SIGNALS

Alert readers will recall that I have recently mentioned the Black Widow prequel movie in two different blogs here and here. Honestly, I am not stalking its glamorous star. Rather, this particular movie just keeps making news. In this latest installment, the movie's star, Scarlett Johansson, has filed suit against Disney, owner of the Marvel franchise.

The essential issue, as you can guess, involves streaming. Specifically, instead of a traditional theatrical release subsequently followed by release to other outlets, Disney released the movie simultaneously to theaters and to its own Disney+ channel as a premium offering.

Apparently that did not sit well with Ms. Johansson. In her lawsuit, she claims that the simultaneous release was a breach of contract. The lawsuit says that her contract called for an exclusive theatrical release and that her salary was partly tied to the box-office revenue. To quote: “Disney intentionally induced Marvel’s breach of the agreement, without justification, in order to prevent Ms. Johansson from realizing the full benefit of her bargain with Marvel.”

In its response, a Disney spokesperson said the suit is “especially sad and distressing in its callous disregard for the horrific and prolonged global effects of the Covid-19 pandemic.” Frankly, I'm not sure how that rebuts the accusation. More to the point, Disney says that they “fully complied with Ms. Johansson’s contract and furthermore, the release of Black Widow on Disney+ with Premier Access has significantly enhanced her ability to earn additional compensation on top of the $20 million she has received to date.” I like how the rebuttal manages to both casually plug Disney+ and disclose her salary.

Let's stipulate that Disney's executives and their attorneys are very smart cookies. Would they really have so nakedly breached their agreement as is claimed? I would never say anything cynical about movie studios, but maybe they ran the numbers and projected that even if they were sued, and lost, and even after additionally compensating Ms. Johansson, they would still make more money by interpreting the contract liberally. Maybe that potential cost was calculated to be small compared to the short-term profits from the Disney+ channel, and the long-term benefit of promoting it. But couldn't they have simply renegotiated the contract? Warner Bros., for example, renegotiated their artist's contracts, and ponied up an additional $200 million to compensate them for lost box-office revenue.

The lawsuit also claims that in response to a potential simultaneous release, Ms. Johansson tried to amend her contact, and further claims that a Marvel attorney responded in an email, “We understand that should the plan change, we would need to discuss this with you and come to an understanding as the deal is based on a series of (very large) box office bonuses.” But in the end, the lawsuit claims that Disney did not amend the contract. The proverbial “person familiar with the details” says that it is anticipated that the simultaneous release could cost Ms. Johansson $50 million. Hence, the lawsuit.

Or, is Disney on firm legal ground here? When Disney says they “fully complied with Ms. Johansson’s contract” they might be entirely correct. For example, the contract might not specifically define what a “theatrical debut” is, or specify the timing of the release to other outlets. Words, especially legal words, matter. Ms. Johansson asked to renegotiate, but Disney might have taken a second look at the contract, and decided that all questions of distribution had been fairly agreed to by both parties.

According to a Disney attorney, “There are no limitations or constraints on the company’s judgment on how to distribute Black Widow and the contract gives the studio “complete control and decision-making over distribution of the movie.” In other words, Disney contends, crucially, that the contract did not guarantee an exclusive theatrical release. Further, Disney has indicated that the contract calls for a confidential arbitration to resolve any disputes and that Disney will seek to move the case from the courts to arbitration.

It is impossible to predict how a court may rule or how the parties decide to settle. However, one thing is clear: the rise of subscription channels has forever changed traditional box office profit-sharing equations. In one scenario, movie theaters might be stiffed while a proportionally bigger share is shifted to the headlining stars. In any case, lawyers on all sides will sharpen their pencils to determine how the math should be modified. Or, what kind of entirely new math needs to be invented that will result in a satisfactory division of the spoils.

Finally, to quote the Black Widow herself from the movie's trailer: “Before I was an Avenger, I made a lot of mistakes. And a lot of enemies.