Disney and TSG settle lawsuit over “Hollywood accounting”

Disney and TSG Entertainment Finance have reached a resolution in the litigation that arose in August 2023 when TSG sued Disney for alleged “rampant self-dealing” and breach of their revenue participation contract. A Disney spokesperson confirmed the settlement.

TSG, which has financed over 140 films totaling $3.3 billion with Fox (acquired by Disney in 2019), listed various films in its portfolio, including Avatar: The Way of Water, Bohemian Rhapsody, Deadpool, Deadpool 2, X-Men: Days of Future Past, Logan, Dawn of the Planet of the Apes, The Martian, The Grand Budapest Hotel, JoJo Rabbit, The Banshees of Inisherin, Hidden Figures, The Shape of Water, and Empire of Light.

The lawsuit, filed in Los Angeles District Court, accused Fox of utilizing dubious accounting practices to avoid paying TSG its share of defined gross receipts under their long-term participation agreement. TSG claimed that Disney/Fox engaged in self-dealing with FX, Hulu, and Disney+ and alleged breaches of contract based on an audit showing revenue shrinkage, although specific films were not identified.

The suit highlighted a backroom deal related to the Oscar-winning film The Shape of Water in 2017, alleging a reduction of nearly $4 million from the agreed-upon price. TSG contended that Disney/Fox failed to distribute co-financed films fairly, citing former CEO Bob Chapek’s decision to shorten exclusive theatrical windows and prioritize Disney+ over theatrical releases, impacting TSG’s expected theatrical revenue.

This issue mirrored concerns raised by Scarlett Johansson’s lawsuit against Disney over the dual release of Black Widow in theaters and on Disney+ in 2021. TSG claimed that Disney’s strategy, coupled with Fox’s alleged self-dealing and “Hollywood Accounting,” deprived them of the necessary funds for future film investments.

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