that “Avatar: The Way Of Water” will be released in China on Dec. 16, the same day it is slated to be released globally, according to people familiar with the matter.
Executives at Disney and at movie-theater chains had been closely watching for a decision from Chinese censors on the movie, director
James Cameron
‘s sequel to the 2009 science- fiction epic. It will be distributed by Disney-owned 20th Century Studios.
“This is fantastic news for Disney, for
James Cameron
and for the movie, because the potential box office from China is enormous,” Paul Dergarabedian, senior media analyst at Comscore, said in an interview. “This may be the pivotal moment that indicates that ‘Way of Water’ will earn enough money to justify further installments of the Avatar franchise.”
The last seven superhero films produced by Marvel Studios, Disney’s most-profitable film studio over the past decade, haven’t received release dates in the crucial China market, denting the global box-office gross.
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In July, for example, Disney cited the lack of a China release for “Thor: Love and Thunder,” the fourth solo film featuring Chris Hemsworth’s Thor character from the popular Avengers superhero team, as one reason the movie underperformed at the international box office.
Disney and other Hollywood studios have run up against Chinese censors in recent years, especially when their movies deal with sensitive political themes or when actors or directors make statements that Chinese authorities find objectionable.
Two recent Marvel films were blocked from release in China after comments that the Chinese government viewed as insulting, made by the director of one movie and a star actor of the other, were unearthed and circulated in the country.
While Disney hasn’t revealed the “Avatar” sequel’s budget, Mr. Cameron, the director, said in a recent interview in GQ magazine that the “Avatar” sequel was “the worst business case in movie history” and that it would have to be the third- or fourth-highest-grossing film in history just to break even. Disney has said that it plans to make five Avatar movies in total.
The first Avatar movie from 2009 grossed nearly $2.9 billion worldwide, with $259 million of that total coming from China, making it the highest-grossing movie of all time. It narrowly edged out Marvel’s “Avengers: Endgame” after a September 2022 rerelease of the movie added $73 million in ticket sales, according to Comscore, a box-office tracker.
It sparked a boom in multiplex construction in China, as Chinese audiences flocked to see the film in 3-D and government authorities sought to encourage consumers to spend more money in shopping centers.
Theaters saw lines for the first “Avatar” up to six hours long, and scalpers sold tickets for $100 apiece, according to
Richard Gelfond,
chief executive of the movie technology company
IMAX Corp.
In Beijing, Chinese authorities closed an IMAX theater so high- ranking party members could watch it at a private screening, he said. Before the 2009 movie, IMAX had 14 screens in China, but now has 800, with 200 more contracted to be built.
“Everything changed after ‘Avatar,’” Mr. Gelfond said. “It was really the match that lit the entire movie industry” in China.
and is calling on the media company to buy the rest of Hulu, explore spinning off ESPN and refresh its board.
Mr. Loeb on Monday said his firm, which liquidated a large Disney stake earlier this year, has repurchased a “significant stake” in the company and sent a letter to Disney Chief Executive
Bob Chapek
urging the company to engage with Third Point on a number of issues.
Mr. Loeb praised growth in Disney’s streaming subscriber base, but also wanted Disney to more aggressively cut costs and consider a number of steps to shake up its portfolio.
The investor’s calls come at an inflection point for Disney and the streaming industry at large, which enjoyed torrential growth during Covid-19 but now face headwinds that include financial losses, domestic subscriber saturation and the introduction of new ad-supported tiers.
Mr. Loeb also now represents a fresh challenge for Mr. Chapek, who assumed the CEO job in February 2020, one month before Covid-19 shut down his company’s theme parks and the nation’s movie theaters. Earlier this year, Mr. Chapek found himself under fire from his own employees and Florida Gov.
Ron DeSantis
over his response to the state’s bill known by opponents as the “Don’t Say Gay” legislation.
Mr. Chapek was renewed to a three-year contract this summer, and recent subscriber growth in Disney’s flagship service, Disney+, has shown the company is advancing on the streaming industry’s dominant player,
Netflix Inc.
A spinoff of ESPN—itself a source of paying subscribers through its ESPN+ offering—would radically alter Disney’s presence in the streaming ecosystem.
“We welcome the views of all our investors,” Disney said in response to Third Point’s letter. The company said its board has been continuously refreshed, “with an average tenure of four years.”
Third Point is pushing Disney to “make every attempt” to buy up
Comcast Corp.’s
CMCSA 1.26%
remaining minority stake in the streaming giant Hulu before its contractual deadline in early 2024. Under a 2019 agreement, Comcast can require Disney to purchase its NBCUniversal subsidiary’s one-third stake in Hulu by that deadline for at least $9 billion, assuming the streaming service has an equity value greater than $27.5 billion.
“We believe that it would even be prudent for Disney to pay a modest premium to accelerate the integration but are cognizant that the seller may have an unreasonable price expectation at this time,” Mr. Loeb’s letter says.
