Lawsuit Filed Against Disney by Financing Partner Over Accusations of Million-Dollar Fraud

Film Financier TSG Accuses Disney of Withholding Profits

Film financier TSG is taking legal action against Disney, accusing the company of withholding millions in profits through deceptive accounting practices. TSG claims to have invested $3.3 billion in 140 projects at Fox, which was acquired by Disney in 2019. Some notable films involved in the lawsuit include "The Banshees of Inisherin," "Avatar: The Way of Water," "Bohemian Rhapsody," "Deadpool," "The Grand Budapest Hotel," and "The Shape of Water." TSG alleges that Disney has utilized various tactics to manipulate accounting figures and deny them their rightful share of profits.

Lawsuit Revolves Around Film Distribution and Streaming

The lawsuit in question revolves around the issue of film distribution and how it has been affected by the rise of streaming services, particularly during the COVID-19 pandemic. The lawsuit argues that the traditional practice of "windowing" film distribution, which aims to maximize profits by preventing different revenue streams from competing with each other, has been disrupted. The collapse of these distribution windows is claimed to have resulted in missed opportunities for studios and their investors to generate significant revenue.

TSG Claims Losses Due to Disney's Deal with HBO

A lawsuit has been filed against Disney by TSG Entertainment, alleging that the company forced 20th Century Film Studio to renegotiate a deal with HBO. This resulted in TSG losing a significant portion of its guaranteed license fees from HBO, while Disney benefited financially from streaming the films on Disney+ and Hulu. TSG claims that this decision cost them millions of dollars.

Accusations of Breach of Contract and Undervalued License Fees

According to a report, TSG Entertainment has accused 20th Century Studios of breaching a contract and causing a decrease in its cash flow. TSG claims that the studio ignored an agreement with FX Networks and made a secret deal that undervalued the license fees for the movie "Avatar: The Way of Water." This alleged breach prevented TSG from investing in future projects.

Attorney Accuses Studios of "Hollywood Accounting" Practices

In a recent development, TSG's attorney, John Berlinski, has accused studios of engaging in "Hollywood accounting" practices that allegedly cheat investors, including his clients, out of their fair share of profit money. Berlinski, who also represented Scarlett Johansson in her lawsuit against Disney over her compensation for the film "Black Widow," used this phrase to describe the alleged deceptive financial practices employed by studios. This revelation sheds light on the ongoing disputes between actors, studios, and investors regarding profit distribution in the entertainment industry.

Disney Accused of Manipulating Distribution and Preventing Liquidation

The article discusses a complaint filed against Disney by David Berlinski, a participant in the profit-sharing agreement with the company. Berlinski alleges that Disney has been manipulating the distribution of qualifying pictures and preventing him from liquidating his interests in certain tranches of these pictures. He claims that Disney is doing this to boost its own share price at the expense of him and other profit participants.

TSG Suffers Losses Due to Electronic Sell-Through Distribution

According to auditors, TSG (The Walt Disney Company's streaming division) has suffered a loss of at least $54.5 million due to issues with Electronic Sell-Through distribution. A lawsuit has been filed, specifically naming Disney CEO Bob Iger, claiming that the company pursued this strategy recklessly and without proper planning. The lawsuit references a statement made by Iger during an earnings call in August 2023, where he admitted that Disney grew the Disney+ business rapidly without fully understanding the pricing strategy.

Disney Yet to Comment on Lawsuit

Disney is facing a lawsuit, but the company has not yet made any public comments regarding the matter. It is worth noting that The Daily Wire, a news outlet, has announced its plans to create kids entertainment content.