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‘Avatar’ Sequel Financier Accuses Disney of Withholding Hundreds of Millions of Cash

TSG Entertainment, a prominent Hollywood financier, has filed a lawsuit against Disney, alleging breach of contract. The lawsuit, filed in Los Angeles Superior Court, claims that Disney and its subsidiary, 20th Century Fox engaged in various violations, including withholding profits and making deals to bolster their streaming platforms and stock price. These actions are said to have hindered TSG’s ability to invest in individual films and sell its stakes in other movie projects.

TSG collaborates by co-financing film production and marketing costs in exchange for a share of defined gross receipts post-release. The company has participated in financing around 140 films produced by 20th Century Fox, a studio acquired by Disney in 2019, including notable titles like “Avatar: The Way of Water.” Since 2012, TSG has invested roughly $3.3 billion in the studio’s content.

Following a decline in profits, TSG sought an audit of a sample of three films it financed for 20th Century Fox. The audit allegedly uncovered instances of “rampant self-dealing” and “accounting tricks,” indicating that TSG had been underpaid by at least $40 million.

The lawsuit accuses Disney and Fox of employing Hollywood Accounting tactics to deprive TSG of substantial amounts, highlighting instances such as undervalued licensing agreements and undisclosed revenue. TSG also claims that Disney’s 2021 deal with Warner Bros. Discovery, which relaxed exclusivity for HBO and the Max streaming service in exchange for reduced license fees, directly impacted TSG’s potential earnings.

Furthermore, TSG contends that its attempts to sell its stake in other films were denied by Disney, preventing the company from investing further in individual projects. This allegedly triggered a provision entitling Fox to a significant portion of TSG’s profits.

Represented by John Berlinkski of Bird Marella law firm, TSG’s lawsuit is reminiscent of its earlier representation of Scarlett Johansson in her dispute with Disney over the release of “Black Widow” on Disney+ alongside theaters. The lawsuit underscores the complexities and disputes that can arise within the entertainment industry, particularly regarding financial agreements and profit-sharing arrangements.

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