Disney and Comcast have been in a dispute over the value of Hulu, The Wall Street Journal previously reported. When Disney took majority control of Hulu in 2019, the service was valued at a minimum of $27.5 billion. Comcast believes the value of Hulu is now closer to $70 billion, people familiar with the matter have said.
The two companies have already started to unwind some aspects of their partnership. Comcast’s NBCUniversal earlier this year exercised an option to exit its content-sharing agreement with Disney, the Journal reported. Content from NBCUniversal that previously would have gone to Hulu after airing on NBC and NBC-owned cable channels will now go directly to Peacock, NBCU’s streaming service.
Mr. Loeb’s letter also states that there is a “strong case to be made” that Disney should spin off its ESPN business to shareholders to alleviate leverage at the parent company, despite ESPN’s centrality to the company’s streaming offerings and the significant free cash flow it generates.
Mr. Loeb suggests that synergies between Disney and ESPN could be replicated through contractual arrangements. A spinoff would drive better long-term value for Disney shareholders and result in a business “no longer haunted by the specter of cord-cutting,” the letter says.
Cord-cutting has driven Disney to make drastic changes to its business model in the past. In the summer of 2015, former Disney CEO
Robert Iger
acknowledged that the company was seeing “some subscriber losses” to ESPN. One year later, ESPN lost two million subscribers, dropping to its lowest count since 2005.
That steady decline became an albatross on Disney’s stock price, which fell as investors feared a future in which ESPN—once a top moneymaker—fell in relevance and revenue.
ESPN’s troubles—and Wall Street’s response to them—were one reason Mr. Iger would decide to launch his own streaming service. Disney+ premiered in the fall of 2019, and its rocketing growth in its first 18 months caused Disney shares to rise even as Covid-19 wrecked other parts of the business.
Hollywood has been rampant with rumors about the future of ESPN since those first indications of subscriber losses, with rivals speculating that a spinoff or sale was in its future. Today, the sports network is one of three core components of Disney’s streaming bundle, along with Disney+ and Hulu.
Disney+ has 152.1 million subscribers as of the most recent quarter, ESPN+ has 22.8 million and Hulu has 46.2 million.
Mr. Loeb’s letter also urges the company to rethink the makeup of its board and consider a list of potential new members that Third Point has compiled. It also advocates for a wide-ranging cost-cutting program and the continuation of Disney’s pandemic-era suspension of cash dividend payments.
Mr. Loeb has been a thorn in the side of studio chiefs before. In 2013, he bought a stake in
Sony Group Corp.
and publicly criticized the company’s movie arm, Sony Pictures Entertainment. He called on the company to make cuts to the division and introduce “discipline and accountability.”
Soon after Mr. Loeb’s disclosure of a 7% stake, Sony Pictures’ then-CEO pledged to find at least $350 million in annual savings. Mr. Loeb sold his stake about a year later, but has called on Sony to make changes to its entertainment division in the years since.
Last week, Disney reported better-than-expected earnings and added 14.4 million new subscribers to its Disney+ streaming service, many of which came to the service amid its expansion internationally.
The company’s new customer additions brought its total at all of its streaming services, including Disney+, Hulu and ESPN+, to 221.1 million subscribers, which puts Disney’s streaming total narrowly ahead of rival Netflix Inc., which last month reported it had 220.67 million subscribers.
Disney’s share price is up more than 12% in the past week, but remains down about 20% since the start of the year, amid a broad pullback in technology and media stocks.
Last week, Disney also announced price increases to its streaming services, including for its planned ad-supported tier of Disney+, a move that industry executives and analysts said is intended to help drive profitability at its streamers.
Disney, whose direct-to-consumer segment has lost more than $7 billion since Disney+ launched in late 2019, predicts that Disney+ will achieve profitability by September 2024.
“We have plenty of room on price value,” Mr. Chapek said last week.
Third Point previously held 4.1 million shares of Disney and successfully pushed the company to suspend its $3 billion annual dividend and plow the funds instead into the streaming business.
But by the first quarter of this year, the hedge fund had completely exited its position. Mr. Loeb had become worried that it would take years for Disney’s streaming business to reap the profits needed to boost the company’s share price, a person familiar with his thinking told The Wall Street Journal in May.
Since 1967, the Florida land housing Disney’s theme parks has been governed by the company, allowing it to manage Walt Disney World with little red tape. WSJ’s Robbie Whelan explains the special tax district that a Florida bill would eliminate. Photo: AP
Write to Dean Seal at dean.seal@wsj.com and Erich Schwartzel at erich.schwartzel@wsj.com
The growth-at-all-costs phase of the streaming wars is over; now, profits are the priority.
Faced with slowing subscriber growth in their core domestic markets, some streaming services are shifting their focus from adding users to increasing their bottom line. The result is that streamers such as
Walt Disney Co.
DIS 4.68%
,
Netflix Inc.
NFLX -0.58%
and
Warner Bros. Discovery Inc.
WBD 4.43%
are each doing some combination of reducing costs, raising prices and creating new ad-supported tiers that offer content at lower prices to consumers but also establish a new revenue stream for the companies.
