Avatar: The Way of Water
Courtesy: Disney Co.
Hollywood financer TSG Entertainment has filed a breach of contract lawsuit against Disney for alleged transgressions, including withholding profits and manipulating deals to benefit its streaming platforms and stock price. The lawsuit claims that these actions deprived TSG of funds for investing in individual films and selling its stakes in other movies.
Disney has not yet responded to CNBC’s request for comment.
TSG co-finances the production and marketing costs of films and receives a share of the defined gross receipts after release. The company has invested approximately $3.3 billion in content produced by 20th Century Fox, which Disney acquired in 2019. Notable films include “Avatar: The Way of Water,” “The Menu,” “Jojo Rabbit,” “The Greatest Showman,” and “Gone Girl.”
To address declining profits, TSG requested an audit of three films it financed for 20th Century Fox. The audit uncovered what TSG claims to be rampant self-dealing and accounting tricks, resulting in the underpayment of at least $40 million.
The lawsuit describes the situation as a prime example of Hollywood Accounting, with Fox and Disney attempting to deprive TSG of hundreds of millions of dollars. One instance cited involves the undervaluation of “The Shape of Water” in a licensing deal with FX, a studio-owned channel.
TSG also discovered that it had not received proper revenue credits and was wrongfully charged distribution fees not included in its agreement with the studio. Additionally, TSG asserts that Disney’s 2021 deal with Warner Bros. Discovery adversely affected its potential profits.
Furthermore, TSG claims that it was denied the right to sell its stake in other films back to Disney or a third party, resulting in reduced financial resources for future investments.
Represented by John Berlinkski of Bird Marella law firm, TSG is seeking resolution for the alleged breach of contract. Mr. Berlinkski previously represented Scarlett Johansson in her lawsuit against Disney over the simultaneous release of “Black Widow” in theaters and on Disney+.
The Wall Street Journal initially reported on the lawsuit.
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