Disney Settles Suit That Claimed Its Shady Business Practices Hid Hundreds of Millions in Profits

Lawyer Daniel Petrocelli is a busy man. Whenever The Walt Disney Company has a high-profile case, they call on Petrocelli to represent them. It was Petrocelli who helped Disney and Marvel reach a settlement with Scarlett Johansson over her payment for Black Widow. 

Related: Disney Busting Out Legal Legend for Fight With DeSantis

Petrocelli is also arguing Disney’s case against Florida Governor Ron DeSantis in Federal Court and the Central Florida Tourism Oversight District in State Court. But this week, Petrocelli earned his money again by helping The Walt Disney Company settle its lawsuit with film financier TSG Entertainment.

This latest lawsuit hit at the heart of Disney’s accounting practices and ability to make money using its streaming platforms without paying residuals to those who create and finance those projects. Film financier TSG sued Disney, accusing them and 20th Century Fox of breach of contract.

TSG Entertainment has invested over $3.3 billion in hundreds of movies and is accusing Disney of hiding profits and using “creative accounting” to hide profits from the films TSG financed. An independent audit of the Best Picture winner, The Shape of Water (2017), found that Disney withheld at least $40 million in profit.

TSG alleged that Disney and 20th Century Fox moved movies to Disney+ and Hulu earlier than anticipated, making their DVD purchase window shorter. It also makes it more challenging to determine profits when a film arrives on Disney’s streaming platform. By closing the window, TSG alleges that Disney boosted its profits while shorting them “hundreds of millions” in yields.

When Disney purchased 20th Century Fox, the studio had deals with FX Network and HBO to allow 20th Century Fox films to be shown on the platforms. Payment for those films was based on how much each film made at the box office. But Disney changed the terms of those deals to get those movies onto Disney’s streaming platforms first.

According to the Hollywood Reporter, because Disney withheld profits on The Shape of Water, movie financier TSG Entertainment was not able to invest as much in the 20th Century Studios release, Avatar: The Way of Water (2022). The film would make $2.32 billion at the box office.

Cases like this that involve “Hollywood accounting” don’t usually make it to court. However, the deal between Walt Disney Studios, 20th Century Studios, and TSG Entertainment called for any disputes to be filed in court so either side could appeal the ruling.

A Disney spokesperson said that the matter “has been resolved,” but did not release the terms of the deal.

We will continue to update this story at Disney Fanatic.