leading asset managers and a company wholly owned by the Government of Singapore with ten offices worldwide, including New York — say they bought Disney stock between December 10, 2020, and May 10, 2023, and suffered “substantial losses” as a result of the conduct they set out.    

Their filing targets Disney, former chief executive Robert Chapek, former chief financial officer Christine M. McCarthy and former Disney Media and Entertainment Distribution chairman Kareem Daniel. The investors claim the company and executives deceived the market about subscriber growth, churn, content costs and the path to profitability for Disney+, while using what they call “growth‑at‑any‑cost artifices.”    

According to the allegations, the turning point came at Disney’s Investor Day on December 10, 2020. Chapek and McCarthy told investors that Disney+ would reach 230 million to 260 million subscribers by fiscal 2024, nearly quadrupling the original 60‑million to 90‑million goal, and laid out projections that impressed analysts.  A former Disney executive quoted in the filing called the target “batshit crazy.”    

To support those goals, the investors say, Disney reorganized its media operations into a DMED unit reporting to Chapek, with Daniel placed in charge.  DMED became responsible for the commercialization of all Disney content globally and oversaw the operations of the company’s streaming services.  The filing claims this structure enabled tactics such as steering films to Disney+ at the expense of profitability, chasing subscriber growth through unsustainable content spend, using steep discounts and aggressive promotions that attracted “low quality” subscribers and pursuing growth in unprofitable international markets.    

At the same time, Disney and its executives are alleged to have repeatedly assured investors that subscriber growth was “on track,” churn was low or declining, aggressive content spending would drive the 230‑million to 260‑million target and profitability by fiscal 2024, and that Disney+ was well situated to achieve long‑term profitability.  Internal data, the investors contend, told a different story, and the company used “accounting gimmicks to conceal runaway costs.”    

The alleged cracks appeared in November 2021, when Disney disclosed a slowdown in Disney+ subscriber growth and said losses in the service would continue longer than previously indicated. The filing says the stock dropped $12.34 a share, or 7.1%, on the news.    

A year later, on November 8, 2022, Disney reported a $1.47 billion operating loss in its streaming segment, followed by a $13.15‑per‑share, or 13.2%, fall in the stock.  Days afterward, Chapek was removed as chief executive and replaced by Bob Iger.    

On May 10, 2023, Iger announced a change in direction: withdrawing Chapek’s subscriber target, shifting focus from subscription growth to profitability, ending aggressive promotions that had produced “low‑quality” spikes, pulling back from unprofitable international markets and taking a $1.5 billion impairment charge as more than fifty original Disney+ titles were removed.    

The filing notes that Disney’s stock, which had climbed to nearly $200 a share during the period in question, fell to $92.31 when this “full truth” was revealed, leaving Union and GIC with losses.    

For advisers and institutional investors, the case highlights how subscriber targets, internal reorganizations and streaming‑era metrics can move portfolios. For now, these are the investors’ allegations in an early‑stage lawsuit; no court has yet decided whether Disney or its former executives broke the law.