The streaming providers said the price increases are warranted because of the amount of content offered. “We have plenty of room on price value,” Disney Chief Executive Officer
Bob Chapek
said Wednesday.
The price increases come as growth has stalled domestically, usually the most-profitable market for streamers. Just 100,000 of the 14.4 million net new subscriptions to its flagship Disney+ service in the most recent quarter came from the U.S. and Canada. Of the rest, about eight million came from India, while about six million came from other countries, including 52 new markets where Disney+ has launched since May.
“Domestically, Disney+ is tapped out,” said analyst Rich Greenfield of LightShed Partners. “Disney is operating under the belief that, just as in their theme parks, they can raise prices dramatically and count on customers not dropping the service.”
Disney said that in early December it will raise the price of its ad-free, stand-alone Disney+ service in the U.S., to $10.99 a month from $7.99, and the company will begin offering an ad-supported tier for Disney+, starting at $7.99. The company also announced increases to one of its bundle packages.
In addition, the company scaled back its projections for total global subscribers to Disney+, largely in response to lower anticipated growth in India, where Disney recently was outbid for the right to stream matches from a popular cricket league.
Markets welcomed news of the price increases and the company’s better-than-expected quarterly results. Shares of Disney rose 4.7% on Thursday to close at $117.69.
Investors and analysts expect higher subscription costs and the introduction of ads to Disney+ to result in higher profits from the streaming segment, but add that price increases risk alienating some customers and increasing the platform’s churn rate, or the percentage of users who cancel the service each month. The U.S. churn rate for Disney+ is already on the rise, increasing to 4% in the second quarter from 3.1% a year earlier, according to the media analytics firm Antenna.
“We do not believe that there’s going to be any meaningful long-term impact on our churn,” Mr. Chapek said about the price increases. He said Disney+ was one of the lowest-priced streaming services when it launched, and has become more valuable over time as it has added more popular shows and movies.
Other companies that focus on streaming video are making similar moves. Warner Bros. Discovery, the newly formed media giant that owns the premium television service HBO and the streaming services HBO Max and Discovery+, reported last week that it had added 1.7 million new subscriptions. As with Disney, about all of Warner Bros. Discovery’s subscription growth came from overseas—its direct-to-consumer segment lost 300,000 domestic subscribers in the quarter.
David Zaslav,
the newly formed company’s CEO, has taken an ax to Warner Bros. Discovery’s spending, scrapping multiple high-budget movies that were in production or near completion and destined for release on HBO Max, including “Batgirl” and “Wonder Twins,” after deciding that the best return on capital for them was a tax writeoff.
“Our focus is on shaping a real business with significant global ambition but not one that solely chases the subscribers at any cost or blindly seeks to win the content spending wars,” said JB Perrette, Warner Bros. Discovery’s head of streaming, on a call with analysts last week.
Warner Bros. Discovery said it expects losses in its streaming business to peak this year, and expects profitability for the segment in 2024. Similarly, Disney, whose direct-to-consumer segment has lost more than $7 billion since Disney+ launched in late 2019, predicts that Disney+ will achieve profitability by September 2024.
Warner Bros. Discovery has signaled it will launch an ad-supported tier of HBO Max next year. The company has alluded to a new pricing strategy focused on the goal of streaming profitability, but it hasn’t revealed pricing details.
“We will shift away from heavily discounted promotions,” Mr. Perrette said.
At Netflix, customer defections jumped after it raised the price of U.S. plans by $1 to $2 a month earlier this year. In the U.S. and Canada, the company lost 1.3 million subscribers during the second quarter, more than twice the 640,000 it lost in the region in the first quarter. Like Disney+, Netflix is now looking to increase the revenue per user that they draw by selling ads.
Doing so helps streaming services make more money from their existing customer bases, while offering an alternative to price hikes, according to industry analysts.
Existing subscribers to Disney+ will be automatically put into the ad-supported tier unless they elect the higher-priced ad-free version, and some shows, such as “Dancing with the Stars,” will stream with no ads on any tier, a Disney executive said. Disney said that in general, the ad load on Disney+ will be lighter than that of other services, and will benefit from consumers who cancel cable subscriptions and replace them with streaming services.
Netflix said in July that it expected some loss of customers following a price hike and that customer departures are returning to the levels where they were before the increase.
The Los Gatos, Calif.-based company has said its coming ad-supported tier of service is likely to appeal to more-price-conscious customers who are willing to pay less in exchange for viewing ads. Netflix hasn’t said how much its ad-backed tier will cost, but it is expected to charge less than the most basic plan that is currently available, which costs $9.99 a month for a single viewer with the lowest video-resolution quality.
While there has been an overall slowdown in net subscriber growth in the U.S. and more consumers jumping between streaming services, the amount of time people spend watching streaming content continues to grow, said Marc DeBevoise, CEO of the video technology company
Brightcove.
That trend makes selling ads a more attractive strategy for streaming services, he said.
