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Disney Sued For Hiding Profits, Agrees to Settle

Disney+ Plus
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In 2019, just months before COVID-19 swept across the world, The Walt Disney Company launched its very own streaming service, Disney+. Disney+ was touted as the ultimate streamer for fans of Disney, Marvel, and Star Wars. Millions of people subscribed to the platform in the first days and weeks.

Disney+ Disney Plus

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Three months after Disney+ launched, Bob Iger stepped down as CEO and Bob Chapek took over. From the start, things were rocky and fans struggled to embrace the new leadership.

Although things started out strong for Disney+, they just as quickly started to go downhill. The streamer started losing subscribers, along with millions of dollars.

Bob iger villain Walt disney company ceo chief executive officer bob Chapek disney villain Robert iger Robert a iger chairman

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Throughout his short tenure as CEO, Bob Chapek repeatedly said that Disney+ would be profitable by the year 2024. Unfortunately, it looks like those statements might not have been entirely true.

In May 2023, a group of investors slapped Chapek, former CFO Christine McCarthy, and Chapek’s right hand man, Kareem Daniel with a lawsuit. The investors felt that Chapek and McCarthy had played with subscriber numbers to make Disney+ look more successful. They also thought Chapek was not being truthful about Disney+ becoming successful in 2024.

Kareem Daniel and Bob Chapek

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Just a few months later, the Mouse House was slapped with a second lawsuit. TSG Entertainment Finance accused Disney of “Hollywood accounting.” This means that the company was, on paper, making its films look less successful than they were. TSG noted that its profits from the studio began to “decrease dramatically.”

TSG said it sued after noticing that money from its investment “decreased dramatically.” According to the complaint, an audit showed that 20th Century failed to credit TSG with revenue, charged tens of millions in distribution fees not permitted under their deal, deducted expenses not related to the pictures in their slate and “uncovered rampant ‘self-dealing,’ the practice by which a studio enters into ‘sweetheart’ deals with its licensee affiliates to artificially minimize the profit payments to stakeholders like TSG.”

Avatar Screen Shot

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It is not the only legal issue that TSG is having with Disney. TSG has accused Bob Chapek of killing a deal that was supposed to occur between the finance company and 20th Century Fox. TSG alleged that Chapek intervened because he needed to be able to use 20th Century, so he could make Disney+ look like it was performing better than it was.

TSG referred to this as a “cost-shifting scheme.” In addition to that, TSG claimed that Disney had violated an agreement they had by changing the release window for films. Since launching Disney+, and post-pandemic, movies are not staying in the theaters as long as they used to. And they are coming to streaming much faster than expected.

Bob Iger Bob Chapek

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It’s been almost six months, but it looks like Disney is finally putting at least one lawsuit behind them.

According to The Hollywood Reporter, Disney has settled the lawsuit filed by TSG. A Disney spokesperson simply said that the matter was settled.

ValueAct backs Bob Iger in Nelson Peltz fight

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TSG has not publicly commented on the settlement.

Do you think Bob Chapek is still having a negative effect on Disney? Let us know in the comments! 

About Krysten Swensen

A born and bred New England girl living the Disney life in Southern California. I love to read, to watch The Golden Girls, and love everything to do with Disney and Universal. I also love to share daily doses of Disney on my Disney Instagram @BrazzleDazzleDisney!