Disney is being sued by film financier TSG for cheating and hoarding millions in profits
TSG Entertainment Finance has flung a legal boomerang at Disney, accusing the Mouse House of orchestrating a series of maneuvers that allegedly aimed to pump up Disney+ and Hulu subscriptions, supercharge stock prices, and fill executive pockets with more than fairy dust.
The legal battle alleges that the entertainment giant obstructed a deal between TSG and 20th Century Studios, thereby impacting profits and investment returns.
- It raises concerns that Disney manipulated distribution strategies, imposed unauthorized charges, and employed the controversial practice of "Hollywood Accounting" to diminish TSG's rightful revenue share.
- The crux of the lawsuit asserts that Disney's actions were primarily driven by its desire to bolster subscriptions for streaming services like Disney+ and Hulu, elevate stock prices, and enhance executive compensation.
TSG looking for their share of the profits from Disney. https://t.co/1pMna5SS12 pic.twitter.com/4w11ZnCBVW
— Lewis IMF (@LewisJo58265023) August 15, 2023
Why
At the heart of the dispute is the accusation that Disney thwarted a potential deal between 20th Century Studios and TSG Entertainment Finance, with the intention of optimizing its streaming platforms' performance.
TSG contends that Disney maneuvered distribution of designated films, ultimately affecting TSG's share of revenues. Furthermore, Disney is alleged to have imposed fees that weren't agreed upon, thereby diminishing TSG's financial gains.
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Hollywood Accounting?
The most critical part of the lawsuit is the alleged use of "Hollywood Accounting" - a controversial practice that's been criticized for its complexity and potential to unfairly diminish profit participants' earnings.
- TSG's lawsuit contends that this practice has been deployed by studios to deceive profit participants, and Disney is no exception. By employing convoluted financial maneuvers, studios can allegedly underreport revenues, leading to reduced payouts for those entitled to a share of profits.
TSG's lawsuit paints a picture of Disney's actions as being motivated by corporate interests rather than a commitment to fair dealings. The lawsuit accuses Disney of manipulating distribution patterns and financial calculations to artificially elevate its share price and enhance the value of its executive compensation packages.
- This alleged manipulation is believed to have come at the expense of TSG and other profit participants.
Interference
The lawsuit also highlights Disney's interference in TSG's attempts to sell its stake in films that TSG had financed. This interference reportedly left TSG without sufficient financial resources to invest in upcoming films, including notable projects like Avatar: The Way of Water.
- The lawsuit contends that this interference led to a reduction in TSG's share of defined gross receipts and triggered provisions that further benefited Disney at TSG's expense.
The lawsuit also accuses Disney of inducing a renegotiation of distribution agreements with HBO. TSG claims that Disney's acquisition of 21st Century Fox led to changes in agreements, which were detrimental to TSG's interests.
- These changes reportedly aimed to favor Disney's streaming platforms, Disney+ and Hulu, thereby impacting TSG's expected returns.
TSG's attorney, John Berlinski, who has previously represented clients against studios in payment disputes, refers to Disney's conduct as a "chilling example" of such practices.
In the end, the courtroom conflict between TSG and Disney is a modern-day fairy tale of greed, intrigue, and the fine print of contracts.