Epic legal battles almost never get this massive. But on Thursday, one of the biggest stars in Hollywood sued the biggest entertainment company on the planet, sending shockwaves across an entertainment landscape already reeling from months of disruptions and shifting paradigms.
In one corner, Scarlett Johansson, who claims that the Walt Disney Company has cheated her by releasing “Black Widow” simultaneously on Disney Plus and in theaters. In the other, is Disney, which tore into the actress in unusually personal terms in a statement Thursday, calling her claims “sad and distressing” and accusing her of showing “callous disregard” for the effects of the COVID-19 crisis. The consequences of this clash of titans could fundamentally reshape the way that actors are compensated for their work at a time when new streaming services and a global pandemic have disrupted the theatrical landscape.
“Good for her,” said one Hollywood talent agent. “A lot of other actors are cheering for Scarlett and rooting her on. She has a lot of power and that makes this a visible conversation that puts Disney on the spot. By doing all of this in public, she might be able to change the rulebook.”
Salary disputes between top talent and studios are becoming more commonplace in the streaming era. Agents erupted when Warner Bros. sent its entire 2021 slate to HBO Max, opting to release movies like “Dune” and “Godzilla Vs. Kong” on the streaming platform at the same time they hit theaters. They claimed that the move prevented their clients from realizing their full back-end potential, because those payouts were tied to box office performance. Warner Bros. quickly worked to make things right, paying out over $250 million in backend deals to the likes of Will Smith (“King Richard”), Denzel Washington (“The Little Things”), and Gal Gadot (“Wonder Woman 1984”).
But most of the haggling took place behind closed doors. Johansson’s case is the first to break into open view, rather than being settled quietly, either through negotiation or arbitration. It appears to be emboldening other stars, with industry insiders telling Variety that several Disney actors are considering their own legal challenges. That could create a cascade effect, one that could prove costly to Disney if they have to cut talent in on a bigger piece of the overall pie.
“Something has gone wrong,” said one industry veteran. “I just find it absolutely stunning and amazing that they didn’t resolve this short of her suing. Disney does not want to get in a fight with Scarlett Johansson.”
According to the suit, Johansson’s contract guaranteed a “wide theatrical release” for “Black Widow,” meaning the film would be shown on at least 1,500 screens. Johansson’s lawyers argue that everyone understood that to mean an “exclusive” theatrical release, under which “Black Widow” would not be available on other platforms for at least 90 to 120 days.
To bolster their argument, the suit includes a 2019 email between the actress’s legal team and Marvel Chief Counsel Dave Galluzzi, in which the studio attorney promised a traditional theatrical bow “like our other pictures,” while adding “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.”
Disney has countered that it did live up to the agreement. That is, “Black Widow” did get a wide theatrical release, and nowhere in the contract does it say that the release would be exclusive to theaters.
“This case in some respects is going to boil down to a semantic argument of, ‘Does that wide release necessarily mean exclusive?'” said Chad Fitzgerald, a partner at Kinsella Weitzman Iser Kump Holley who has handled Hollywood profit participation disputes. “It’s certainly not open and shut.”
If the case gets that far, much will depend on whether Johansson’s contract is “ambiguous” — that is, whether it could be read more than one way. If the contract is clear, then so-called “extrinsic” evidence — such as what industry figures generally understand certain terms to mean — would not become a factor.
“As a general rule, you don’t delve into industry custom and standard when the contractual language is plain and unmistakable,” said James Sammataro, co-chair of the media and entertainment group at Pryor Cashman LP.
Left out of the legal wrangling is a growing consensus that Marvel missed the mark with “Black Widow.” The film set a pandemic opening record with it $80 million debut in North America, but grosses have flatlined in the following weeks. Disney initially said that the film had made $60 million in Disney Plus rentals, but it has yet to provide any more transparency into those numbers in subsequent weeks, which could be a sign they were disappointing. The studio believes that the film, which currently has a $320 million global gross, will fall short of making $500 million worldwide, and views the film as more of a single than a home run. By way of context, in pre-pandemic times, many Marvel movies topped $1 billion at the box office. Johansson’s camp is speculating that the cannibalization caused by the Disney Plus launch potentially cost the actress $50 million in backend compensation. Rival studio executives think that’s overly generous, pegging her likely payout in a world without COVID at half that amount. Adding to the melee, the actress’s agency, CAA, is slamming Disney for disclosing that Johansson made $20 million in upfront salary, calling it an attempt to “weaponize her success as an artist and businesswoman.” Everyone is looking to land blows in a dispute that’s growing increasingly acrimonious.
