Settlement Reached Between Disney, 20th Century Studios Over 'Financial Whitewash' Accusations

Disney and 20th Century Studios have settled their breach of contract lawsuits with film financier TSG Entertainment.

Disney, 20th Century Studios Settle Breach of Contract Lawsuits

In a recent article from the Hollywood Reporter, Disney and 20th Century Studios have both settled their breach of contract lawsuits from film financier TSG Entertainment. The entertainment film financier accused film studios of withholding profits and self-dealing to boost subscriber counts for their respected streaming platforms.

It’s important to note that 20th Century Studios collaborates with various other studios and goes by many names, including Searchlight Pictures, Fox Corp, Fox Searchlight, Fox Searchlight Pictures, 20th Century Fox Television, Fox Film Corporation, Twentieth Century Pictures, Fox Corporation, 20th Television, the Walt Disney Company, Fox 21 Television Studio, Twentieth Century Fox, ABC Studios, FOX Sports, Touchstone Television, Marvel Studios, and Disney 20th Century Studios as of recent.

On January 5, legal representatives from both parties informed the court about a resolution reached to settle the conflicting lawsuits, although specific terms of the agreement were not disclosed. The focal point of the case revolved around an independent audit conducted on three films in which TSG had invested, notably the best picture recipient, The Shape of Water (2017).

The audit reportedly unveiled a minimum owed amount of $40 million. TSG contended that this financial deficit led to a less favorable position in their investment in Avatar: The Way of Water (2023), preventing them from having the necessary funds to exercise options for investments in other films.

In the preceding year, TSG initiated legal action against 20th Century, alleging breach of contract, and Disney, accusing the latter of inducing that breach. In response, Disney counter-sued, seeking a court order affirming its adherence to the terms of the longstanding agreement with TSG.

TSG, a significant financial partner with investments exceeding $3.3 billion in over 100 films, including notable titles like Bohemian Rhapsody (2018), Deadpool (2016), and The Grand Budapest Hotel (2014), expressed dissatisfaction with the deal’s financial aspects, referring to it as “Hollywood Accounting.”

Although conflicts of this nature are often resolved privately, the terms of the agreement between the financier and the studio allowed for court intervention to preserve the right to appeal any ruling. TSG initiated legal proceedings after observing a substantial return reduction from its investment.

The complaint outlined various financial discrepancies, including uncredited revenue, unauthorized distribution fees, and expenses unrelated to the films. Additionally, TSG alleged instances of “self-dealing,” where 20th Century purportedly entered into advantageous agreements with its licensee affiliates to diminish profit payments to stakeholders artificially.

An illustrative example cited involved a secret side deal with FX Networks, deviating from a pre-existing agreement on fair value tied to domestic box office performance.