The Walt Disney Company is going to be headed back to court again. Disney has already lost a First Amendment case at the Supreme Court, and just last month, they were dragged into another First Amendment case over the use of a bag used in Indiana Jones and the Dial of Destiny (2023). And there are the ongoing lawsuits, plural, with Florida Governor Ron DeSantis and the Central Florida Tourism Oversight District.
But this latest lawsuit hits 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 is suing 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.
The complaint said:
Disney (and the executives running it) had and continue to have every incentive to do anything and everything they can, including manipulating distribution of the Qualifying Pictures and preventing TSG from liquidating its interests in certain tranches of Qualifying Pictures, to attempt to boost Disney’s share price at the expense of TSG and other profit participants.
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TSG alleges that Disney and 20th Century Fox moved movies to Disney Plus 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.
Attorney John Berlinski is representing TSG. He is familiar with Disney, as he represented Scarlett Johansson’s fight against Disney over her payment on Black Widow after it was given a simultaneous release on Disney Plus. Johansson settled her lawsuit with Disney.
Disney film revenue has dropped recently, but TSG Entertainment invested in one of Disney’s few hits, Avatar: The Way of Water (2022). But TSG Co says that by withholding profits from previous films, they took a lower position in that film and lost millions.
Disney has not commented on the lawsuit. However, at his earnings call last week, Disney CEO Bob Iger revealed that Disney Plus would be raising prices and cracking down on password sharing. The streaming platform lost millions of dollars for the Walt Disney Company and 20th Century Fox Studio.
We will continue to update this story at Disney Fanatic.
