What potential liability or settlement costs could Disney face if found to have violated COPPA?

Potential liability / settlement exposure

If the FTC determines that Disney (or its YouTube‑partner channels) willfully violated the Children’s Online Privacy Protection Act, the statutory penalty is up to $1,500 per alleged violation. Because the alleged conduct involves “collecting personal data from children who view Disney videos on YouTube” and then serving targeted ads, each unique child‑view could be counted as a separate violation. Analysts have estimated the exposure in comparable cases to run in the low‑to‑mid‑tens of millions: the FTC’s 2022 settlement with YouTube parent Google was $19.5 million for similar COPPA breaches, while a 2020 FTC action against a network of toy‑review sites resulted in a $30 million settlement. If Disney is found liable for, say, 1‑2 million child‑view incidents (a modest share of the billions of monthly YouTube views Disney content receives), the headline fine could approach $1.5‑$3 billion—though in practice the agency typically negotiates a reduced settlement that reflects the company’s ability to pay and the public‑interest benefit of compliance. Realistically, market participants are pricing a $50‑$150 million out‑of‑court settlement range, plus the cost of a compliance overhaul (legal fees, audit, privacy‑by‑design upgrades).

Trading implications

The uncertainty around the ultimate liability is already reflected in DIS’s recent price action: the stock has slipped ~6 % since the Rosen Law Firm announcement and is trading near its 20‑day low, with the 50‑day SMA acting as resistance. Volume has been modestly elevated, suggesting a cautious short‑covering environment rather than a panic sell‑off. From a risk‑reward perspective, a short‑term bearish bias is justified until the FTC or a court provides more concrete guidance. Investors could consider a protective put (e.g., $90‑$95 strike) to hedge against a sudden settlement announcement that pushes the stock lower, while keeping a long‑bias for the longer term if Disney’s fundamentals (strong parks cash flow, streaming subscriber growth) remain intact. If the case settles for a figure at the lower end of the $50‑$150 million range, the impact on Disney’s cash‑flow and earnings per share would be marginal, likely limiting the downside to 5‑8 % from current levels. Conversely, a settlement above $300 million—or a headline‑making FTC fine—could trigger a 10‑15 % correction, making the put‑sell spread an attractive tactical play. Keep an eye on any SEC filings or FTC press releases in the next 4‑6 weeks for the catalyst that will define the next price move.