Introduction

Hollywood financer TSG Entertainment has filed a lawsuit against Disney for breach of contract. The suit alleges that Disney, along with its studio 20th Century Fox, engaged in various transgressions that deprived TSG of cash needed to invest in films.

Details of the Lawsuit

The lawsuit, filed in Los Angeles Superior Court, claims that Disney withheld profits and made deals to boost its streaming platforms and stock price. These actions allegedly restricted TSG from investing in individual films and selling its stakes in other movies.

Representatives from Disney have not yet responded to AsumeTech’s request for comment.

TSG’s Role and Investments

TSG co-finances the production and marketing costs of films in exchange for a share of the defined gross receipts after the film’s release. The company has invested approximately $3.3 billion in content produced by 20th Century Fox since 2012, including films like “Avatar: The Way of Water.”

TSG’s logo, which features a man shooting an arrow through axe heads, can be seen in the opening credits of movies such as “The Menu,” “Jojo Rabbit,” “The Greatest Showman,” and “Gone Girl.”

Audit Findings and Alleged Incidents

After noticing a decline in profits, TSG requested an audit of three films it financed for 20th Century Fox. The audit revealed what TSG describes as “rampant self-dealing” and “accounting tricks,” leading to an underpayment of at least $40 million.

One incident highlighted in the lawsuit involves Fox licensing “The Shape of Water” to FX, a channel owned by the studio, for $4 million less than agreed upon. TSG also discovered uncredited revenue and excessive distribution fees that were not part of their agreement with the studio.

Legal Representation and Impact of Disney’s Deal

TSG is represented by John Berlinkski of the law firm Bird Marella, who previously worked with Scarlett Johansson in her lawsuit against Disney. TSG claims that Disney’s 2021 deal with Warner Bros. Discovery, which waived exclusivity to HBO and the Max streaming service, directly affected their potential profits.

Denial of Stake Sale and Consequences

When TSG attempted to sell its stake in other films back to Disney or a third party, the request was denied. As a result, TSG lacked the financial resources to invest further in individual films like “Avatar: The Way of Water.” The suit alleges that this denial triggered a provision entitling Fox to 50% of TSG’s profits after the winding-up of TSG’s investment vehicle.

Conclusion

TSG Entertainment’s lawsuit against Disney highlights allegations of breach of contract, with claims of withheld profits and detrimental deals. The outcome of the legal proceedings will determine the impact on TSG’s investments and future film productions.

Source: The Wall Street Journal