Mouse in a Coal Mine: What a Recent Complaint Filed Against Disney+ Could Mean for the Future of Streaming Services

By: Taylor Miller

Disney+, Netflix, Amazon Prime Video, Hulu, HBO MAX, Peacock, Paramount+, YouTube: the list of streaming services seems to be ever growing. However, a recent complaint filed in the U.S. District Court for the Central District of California could foreshadow the eventual end of the streaming service dominance era. [1]

A shareholder derivative suit filed in August alleges that Disney misled investors about the success of Disney+ by concealing difficulty maintaining subscriber growth and the true costs and expenses of the platform. [2] Specifically, the complaint alleges that Disney improperly shifted its operating expenses into legacy distribution channels in order to hide the lack of success the platform was facing. [3] 

Amid the COVID-19 pandemic, Disney+ gained nearly 74 million subscribers by November 2020. [4] The complaint alleges that the platform failed to maintain enough subscriber growth to achieve the 230-260 million subscriber goal that Disney promised investors by 2024.[5] In reality, Disney was suffering from the staggering costs required to make content necessary to compete in the highly competitive streaming market. [6]

Disney’s stock remained artificially inflated due to misrepresentations about the success of Disney+ for some time, but it collapsed by more than 13% in a single day in November 2022 after a report revealed that Disney+ was experiencing significant operating losses. [7] This year, Disney+ has slashed content from its streaming services to avoid paying residuals and save on licensing fees and has also laid off thousands of employees. [8] In the most recent quarter, Disney+ lost $512 million, bringing the total loss to more than $11 billion.[9]

Disney is not the only streaming service taking the heat this summer, as Netflix started cracking down on passwords in an attempt to bring in new subscribers.[10] This decision came after Netflix’s struggle to compete with the influx of new streaming services resulted in steady declines in revenue growth. [11] Once reigning supreme as the first major streaming service, not even Netflix is immune from the pressures of growing competition in the streaming industry. [12]

As media giants battle to squeeze the last drop of profit from their consumer base, the future of affordable, ad-free streaming services looks bleak. On October 12th, the ad-free version of Disney+ is increasing to $14, which is a 27% increase. [13] Both Netflix and Disney are now offering significantly cheaper streaming subscriptions for ad-supported streaming while also significantly increasing the costs of ad-free streaming due to the increased profit opportunities from advertising space. [14]

Furthermore, streaming services are anticipated to take another hit as the writers’ strike in Hollywood is still ongoing.[15] Although Netflix claims that it will be able to weather the writers’ strike and even reported an increase in free cash flow from $3.5 billion to $5 billion due to the decrease in production, reported delays in production in popular shows such as “Stranger Things” demonstrate a decline in the quality of streaming services while prices continue to skyrocket.[16]

Major players in the streaming industry continue to raise prices, refuse to negotiate with the writers and actors that brought their success, and force users to consume more advertising content if they don’t want to pay premium prices. The days of Netflix binge watching and sense of online community after new episode releases are likely to soon become days of scrolling through unoriginal content and ultimately unsubscribing due to yet another price increase.

[1] Martina Barash, Disney Accused of Misleading Investors on Streaming Revenue, Bloomberg Law (May 15, 2023) [].

[2] Id.

[3] Id.

[4] Winston Cho, Investors Sue Disney Over Alleged Chapek Era “Cost-Shifting Scheme” to Hide Streaming Losses, Hollywood Reporter (Aug. 29, 2023) [].

[5] Barash, supra note 1.

[6] Erica Sandberg, Disney to Raise Disney+ Price for Ad-Free Plan, US News (Sept. 8, 2023),related%20to%20boosting%20subscriber%20numbers.

[7] Todd Spangler, Disney Stock Slumps to Two-Year-Plus Low on Earnings Miss, Weak Profit Outlook on High Streaming Losses Into 2023, Variety (Nov. 9, 2022) []

[8] Alex Sherman, Netflix earnings showcase strength as the rest of the media industry struggles, CNBC (July 19, 2023), [].

[9] Brooks Barnes, For Disney, Streaming Losses and TV’s Decline Are a One-Two Punch, N.Y. TIMES (Aug. 9, 2023), [].

[10] Nicole Sperling, Netflix Starts to Crack Down on Password Sharing, N.Y. Times (May 27, 2023) []. 

[11] Dawn Chmielewski and Tiyashi Datta, Netflix rocked by subscriber loss, may offer cheaper ad-supported plans, Reuters (Apr. 20, 2022)

[12] Sperling, supra note 9.

[13] Barnes, supra note 8.

[14] Id.

[15] Jennifer Maas, Peak TV Has Peaked: From Exhausted Talent to Massive Losses, the Writers Strike Magnifies an Industry in Freefall, Variety (last visited August 14, 2023).

[16] Meredith Heyman, Netflix Is ‘Enemy No. 1’ In The Writers Strike. Here’s How It’s Uniquely Positioned To Survive, Investors (Aug. 9, 2023),earlier%20estimate%20of%20%243.5%20billion.