- Film financing company TSG is suing Disney, claiming the entertainment giant used dubious accounting methods to deny them millions in profits.
- The lawsuit centers on distribution shifts with the rise of streaming platforms, which TSG alleges have been manipulated by Disney to its own advantage and to the detriment of stakeholders.
- TSG’s attorney, John Berlinski, who previously represented Scarlett Johansson in a lawsuit against Disney, uses the term “Hollywood accounting” to describe these practices.
Film financing company TSG has taken legal action against entertainment titan Disney, alleging that the company utilized a variety of questionable accounting tactics to intentionally withhold significant profits.
TSG claims to have invested over $3.3 billion in 140 film projects at Fox, which Disney acquired in 2019.
The lawsuit focuses primarily on the new distribution standards that have emerged as streaming services have risen in prominence, particularly in the wake of the COVID pandemic.
According to TSG, Disney’s strategies in the realm of film distribution intentionally diminish the potential for multiple revenue streams, which ultimately costs stakeholders.
The suit cites several instances to support these claims.
In one instance, TSG alleges that Disney instructed 20th Century Film Studio to renegotiate its distribution deal. As a result, a portion of the guaranteed HBO license fees were relinquished, allowing the films to appear on Disney+ and Hulu.
While this move was financially beneficial for Disney and its shareholders, TSG argues that they lost millions.
Another major grievance cited in the lawsuit relates to an alleged breach of a prior agreement with FX Networks.
TSG claims that 20th Century disregarded an arrangement that determined license fees based on domestic box office performance. Instead, the studio purportedly made a covert deal for a significantly reduced sum.
The term “Hollywood accounting” was used by TSG’s attorney, John Berlinski, to describe these alleged deceptive practices.
Berlinski, who previously represented Scarlett Johansson in her lawsuit against Disney regarding the “Black Widow” film, maintains that these tactics deliberately cheat investors out of rightfully earned profits.
In the complaint, Berlinski argued that Disney executives have motivations to engage in these practices. Specifically, they aim to bolster Disney’s share price at the expense of TSG and other profit participants.
An audit indicated that these questionable strategies slashed TSG’s earnings by a minimum of $54.5 million from Electronic Sell-Through distribution.
Disney CEO Bob Iger was directly named in the lawsuit, which cited a 2023 earnings call where Iger admitted to rapid growth strategies for Disney+ without a clear pricing strategy.
Disney representatives have yet to release a public statement concerning the lawsuit.
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