“There aren’t more people to get to subscribe, but there are more hours to capture,” he said. “It is still a growing pie of total viewership.”
Write to Robbie Whelan at robbie.whelan@wsj.com and Sarah Krouse at sarah.krouse+1@wsj.com
Corrections & Amplifications JB Perrette is Warner Bros. Discovery’s head of streaming. An earlier version of this article incorrectly said J.B. Perette. (Corrected on Aug. 11)
reported a better-than-expected 26% jump in revenue Wednesday, driven by record results at its theme parks division and the addition of more new subscribers than projected to its flagship streaming video platform Disney+.
Disney’s results highlight the complex dynamics of the competitive streaming landscape. The company lowered its forecast for future Disney+ growth, raised the prices on its streaming offerings, outlined plans for a new ad-supported tier of Disney+ and said nearly all of the streaming service’s growth is coming from overseas.
The company’s earnings this quarter reflect the difficulties it and rivals, such as
Netflix Inc.,
face in attracting new customers domestically, where streaming options abound and many households use one or more services. Plus, in an increasingly difficult economic environment, some households are rethinking spending on in-home entertainment, industry analysts have said.
Chief Executive
Bob Chapek
said he didn’t think the price changes would result in any meaningful loss of streaming customers. “We believe that we’ve got plenty of price value room left to go,” Mr. Chapek said.
On the company’s call with analysts, Chief Financial Officer
Christine McCarthy
ratcheted down its forecast for Disney+, saying it now expects a total range of 215 million to 245 million subscribers by September 2024, in part because it lost the right to air popular Indian cricket competitions.
A few months ago, Mr. Chapek said the company’s previous target of 230 million to 260 million, set by the company in December 2020, was “very achievable.”
In the three-month period ended July 2, Disney+ gained 14.4 million new subscribers, bringing its global total to 152.1 million subscribers. Analysts were expecting 10 million additions, according to
FactSet.
Wednesday’s report brings Disney’s total subscriber base to 221.1 million customers across all of its streaming offerings, including ESPN+ and Hulu, surpassing Netflix, its chief streaming rival, in total customers. Netflix last month reported it had 220.67 million subscribers.
Disney shares rose about 7% in after-hours trading to $120.11.
Overall for the third quarter, the world’s largest entertainment company reported profits of $1.41 billion, or 77 cents a share, up from $918 million, or 50 cents a share, in the year-ago period. Revenue increased to $21.5 billion, above the average analyst estimate of $20.99 billion on FactSet.
Since 1967, the Florida land housing Disney’s theme parks has been governed by the company, allowing it to manage Walt Disney World with little red tape. WSJ’s Robbie Whelan explains the special tax district that a Florida bill would eliminate. Photo: AP
Sales at the parks, experiences and products division—which includes Disneyland, Walt Disney World and four resorts in Europe and Asia and has historically been Disney’s most profitable segment—reached $7.4 billion for the quarter, a record, and was up 70% from a year earlier. The division posted profits of $2.2 billion for the quarter, up from $356 million a year ago.
“Demand has not abated” at the parks, Ms. McCarthy said. Since reopening in 2021 after pandemic-related closures, Disney’s theme parks haven’t been running at full capacity, but a new online reservations system and ride-reservation apps have helped the company better respond to demand and generate more revenue per visitor.
Over the past year, CEO Bob Chapek and other top Disney executives have signaled an increased focus on international markets for growing its streaming business.
Photo:
Laurent Viteur/Getty Images
Ms. McCarthy said that if economic conditions worsen, Disney could tweak the reservation system to allow more visitors in on certain days, but as of now, demand is outstripping available spots.
Disney’s direct-to-consumer segment, which includes video streaming, lost $1.1 billion in the third quarter, widening from a loss of $293 million a year earlier. Since Disney+ launched in late 2019, the segment has lost more than $7 billion. On Wednesday, Ms. McCarthy said Disney’s estimate for overall spending on content for fiscal 2022 had fallen slightly, from $32 billion to $30 billion.
Disney gave a launch date of Dec. 8 and outlined pricing information for its previously announced ad-supported tier of Disney+ in the U.S., a new product designed to expand the reach of the company’s streaming business.
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The price of the ad-free stand-alone Disney+ service will rise from its current level of $7.99 a month in the U.S. to $10.99 a month, or $109.99 a year. The new, basic Disney+ service with ads will cost $7.99 a month.
The premium Disney streaming bundle, which includes ad-free versions of Disney+ and Hulu, as well as a version of sports-focused ESPN+ with ads, will remain at its current price of $19.99 a month in the U.S., while a bundle that includes all three services, but with ads on Hulu, will rise in price by $1 a month, to $14.99.
Mr. Chapek defended the price increases, saying that when it was launched, Disney+ was among the most competitively-priced streaming offerings and that the company has added more and higher-quality content to the service.
“I think it’s easy to say that we’re the best value in streaming,” Mr. Chapek said Wednesday.
