Scarlett Johansson, who has repeatedly played Marvel’s Avenger character “Black Widow,” has sued Disney for breaching the promise in her contract to play in its new film, entitled “Black Widow,” that Disney would give the film a “wide theatrical release.”  Johansson was promised generous box office bonuses.  Instead, Disney released the film simultaneously in theaters and on its new streaming subscription service, Disney+.

The advent of studio-owned streaming opens a new front in a long history of litigation between talent and studios over how entertainment revenues are shared, particularly where the sharing is impacted by new technology and “vertical integration,” consolidation within major corporations of the means of bringing entertainment to consumers.

Traditionally, to be a “studio,” a corporation must provide finance, production and distribution and release a regular slate of films. 

In early days studios also sought to own the means of exhibition, the theaters.  The Justice Department moved to block mergers or force divestment to limit studio ownership and control of theater chains.

Films were released in different venues, or media, at different times, in “windows.”  First the windows were live theater and free television.  As technology evolved, windows for release on tape, DVD and pay cable intervened between theaters and free television (if the latter still exists).  The main revenue driver was the exclusive first window, the theatrical release – “box office.” 

Topline talent and studios wrestled over their share of the lucrative box office.  Other revenue sharing opportunities opened when consumers viewed the same film by first buying a theater ticket, then buying the DVD, then paying monthly fees to a cable channel.

Studios likely bargained at arm’s length with third party theater owners for the best rates.  However, as the media used to distribute films multiplied, and given corporate consolidations, there has been profit-sharing litigation where talent complained that studios were bargaining with themselves over issues such as window duration and pricing, to the detriment of the share going to talent.

Now, due to ubiquitous high-speed Internet, “cord cutters” are increasingly terminating their cable subscriptions in favor of streaming packages.  Covid-19 accelerated this trend by shutting down live theater.  Studios are once again trying to own the means of exhibition by promoting their streaming products.  Consumers afraid of catching a virus in a crowded theater have paid to see topline releases at home.  This has driven content owners to monetize their works by pushing major films into living rooms at the same time as theaters – “day and date” releases.

Scarlett Johansson sued because her contract, signed before the global pandemic, promised a wide theatrical release for “Black Widow.”  Disney+ did not then exist, and thus her contract likely says little or nothing about sharing revenues through a streaming service owned by Disney.  Disney delayed releasing “Black Widow” when Covid-19 closed theaters, and ultimately released “Black Widow” simultaneously in theaters and on Disney+.  Johansson claims breach because this decision moved revenue from an exhibition venue in which she had a stake to one in which likely she had little or none.

She also complains of another wrinkle that impacted her take on the film.  While previously a consumer wishing to see “Black Widow” on release and then again at home would, at minimum, have been required to purchase a movie ticket but also buy the DVD, Disney+ subscribers who paid Disney to see “Black Widow” on release purchased the right to replay the movie endlessly without additional charge.  This bargain removed the need for consumers to pay to see the movie more than one time.

Johansson’s Complaint quotes a Disney executive promising to revisit her revenue sharing agreement if there was no wide theatrical release.  Apparently, this never happened.  If Disney bargained for a “force majeure” clause, it may claim this overrode the theatrical release promise. 

Whether Disney is willing to risk severing their relationship with Johansson, I doubt they will be interested in discovering what a judge or jury will say about their actions.  I strongly suspect the case will settle on confidential terms.

Going forward, talent lawyers will be revising their forms to account for providing their clients a share of revenue when the studio also owns the exclusive right to exhibit through streaming.  As major corporations once again become vertically integrated to own all aspects of exploitation of a work, including exhibition, there will assuredly be more litigation about the negative impact of inside bargaining on the talent’s share of revenue.