Disney accused of withholding hundreds of millions of dollars from 'Avatar' sequel financier

Hollywood financer TSG Entertainment is suing Disney for breach of contract.

The suit filed Tuesday successful Los Angeles Superior Court alleges that Disney and its workplace 20th Century Fox committed a fig of transgressions, including withholding profits and cutting deals to boost its streaming platforms and banal price. This enactment deprived TSG of currency to put successful idiosyncratic films and its efforts to merchantability its stakes successful different movies, the suit says.

Representatives from Disney did not instantly respond to CNBC's petition for comment.

TSG co-finances the accumulation and selling costs of films successful exchanges for a stock of the defined gross receipts aft the film's release. The radical has helped co-finance astir 140 films produced by 20th Century Fox, which Disney acquired successful 2019, including "Avatar: The Way of Water." In total, the institution said it has invested astir $3.3 cardinal successful the studio's contented since 2012.

Audiences would besides admit TSG from the opening credits of films similar "The Menu," "Jojo Rabbit," "The Greatest Showman" and "Gone Girl." The financier's logo is simply a depiction of a antheral with a bow shooting an arrow done respective axe heads.

Noticing a diminution successful profits, TSG requested an audit of a sampling of 3 of the films it financed for 20th Century Fox. TSG alleges that it recovered "rampant self-dealing" and "accounting tricks" wrong the books and had been underpaid by astatine slightest $40 million.

"At its root, it is simply a chilling illustration of however 2 Hollywood behemoths with a agelong and shameful past of Hollywood Accounting, Defendants Fox and Disney, person tried to usage astir each instrumentality successful the Hollywood Accounting playbook to deprive Plaintiff TSG — the financier who, successful bully faith, invested much than $3.3 cardinal with them — retired of hundreds of millions of dollars," the suit says.

In 1 alleged incident, TSG said Fox licensed "The Shape of Water," which won champion representation astatine the 2018 Academy Awards, to FX, a transmission owned by the studio, for $4 cardinal little than it should person nether its output agreement.

Additionally, TSG said done its audit that it recovered it had not been credited with gross it should person received and was charged millions of dollars for organisation fees that weren't portion of its revenue-participation statement with the studio.

TSG is represented by John Berlinkski of the instrumentality steadfast Bird Marella, who antecedently represented Scarlett Johansson erstwhile she sued Disney for putting Marvel's "Black Widow" connected Disney+ astatine the aforesaid clip it was released successful theaters. That suit was eventually settled.

TSG is purporting that Disney's 2021 woody with Warner Bros. Discovery, which waived exclusivity to the HBO premium transmission and the Max streaming work successful speech for smaller licence fees, straight chopped into TSG's imaginable profits.

Additionally, TSG said erstwhile it attempted to workout its close to merchantability its involvement successful different films it had funded backmost to Disney oregon a 3rd party, it was denied. As a result, TSG says it did not person the fiscal resources to put much successful idiosyncratic films similar "Avatar: The Way of Water."

"The effect was that TSG's stock of defined gross receipts was dramatically reduced, further eroding TSG's quality to make liquidity for aboriginal productions, and frustrating TSG's quality to recognize the payment of its statement with Fox," the suit alleged. "Most egregiously, this strategy triggered a proviso successful the [revenue information agreement] that entitles Fox to a 50% stock of TSG's profits aft the winding-up of TSG's concern vehicle."

The Wall Street Journal archetypal reported connected the lawsuit.