Over the past year, Mr. Chapek and other top Disney executives have signaled an increased focus on international markets for growing its streaming business. Disney is spending heavily to produce hundreds of local-language television shows in countries such as India, and over the summer, Disney+ launched in 53 new countries and territories, mainly concentrated in Eastern Europe, the Middle East and North Africa.
Pricing for a Disney+ subscription in many of these new markets runs below the $7.99 a month that American customers pay. Still, Disney+’s average monthly revenue per paid subscriber—a key metric in streaming businesses—stood at $6.27 in North America, compared with $6.29 internationally, excluding Asia’s more inexpensive Disney+ Hotstar service.
Disney+ Hotstar, the service used by Disney’s 58.4 million subscribers in India, produces just $1.20 a month per user. Some analysts and former Disney executives predict that losing cricket streaming rights will result in millions of canceled accounts over the next year.
The flagging growth of North American Disney+ subscriptions is likely the result of a glut of content being released by in movie theaters and on a proliferation of streaming services, as well as fatigue the Star Wars and Marvel superhero movie franchises, said Francisco Olivera, a Disney shareholder who manages a small family fund based in Puerto Rico that has about 15% of its holdings in Disney stock.
The addition of an ad-supported tier, higher prices and possible further integration of the Hulu service in the future, could help reduce subscriber churn and make it easier to achieve profitability, he said.
“It’s a healthier market right now with the parks recovering, so they’re really flexing their muscles on pricing,” Mr. Olivera said.
—Sarah Krouse contributed to this article.
Write to Robbie Whelan at Robbie.Whelan@wsj.com
Corrections & Amplifications Disney+ launched in 53 new countries and territories over the summer. An earlier version of this article incorrectly said it launched in 54. (Corrected on Aug. 10)
AT&T Inc. detailed its plans for the spinoff of WarnerMedia on Friday, with investors eventually expected to receive a share of the new streaming-media entity for every four AT&T shares they own.
AT&T
T,
+2.19%
is in the process of spinning off its WarnerMedia business in a combination with Discovery Inc.
DISCA,
+0.85%,
which executives have said would allow AT&T to refocus attention on core telecommunications efforts. The company expects the deal to close in April, and executives declared plans for a stock dividend to its investors for April 5 at the close of business.
AT&T explained in a Friday release that those who own AT&T shares as of the end of trading April 5 will be able to receive shares of WarnerMedia SpinCo representing 100% of AT&T’s interest in the business. After the transaction closes, expected sometime in April, investors will receive an estimated 0.24 shares of the newly created WarnerBros. Discovery for each share of AT&T they own.
See also: AT&T issues new guidance as WarnerMedia spin draws nearer
The shares created represent about 71% of WarnerBros. Discovery, which will trade under the ticker symbol “WBD” after the spinoff completes. Shareholders “do not need to take any action” as the SpinCo shares will be automatically exchanged on the date the transaction closes, the company reported.
The potential period between the stock dividend and the closing of the deal could create confusion for anyone who wants to buy or sell the stock. The company noted that between April 4, the trading day before the record date for its spinoff distribution, and the closing of the combination with Discovery, there will be two markets for AT&T’s common stock on the New York Stock Exchange.
Those who choose to sell a share of AT&T’s common stock through the “regular way” market will sell both the AT&T share and the right to receive WarnerBros. Discovery shares through the transaction. Those who participate in the “ex-distribution” market will be selling AT&T’s stock while keeping the right to receive WarnerBros. Discovery shares.
Additionally, in the two-way trading window, those who wish to keep AT&T shares while selling the right to receive WarnerBros. Discovery can use a temporary when-issued option that will be available on the Nasdaq.
While AT&T shareholders will still own the same number of AT&T shares after the transaction close that they did just before the transaction close, the company’s stock price is expected to adjust after the deal is complete, reflecting the spinoff.
AT&T’s board of directors also declared a second-quarter dividend of 27.75 cents a share, the first quarterly dividend under a reduced annual payout that executives outlined last month. The dividend will be payable on May 2 for shareholders of record as of April 14.
“The Matrix Resurrections” co-producer Village Roadshow Entertainment Group filed a lawsuit against Warner Bros., alleging the studio parent’s decision to release the movie simultaneously on HBO Max and in theaters was a breach of contract.
The suit, which was filed in Los Angeles Superior Court on Monday, is the latest indication of growing tensions between factions of the entertainment industry as major media companies give priority to direct-to-consumer streaming over traditional distribution platforms.
Warner Bros. parent WarnerMedia, a unit of
AT&T Inc.,
T -0.19%
put its entire 2021 slate of movies on its sister streaming service HBO Max at the same time as their theatrical release. The studio also moved the release date of “The Matrix Resurrections” to 2021 from 2022 in an effort to help HBO Max attract more subscribers, the lawsuit alleged.
“WB’s sole purpose in moving the release date of ‘The Matrix Resurrections’ forward was to create a desperately needed wave of year-end HBO Max premium subscriptions from what it knew would be a blockbuster film, despite knowing full well that it would decimate the film’s box office revenue and deprive Village Roadshow of any economic upside that WB and its affiliates would enjoy,” the suit said.
