The Walt Disney Company reported in a filing with the U.S. Securities and Exchange Commission (SEC) that Florida is a potential threat to their business.
Florida Threatening Disney Business
After releasing their quarter two earnings report on Wednesday, The Walt Disney Company stated in their filing with the SEC that the recent actions by Florida Governor Ron DeSantis and the Florida legislature may have already negatively impacted their ability to conduct business.
This is within a larger list of potential threats to Disney’s operations. The list also includes the ongoing political situations in France, China, and Russia.
Here is the full paragraph from the filing, with the Florida section bolded:
New laws and regulations, as well as changes in any of these current laws and regulations or regulator activities in any of these areas, or others, may require us to spend additional amounts to comply with the regulations, or may restrict our ability to offer products and services in ways that are profitable, and create an increasingly unpredictable regulatory landscape. In addition, ongoing and future developments in international political, trade and security policy may lead to new regulations limiting international trade and investment and disrupting our operations outside the U.S., including our international theme parks and resorts operations in France, mainland China and Hong Kong. For example, in 2019 India implemented regulation and tariffs impacting certain bundling of channels; in 2022 the U.S. and other countries implemented a series of sanctions against Russia in response to events in Russia and Ukraine; U.S. agencies have enhanced trade restrictions, and legislation is currently under consideration that would prohibit importation of goods from certain regions; U.S. state governments have become more active in passing legislation targeted at specific sectors and companies; and in many countries/regions around the world (including but not limited to the EU) regulators are requiring us to broadcast on our linear (or display on our DTC streaming services) programming produced in specific countries as well as invest specified amounts of our revenues in local content productions. In Florida, steps directed at the Company (including the passage of legislation) have been taken and future actions have been threatened, which collectively could negatively impact (and may have already impacted) our ability to execute on our business strategy, our costs and the profitability of our operations in Florida.
Q2 2023 Earnings Report
The Walt Disney Company announced that they made approximately $21.8 billion in revenue during the second quarter of 2023, which ran from January 1 to April 1. Their adjusted earnings per share (EPS) was $0.93, a decrease from $1.08 in last year’s quarter.
The Walt Disney Company has laid off thousands of employees this quarter, part of a plan to cut 7,000 jobs that CEO Bob Iger announced during the Q1 earnings call.
Disney CEO Bob Iger, who returned to lead the company roughly six months ago, announced the company’s cost-cutting strategy is on track to “meet or exceed” the $5.5 billion savings target.
Disney Suing DeSantis & CFTOD Board
In their lawsuit against Governor DeSantis and the Central Florida Tourism Oversight District Board, Disney Parks & Resorts cites “a targeted campaign of government retaliation — orchestrated at every step by Governor DeSantis as punishment for Disney’s protected speech.” The plaintiff further argues that this chronology of events “threatens Disney’s business operations, jeopardizes its economic future in the region, and violates its constitutional rights.”
Among other grievances, the Governor’s threat of new tolls and taxes, and the Board’s decision to void the company’s final agreement with the Reedy Creek Improvement District Board were included in the document.
They name Governor DeSantis, the CFTOD Board of Supervisors members, and now former District administrator John Classe. Glen Gilzean, Jr. is the new District administrator.
Disney is suing for “declaratory and injunctive relief.” Injunctive relief forces a party to act in a certain way or prevents them from doing various things.
Disney regrets that it has come to this, but having exhausted efforts to seek a resolution, the Company is left with no choice but to file this lawsuit to protect its cast members, guests, and local development partners from a relentless campaign to weaponize government power against Disney in retaliation for expressing a political viewpoint unpopular with certain State officials.
The company is demanding multiple items of relief be met, including:
- A. Declare that the Legislative Declaration is unlawful and unenforceable because it abrogates Disney’s rights in violation of the Contracts Clause;
- B. Declare that the Legislative Declaration is an unlawful taking of Disney’s property rights without payment of just compensation in violation of the Takings Clause;
- C. Declare that the Legislative Declaration is unlawful and unenforceable because it was an arbitrary and irrational voiding of the Development Agreement and Restrictive Covenants in violation of the Due Process Clause;
- D. Declare that the Legislative Declaration is unlawful and unenforceable because it was enacted in retaliation for Disney’s speech in violation of the First Amendment;
- E. Declare that the Contracts remain in effect and enforceable;
- F. Declare that Senate Bill 4C and House Bill 9B are unlawful and unenforceable because they were enacted in retaliation for Disney’s political speech in violation of the First Amendment;
- G. Issue an order enjoining Defendants from enforcing the Legislative Declaration;
- H. Issue an order enjoining Defendants from enforcing Senate Bill 4C and House Bill 9B;
- I. Award Plaintiff its attorney’s fees and costs;
- J. Grant such other relief as this Court may deem just and proper.
The CFTOD Board of Supervisors voted to file their own countersuit against Disney. While Disney’s lawsuit is through federal court, the Board’s lawsuit is through state court.
In their 188-page complaint, the Central Florida Tourism Oversight District named itself as the plaintiff and Walt Disney Parks and Resorts US Inc. as the defendant. Through nearly 200 pages of legalese, the district asks the state court to render Disney’s development agreement with the Reedy Creek Improvement District as unenforceable, null, and void. They also ask the same to be done of the restrictive covenants, which notably set the benchmark for expiry at 21 years after the death of the last living descendant of King Charles III, living as of the date of the document.
The CFTOB additionally asks that all agreements cannot be enforced on Disney’s end either. Meanwhile, the Florida Legislature, which is controlled by Republicans and typically acts to rubber stamp Gov. DeSantis’ agenda, is working to pass a law that invalidates Disney’s agreement with Reedy Creek. Governor DeSantis said it was well within his power to do so.