Disney is being sued by Hollywood financer TSG Entertainment for allegedly withholding millions of dollars worth of film profits.
The suit, filed Tuesday in Los Angeles Superior Court, accuses Disney and 20th Century Fox of breaching contracts by withholding profits and signing side agreements to boost its own streaming platform and share price, according to reports.
The way the deals are supposed to work, TSG Entertainment funds a chunk of a film’s production and marketing costs in exchange for a slice of gross receipts after the film’s release.
The firm has co-financed about 140 20th Century Fox films, including 'Avatar: The Way of Water', investing $3.3 billion since 2012.
The suit came to fruition after TSG reportedly asked for an audit of three films it co-financed, pointing to a decline in profits. The firm says it uncovered “rampant self-dealing” and “accounting tricks” that had shorted the company by at least $40 million.
“At its root, it is a chilling example of how two Hollywood behemoths with a long and shameful history of Hollywood Accounting, Defendants Fox and Disney, have tried to use nearly every trick in the Hollywood Accounting playbook to deprive Plaintiff TSG — the financier who, in good faith, invested more than $3.3 billion with them — out of hundreds of millions of dollars,” the suit says.
The suit also alleges that Disney’s 2021 deal with Warner Brots. Discovery to waive exclusivity to the HBO premium channel and the Max streaming service in exchange for smaller license fees directly cut into the potential profits TSG’s could receive.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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