“The Matrix Resurrections” performed disappointingly at the box office, garnering only a fraction of the revenue generated by its predecessors.
Other films released during the pandemic performed well at the box office, including “Spider-Man: No Way Home,” which unlike “The Matrix Resurrections” wasn’t released on a streaming platform when it came out in theaters, the lawsuit said.
Keanu Reeves and Carrie-Anne Moss in the latest ‘Matrix’ movie.
Photo:
Warner Bros./Everett Collection
Moves by major media companies to give priority to their streaming services over other platforms have potentially significant financial implications for actors, producers and financial partners who fear that the push to streaming will come at their expense.
In July, actress Scarlett Johansson filed a lawsuit against
Walt Disney Co.
, alleging her contract to star in the Marvel movie “Black Widow” was breached when the media giant released the movie on its streaming service Disney+ at the same time as its theatrical launch.
Ms. Johansson, who argued her box office-based performance bonus was hurt by the Disney+ move, was seeking as much as $80 million in damages. Disney, which denied it violated her agreement, settled with Ms. Johansson in September.
In Monday’s lawsuit, Village Roadshow also alleges that Warner Bros. is attempting to cut the company out of future movies and TV shows based on characters or intellectual property that it has ownership stakes in. Village Roadshow said it has invested $4.5 billion in its more-than-two-decade partnership and co-financed many Warner Bros. hits including “Joker,” “American Sniper” and the “Matrix” franchise.
“WB has also been devising various schemes to deprive Village Roadshow of its continuing rights to co-own and co-invest in the derivative works from the films it co-owns,” the suit alleged.
In response to the lawsuit, a spokeswoman for Warner Bros. said: “This is a frivolous attempt by Village Roadshow to avoid their contractual commitment to participate in the arbitration that we commenced against them last week. We have no doubt that this case will be resolved in our favor.”
The partnership between the two companies does contain an arbitration clause to resolve disputes, but Village Roadshow said in the suit that it doesn’t apply in this case.
“Instead, the parties’ contracts expressly allow Village Roadshow to bring any action for injunctive or non-monetary relief in this Court, as they agreed that the arbitration agreement `shall not prevent any party from seeking injunctive relief and other forms of non-monetary relief in the state or federal courts located in Los Angeles County, California,’” the suit said.
The suit comes just weeks before AT&T is expected to close on its deal to combine the WarnerMedia assets with
Discovery Inc.
and create a new company dubbed Warner Bros. Discovery.
Village Roadshow has also been exploring strategic options including taking on investments or even selling itself, The Wall Street Journal previously reported.
Bradley Cooper starred in the 2014 movie ‘American Sniper,’ which Village Roadshow co-financed.
Photo:
Warner Bros./Everett Collection
When Warner Bros. unveiled its strategy to put its 2021 movie slate on HBO Max and in theaters, it said it was doing so both to boost the new streaming service and as a counterbalance the effects the Covid-19 pandemic had on the theatrical industry.
The studio earned the wrath of Hollywood producers and stars by not alerting them to the decision in advance. Many feared they would be shortchanged by the move and were openly critical of the studio.
Warner Bros. ended up cutting new deals with much of the talent involved in its 2021 slate, which cost the studio more than $200 million, the Journal previously reported.
No deal regarding “The Matrix Resurrections” was reached, and Village Roadshow said in its suit that not only was the box office for the movie cannibalized but that it was also a victim of “rampant piracy” that Warner Bros. “knew would come by distributing this marquee picture on a streaming platform on the same day as its theatrical release.”
Piracy has been on the rise since more films have been released on streaming platforms, according to firms that track such data. Theater owners have also been vocal about their concerns of increased piracy due to the streaming first strategy.
The issue over the release of “The Matrix Resurrections,” isn’t the only significant crack in Village Roadshow’s 25-year partnership with Warner Bros. It also claimed Warner Bros. is violating Village Roadshow’s rights to participate in projects derived from movies it co-produced.
Village Roadshow co-financed the 2019 film ‘Joker,’ starring Joaquin Phoenix.
Photo:
Niko Tavernise/Warner Bros./Everett Collection
Village Roadshow said Warner Bros. tried to force it to give up its rights in a TV series based on the movie “Edge of Tomorrow,” which it co-financed and co-produced.
“When Village Roadshow refused, WB said the quiet part out loud: it will not allow Village Roadshow to benefit from any of its Derivative Rights going forward, despite the over $4.5 billion it has paid WB to make and distribute 91 films. In other words, if Village Roadshow won’t give up its rights, WB will make sure they are worth nothing,” the suit said.
“Warner Bros. has a fiduciary duty to account to Village Roadshow for all earnings from the exploitation of the films’ copyrights, not just those it can’t hide through sweetheart deals to benefit HBO Max,” said Mark Holscher, a Kirkland & Ellis litigation partner who represents Village Roadshow.
Village Roadshow also said under its agreement with Warner Bros. it should have the option to partner in “Wonka,” a prequel to “Charlie and the Chocolate Factory” that it co-produced.
