Disney is facing a lawsuit in Los Angeles Superior Court filed by film financier TSG, accusing the media giant of using deceptive accounting practices to hoard hundreds of millions in profit. This lawsuit echoes the recent legal battle between Disney and Scarlett Johansson over the release of “Black Widow” on both movie theaters and Disney+. TSG alleges that Disney made strategic moves to prioritize its streaming platform, similar to the legal backlash faced by WarnerMedia over the simultaneous streaming release of “The Matrix Resurrections” and other films.
The lawsuit names Twentieth Century Fox Film Corporation and The Walt Disney Company as defendants, referring to the studio entity as “Fox” despite it now being called 20th Century Studios under Disney’s ownership. Disney has not yet responded to requests for comment on the lawsuit.
The core issue in the case, as with Johansson’s complaint, revolves around distribution. The changing landscape of film distribution, particularly due to the impact of the pandemic, has led to significant shifts in traditional business practices. The theatrical window has come under pressure as streaming services gain popularity and media companies invest heavily in their platforms. TSG argues that these changes have come at the expense of finance partners.
The lawsuit highlights a significant change in the release window for 20th Century Studios’ films. Previously, the studio had a pay-1 release window with HBO. However, after Disney acquired the studio, it instructed 20th Century Studios to renegotiate the output deal, resulting in the surrender of a portion of guaranteed HBO license fees. In return, HBO allowed the films to stream on Disney+ and Hulu. While this move benefited Disney, its shareholders, and senior executives, TSG claims it cost them millions of dollars that they were entitled to.
TSG, led by Chip and Robert Seelig, has been involved with Fox since 2012 and has also had relationships with Warner Bros. and Sony. In addition to the alleged financial losses caused by Disney’s distribution decisions, TSG argues that the lack of cash flow hindered their ability to invest in successful films like “Avatar: The Way of Water.”
Disney recently dismantled a centralized distribution organization that was created during Bob Chapek’s tenure as CEO. The organization, known as Disney Media and Entertainment Distribution (DMED), aimed to streamline decision-making and accelerate streaming growth. However, it faced criticism from creative and financial partners who felt excluded from the process. Bob Iger, who appointed Chapek as his successor, returned to the company after Chapek’s departure in November 2022.
