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Home Editor's Pick Disney accused of withholding hundreds of millions of dollars from ‘Avatar’ sequel financier
Editor's Pick

Disney accused of withholding hundreds of millions of dollars from ‘Avatar’ sequel financier

by August 16, 2023
by August 16, 2023 0 comment
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Hollywood financer TSG Entertainment is suing Disney for breach of contract.

The suit filed Tuesday in Los Angeles Superior Court alleges that Disney and its studio 20th Century Fox committed a number of transgressions, including withholding profits and cutting deals to boost its streaming platforms and stock price. This act deprived TSG of cash to invest in individual films and its efforts to sell its stakes in other movies, the lawsuit says.

Representatives from Disney did not immediately respond to CNBC’s request for comment.

TSG co-finances the production and marketing costs of films in exchanges for a share of the defined gross receipts after the film’s release. The group has helped co-finance around 140 films produced by 20th Century Fox, which Disney acquired in 2019, including “Avatar: The Way of Water.” In total, the company said it has invested around $3.3 billion in the studio’s content since 2012.

Audiences would also recognize TSG from the opening credits of films like “The Menu,” “Jojo Rabbit,” “The Greatest Showman” and “Gone Girl.” The financier’s logo is a depiction of a man with a bow shooting an arrow through several axe heads.

Noticing a decline in profits, TSG requested an audit of a sampling of three of the films it financed for 20th Century Fox. TSG alleges that it found “rampant self-dealing” and “accounting tricks” within the books and had been underpaid by at least $40 million.

“At its root, it is a chilling example of how two Hollywood behemoths with a long and shameful history of Hollywood Accounting, Defendants Fox and Disney, have tried to use nearly every trick in the Hollywood Accounting playbook to deprive Plaintiff TSG — the financier who, in good faith, invested more than $3.3 billion with them — out of hundreds of millions of dollars,” the suit says.

In one alleged incident, TSG said Fox licensed “The Shape of Water,” which won best picture at the 2018 Academy Awards, to FX, a channel owned by the studio, for $4 million less than it should have under its output agreement.

Additionally, TSG said through its audit that it found it had not been credited with revenue it should have received and was charged millions of dollars for distribution fees that weren’t part of its revenue-participation agreement with the studio.

TSG is represented by John Berlinkski of the law firm Bird Marella, who previously represented Scarlett Johansson when she sued Disney for putting Marvel’s “Black Widow” on Disney+ at the same time it was released in theaters. That suit was eventually settled.

TSG is purporting that Disney’s 2021 deal with Warner Bros. Discovery, which waived exclusivity to the HBO premium channel and the Max streaming service in exchange for smaller license fees, directly cut into TSG’s potential profits.

Additionally, TSG said when it attempted to exercise its right to sell its stake in other films it had funded back to Disney or a third party, it was denied. As a result, TSG says it did not have the financial resources to invest more in individual films like “Avatar: The Way of Water.”

“The consequence was that TSG’s share of defined gross receipts was dramatically reduced, further eroding TSG’s ability to generate liquidity for future productions, and frustrating TSG’s ability to realize the benefit of its agreement with Fox,” the suit alleged. “Most egregiously, this scheme triggered a provision in the [revenue participation agreement] that entitles Fox to a 50% share of TSG’s profits after the winding-up of TSG’s investment vehicle.”

The Wall Street Journal first reported on the lawsuit.

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This post appeared first on NBC NEWS
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