Cinderella, Elsa and their friends are moving back in with Barbie.
Mattel Inc.
MAT 9.05%
has won the license to produce toys based on
Walt Disney Co.
DIS 0.59%
’s princess lineup and from the recent blockbuster “Frozen” franchise, wresting the properties back from its rival
Hasbro Inc.,
HAS -2.23%
according to Mattel executives.
The deal reunites the characters with their previous home. Mattel lost the license to Hasbro in 2016, a financial and symbolic setback that precipitated a period of four chief executive officers at Mattel and compounding challenges as they tried to fill the $440 million hole from losing the business.
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Much has changed since then. Mattel CEO
Ynon Kreiz,
who joined in 2018, has stabilized operations with over $1 billion in cost cuts, overhauled leadership, revived key brands such as Barbie and rebuilt relationships with Hollywood studios. Since the day the Disney properties walked away, Mattel executives vowed to win them back.
“It was an important priority, and it’s something we worked hard to win,” Mr. Kreiz said. Mattel showed it could manage evergreen brands that aren’t dependent on big movies, he said.
Mattel will start selling new Disney toys in 2023, and the business will be managed by the same group that has overseen Barbie’s comeback. Financial terms of the deal weren’t disclosed.
For Hasbro, the change comes as the maker of Nerf guns and Monopoly games is making the transition to a new CEO following the death of its longtime leader,
Brian Goldner,
last year. Under his watch, Hasbro surpassed Mattel in annual sales and made an unsuccessful approach to take over its rival.
Hasbro declined to comment on losing the Disney princess and “Frozen” line but said it renewed its Star Wars license recently and will soon start making Indiana Jones toys too. Both are properties of Lucasfilm, which is owned by Disney.
Hasbro’s products inspired by Disney movies included a princess pop-up play set.
Photo:
Charles Sykes/Invision/Hasbro/Associated Press
Shares of Mattel jumped about 8% in early morning trading, after The Wall Street Journal reported on the deal. Shares of Hasbro slipped about 2.5%.
Mattel’s loss of the Disney license originally represented a high-profile fracturing of a relationship between one of the largest toy manufacturers and one of the most powerful companies in entertainment. It was a rare dust-up between companies whose founders worked together since the 1950s, when Mattel advertised toys during the “Mickey Mouse Club” show.
In the early 2010s, Barbie was floundering, with sales dropping for several years. Mattel devoted more resources to shoring up its marquee property. Disney’s princess dolls, meanwhile, were managed by a separate team in a competing unit.
Then, in 2013, Mattel came up with a toy line called Ever After High, which featured dolls based on the children of classic fairy tale characters, including Cinderella, Sleeping Beauty and Snow White. That flew too close to the Disney princess orbit. The following year Disney notified Mattel that it was going to Hasbro. (Mattel no longer sells the Ever After High toys.)
“Losing the franchise was not only a financial challenge for us but a really emotional one,” said Mattel President and Chief Operating Officer
Richard Dickson,
who rejoined Mattel for a second stint months before Disney made its decision. “It was a wake-up call for Mattel.”
The fallout started soon after. In early 2015, Mattel fired CEO
Bryan Stockton.
His successor,
Chris Sinclair,
focused on plugging revenue lost from the license with a range of items without staying power, which added complexity and extra costs to operations. Another CEO, former Google executive
Margo Georgiadis,
lasted about a year before leaving.
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Mr. Kreiz has brought stability to the top job at Mattel. The former television executive cut one-third of jobs and closed several factories to stem ongoing losses. He helped patch up Mattel’s fractured relationships with retailers and Hollywood studios. Key brands such as Barbie and Hot Wheels responded to new marketing and items. Fisher-Price has stabilized, too.
Though sales are still below their peak of $6.5 billion in 2013, Mattel is on pace for more than $5.3 billion in revenue for 2021, according to analysts, up more than 15% from 2020. Projections for net income of $789 million are the highest since 2013. Analysts expect Hasbro to bring in more than $6 billion in 2021 sales, according to FactSet estimates.
A bit of corporate restructuring allowed Mattel to present a stronger case to Disney that the properties would get appropriate attention, Mr. Kreiz said. Instead of organizing its business around boys, girls and infant products, Mattel is now structured around categories such as dolls, vehicles and action figures. The Disney characters will slide into the doll division and be managed by the same group that has overseen Barbie’s comeback.
Barbie has a more open-ended play pattern than the Disney characters, whose stories are imprinted on film and in books. “Side by side, we know that we can exponentially create more value, more play and more business by complementing the narrative rather than competing with it,” Mr. Dickson said.
The transition raises some questions for Hasbro, which aimed to use the Disney princess and Frozen license to build up its catalog of toys geared toward girls. But the property faltered a bit under its new owner, people in the toy industry said.
Jim Silver, CEO of TTPM, an online toy-review site, estimates that the Disney property is about half as big as it was when it left Mattel, in part because of a lack of new content to boost consumer interest in the characters. The Disney deal didn’t reach the levels Hasbro was hoping to achieve, he said.