When Disney opted to release blockbusters like “Cruella,” “Black Widow” and “Jungle Cruise” on Disney Plus simultaneously, it came up with a new formula for calculating backend deals. Insiders say that for some stars the studio agreed to add the film’s rental revenue on Disney Plus to its box office total, giving the actors a better chance of hitting their bonus marks. Warner Bros. used a different approach — it rewarded backend deals by assuming that the simultaneous release had cut box office revenues in half, so it essentially doubled a film’s final gross to calculate the bonus payout. There were variations in this math. Major stars on the order of a Denzel Washington or Will Smith have different kinds of deals, which give them a percentage of all of the revenue that a film generates over its life-cycle, from television licensing to digital rentals. Warner Bros. gave actors impacted by the HBO Max pact an advance on those downstream profits as part of the payout.
Agents and rival studio executives were stunned by Disney’s scorched earth response to Johansson’s suit. Many found it ironic that Disney was accusing Johansson of being callous about the pandemic after the company had laid off or furloughed more than 30,000 workers during the worst of COVID-19. In Marvel world, Black Widow’s arc had been wrapped up in “Avengers: Endgame,” so more sequels featuring the Russian super spy had already appeared unlikely, but it the legal jockeying could limit the actress’s willingness to collaborate on future Disney movies, including a “Tower of Terror” movie that the actress was going to produce for the company.
But Johansson’s spot on the A-list is secure, so she can afford to alienate Disney and Marvel. Other actors aren’t as lucky. Marvel movies are one of the only sure-fire box office draws. Appearing in one can raise an actor’s asking price and help them get other passion projects greenlit. Getting iced out of those superhero opportunities can stall careers, which gives Disney the upper hand.
“They have all the leverage,” an agent lamented.
However, if Johansson is successful, it could be highly lucrative for stars of her caliber. For decades, the top salary for movie stars has largely stalled out at $20 million. Streaming has the potential to raise those prices, because companies like Netflix and Amazon have been willing to pay out 100% of actors’ backends in order to land stars like Ryan Reynolds or Dwayne Johnson for their projects. But as more traditional companies have moved aggressively into the streaming space, launching services like HBO Max, Disney Plus, and Paramount Plus, they have yet to establish their own compensation models. This deficiency was exposed during COVID-19, when studios had no choice but to explore alternative ways of releasing their movies with theaters closed or operating at limited capacity.
“Everything is very haphazard right now, but sometimes it takes a crisis to resolve big issues and this is a very big issue,” says Joe Pichirallo, a former studio executive and a professor at NYU’s Tisch School of the Arts. “In light of these new distribution patterns, a new compensation system needs to be worked out so talent doesn’t feel like they’re being disrespected or treated poorly.”
Johansson’s lawsuit could provide a crucible for all of these issues. But the case may not remain in a public courtroom for very long. Fitzgerald suggested that Disney would likely seek to force the case into arbitration, where several similar cases are already playing out in secret. The lawsuit does not indicate whether Johansson’s contract contained an arbitration clause, but such a clause would be standard.
Forcing it to arbitration would help Disney keep its business strategies out of the public domain, and would protect it from a bruising public relations battle.
“They are going to move heaven and earth to get it to arbitration,” Fitzgerald said.
One oddity of the complaint is that Johansson sued Disney, and not Marvel, its subsidiary. Though the suit states that Marvel breached her contract, it does not assert a breach of contract claim against Marvel. Instead, it accuses Disney, the parent company, of interfering with Marvel’s contract with Johansson and of inducing Marvel to breach it.
A possible explanation is that the Marvel contract includes an arbitration provision, which would require any claims against Marvel to be handled privately. That leaves Johansson’s lawyers in the position of arguing that Disney and Marvel are separate entities capable of interfering with each other’s contracts.
But these issues may not get very far in court.
“This is going to settle,” said the insider. “There must be some miscommunication going on.”
© 2022 PMC. All rights reserved.