Movie financier TSG Entertainment, which has backed major titles such as Avatar: The Way of Water, Deadpool and The Martian, sued Walt Disney Co. and 20th Century Fox for breach of contract and alleged that Disney deprived it of “hundreds of millions of dollars” in profit by prioritizing its own Disney+ and Hulu streaming services.
TSG accused Fox of breaking out of the traditional model of releasing its films — Avatar: The Way of Water being the biggest hit — where it would have specific windows for pay-per-view, DVD and Blu-Ray sales and pay TV before arriving on a subscription service. This model allowed the studio and its investors to maximize the amount of revenue it would generate from a film. TSG said Disney induced Fox to instead renegotiate its deals to move its films straight to streaming, in this case on Disney+, eliminating several revenue streams that could be paid out to TSG and other investors.
In addition, TSG calls the move by Fox, which is owned by Disney, to put its films on Disney+ as a form of “self-dealing” which generated less money than if it had been licensed out to an outside service like HBO (which was originally supposed to hold the streaming rights). You can check out the full lawsuit here, courtesy of Deadline.
The lawsuit is the latest fallout of the media industry’s drive to bolster their respective streaming service catalog, with the pandemic driving some (HBO Max) to forgo theater releases entirely to focus on gaining buzz and attention for their subscription services. While audiences benefited from films moving from the theater to their TVs much faster, the move often yielded financial consequences for investors and the talent, who all struck deals based off of the traditional model.
Even as the worst of the pandemic is over, the changes to the model that came out of 2022 remains, with more films arriving on streaming services faster. TSG argued that prioritizes Disney to the detriment of its own revenue.
“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 lawsuit said.
A Disney spokesman wasn’t immediately available for comment.
Avatar: Way of the Water is a particularly dramatic example given how successful it was when it debuted in theaters last year. It grossed $2.32 billion worldwide, making it the third highest-grossing movie of all time, according to Box Office Mojo.
That sort of high gross suggests it could’ve generated even more revenue had it fallen under the original model of different “pay windows” where consumers either buy digital or DVDs copies. TSG argues a deal to have it air on HBO first would’ve been far more lucrative than moving it to Disney+.
Avatar is just one example. The suit notes that the films were also moved to Hulu, with both streaming services benefiting Disney, but not TSG or other investors in the film.
This isn’t the first time Disney has gotten into legal trouble over the model change. Actress Scarlet Johnasson sued Disney in 2021, alleging that the move to put the Marvel film Black Widow on Disney+ the same day as it premiered in theaters greatly hurt her potential income. The two sides settled in October of that year.