Mr. Silver said Hasbro has other toys for girls on the upswing, including My Little Pony toys boosted by a recent Netflix movie, so the shift of the Disney license might not be as dramatic as it was when Mattel lost it. “I think Mattel will do very well with it, and for Hasbro, I don’t think the economics made sense,” he said.
UBS analyst Arpiné Kocharyan estimates the Disney princess and Frozen license could bring in about $300 million in a nonmovie year. Even after paying royalties to Disney, it could still produce a higher profit margin for Mattel than it did at Hasbro, she said, because Mattel owns much of its doll manufacturing, making it more economical to produce incremental units.
Ms. Kocharyan said Hasbro’s addition of the Indiana Jones license, with a feature film due in 2023, could offset more than half of the lost revenue. Hasbro also has the Disney license for Marvel characters.
are exploring a possible sale of a significant stake or all of the CW Network, which they jointly own, according to people familiar with the matter.
Among the suitors is
Nexstar Media Group Inc.,
NXST -1.86%
the nation’s biggest broadcaster and a large owner of affiliates of the network, the people close to the talks said. The CW Network caters primarily to teens and young adults.
People close to the talks said they are far along and an agreement could be reached soon, though the talks could still fall apart. There are other interested parties as well, but the discussions with Nexstar are most advanced, they said.
The most prevalent scenario is Nexstar’s taking a controlling stake in the CW, with CBS and WarnerMedia remaining as minority owners and receiving commitments to be the primary program suppliers for the network, the people said.
CBS and WarnerMedia have been exploring strategic options for the CW Network for several months, some of the people involved in the talks said. The network isn’t profitable as a stand-alone broadcast entity, but the content produced for it is a valuable asset for other platforms at the parent companies.
Warner Bros., which produces some of the CW’s biggest shows, including “Riverdale,” has generated significant revenue selling the shows to
Netflix Inc.
over the years. Other popular shows on the CW include “All American” and “The Flash.”
Popular CBS-produced shows for the CW include “Walker,” based on intellectual property from the TV show “Walker Texas Ranger.”
With the launch of HBO Max, the WarnerMedia-owned direct-to-consumer streaming service, the CW shows made from Warner Bros. in the future will be funneled there.
AT&T is in the process of merging its WarnerMedia entertainment assets, which also include the cable networks TNT, TBS and CNN, with programming behemoth
Discovery Inc.
to create a separate company. The deal is expected to close in the spring.
For Nexstar, a controlling stake in the CW would represent a significant step in its content aspirations. It already has been investing heavily in a national cable news service called NewsNation.
ViacomCBS and WarnerMedia have been longtime partners in the CW Network since the merger of the UPN and WB networks in 2006.
AT&T Inc. booked a $15.5 billion charge on its pay-television business, reflecting the damage cord-cutting has taken on its DirecTV satellite unit even as the company’s HBO Max streaming service’s growth ramped up.
The write-down created a fourth-quarter loss as the media-and-telecommunications giant weighs the potential sale of its pay-TV assets and executives focus their investments on newer technologies. The company reported quarterly revenue declines in its legacy-video and WarnerMedia units, offsetting gains in its core wireless-phone division.
Executives called the noncash accounting charge a sign of the pay-TV unit’s aging status as the Dallas company promotes an internet-streaming model that gives its content-production business a direct line to viewers.
“Our biggest and single-most important bet is HBO Max,” Chief Executive John Stankey said on a conference call Wednesday. Executives plan to expand the service’s footprint in other countries this year and launch an advertising-supported version in the second quarter.
Overall, AT&T reported a fourth-quarter loss of $13.89 billion, or $1.95 a share, compared with a profit of $2.39 billion, or 33 cents a share, a year earlier. Revenue fell 2.4% to $45.7 billion.
NBCUniversal is shutting down its sports cable channel NBCSN at the end of the year and migrating much of its programming to its sister general entertainment network USA, the company said.
The premium properties on NBCSN are the National Hockey League and Nascar auto racing, both of which will start to transition to USA Network this year. Some content will remain on both channels until NBCSN officially turns off the lights. NBCUniversal informed staffers of the plan Friday afternoon in a company memo.
“We’re absolutely committed more than ever to live sports as a company, and having such a huge platform like USA Network airing some of our key sports content is great for our partners, distributors, viewers and advertisers alike,” said NBC Sports Group Chairman Pete Bevacqua.
By putting high-profile sports on USA Network, NBCUniversal—a unit of Comcast Corp. —is hoping to solve two problems with one move: Get rid of an underperforming asset and boost an already powerful one. The Premier Soccer League will also have matches on USA.
NBCSN has struggled to compete against bigger rivals such as Walt Disney Co. ’s ESPN and Fox Corp.’s Fox Sports cable network. While it has a large national reach, its ratings pale in comparison to its competition. Fox Corp. and Wall Street Journal parent News Corp share common ownership.
