Disney and TSG Settle Lawsuit Over Claims of Withholding Profits

Disney and its subsidiary 20th Century Studios have settled a lawsuit with film financing partner TSG Entertainment, which sued the major studio claiming it had breached its contract by withholding profits and self-dealing to boost streaming service subscriber numbers.

In court documents obtained by TheWrap, lawyers for the two companies notified Los Angeles Superior Court of the settlement and moved for the lawsuit to be dismissed. The terms of the settlement have not been disclosed.

TSG has been a longtime financing partner with 20th Century and its specialty wing Searchlight Pictures, dating back to before their acquisition by Disney in 2019. Among the films co-financed by TSG before and after the Disney/20th Century merger include “Dawn of the Planet of the Apes,” “Deadpool,” “The Banshees of Inisherin” and Best Picture Oscar winner “The Shape of Water.”

The lawsuit, which was filed last August, claimed that Disney’s alleged self-dealing had kept TSG from receiving millions in profits that it could use to invest in future films and denied TSG the right to sell stakes in other projects. TSG had alleged that it had been underpaid by at least $40 million after requesting an audit of three films it financed for 20th Century.

One of those films was “The Shape of Water,” which TSG claimed 20th Century had licensed to its cable network FX for $4 million less than it should have under its output agreement to TSG.

TSG said it also discovered through the audit that it had not been credited with revenue it should have received and was charged millions of dollars for distribution fees that weren’t part of its revenue-participation agreement with 20th Century.

“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 read.

TSG also claimed in its lawsuit that Disney, after acquiring 20th Century, had its subsidiary renegotiate its exclusive “pay one window” distribution deal negotiated with HBO in 2012 for a 10-year period. TSG claimed this renegotiation, which was done to allow 20th Century films to appear on Disney’s streaming services Disney+ and Hulu faster, cost the financier “a significant portion of its guaranteed HBO license fees.”

Disney, in its cross-complaint against TSG, claimed that TSG’s output deal with 20th Century and FX explicitly excluded films distributed by Searchlight, including “The Shape of Water.” It also sought a court order giving the studio “sole discretion and control over distribution decisions.”

TheWrap has reached out to Disney and TSG for comment.

Pamela Chelin contributed to this report.

The post Disney and TSG Settle Lawsuit Over Claims of Withholding Profits appeared first on TheWrap.