Andrew Baim
On September 30, Scarlett Johansson and Disney settled a dispute alleging Disney breached its employment contract on the film “Black Widow” by sabotaging the film’s theatrical release.[1] On the heels of this controversy, it is important to note the competing contractual and corporate obligations that sparked it, and how other film companies should take note moving ahead.
Studios typically pay actors with a combination of up-front salaries and backend compensation via profit-participation schemes built into contracts. In an industry where a career’s lifespan is only as long as its salability, and where the supply of lead roles dwindles as stars age out of their prime, these backend payment schemes are particularly pivotal. Actors can earn more by sharing in the success of a film than a studio can dish out on the film’s budget. Recently, there has been an uptick in conflict surrounding the profit-participation model.[2]
In this case, Johansson’s contractual concerns were particularly compelling against the backdrop of the film’s release, given how the COVID-19 pandemic has forced even the titan corporation Disney to adapt its business model. On November 12, 2019, Disney launched its independent streaming service, Disney+, to compete with the likes of Netflix and Hulu. As the streaming services had begun making plays to roll out their own projects in theaters, so Disney sought to expand its market to viewers’ homes.
Once movie theaters shut down in response to the pandemic, Disney had to confront the problem of how to release theatrical content in a post-theatrical world. But with every obstacle, there is also opportunity. Disney had the advantage of established and highly-anticipated IP coming up through the pipeline, which could be leveraged, along with nostalgia content, to draw in new Disney+ subscribers. Not only did they have a vehicle for delivering theatrical content in quarantine, but also a unique selling point to solidify their position in the streaming market. In the middle of a pandemic that challenged corporations everywhere to adapt to survive, Disney was poised to thrive.
In December 2020, Disney successfully auditioned its Premier Access program, where Disney+ subscribers could pay $29.99 to rent a new movie release in place of seeing it in theaters.[3] Additionally, Disney unveiled that a subscriber purchasing a Premier Access release would retain access to the film without bounds on time or number of viewings.[4] The program’s success and public support provided Disney strong corporate incentive to further expand and capitalize on the streaming market with direct-to-streaming releases.
By July 2021, with the post-pandemic state of theaters still up in the air, Disney also had strong motivation to hedge against poor in-person attendance by making upcoming blockbuster films available with Premier Access. However, it was unclear how a Premier Access rollout would impact in-person attendance, let alone effect overall box office sales. A variable number of people could now stream the film, unlimited times, with a single purchase, as opposed to the single-viewer single-watch format of theaters. This next raises the question of how one might accurately measure profit from an online rollout, where purchases are tethered to a subscription platform and there are no theater-licensing agreements.
Johansson’s “Black Widow” became the testing ground for the dual-format release of a legitimate blockbuster. Johansson had been portraying Black Widow for over a decade, and many fans had been anxiously awaiting this film for nearly as long. During contract negotiations, Johansson would have relied on comparable Marvel movie data points to seek appropriate compensation, including the $1.1 billion performance of “Spider-Man: Far From Home” in 2019.[5] Clearly, the film’s ultimate performance of $379 million has missed the mark.[6]
Although Johansson could not have predicted a pandemic would so drastically impact her payday, it is difficult to discount that “Black Widow” Premier Access release further diminished the film’s gross earnings. Disney’s follow-up Marvel movie, which relied on a novel titular hero, and released solely in theaters on the notoriously slow Labor Day Weekend, has already outperformed “Black Widow” in gross.[7]
Notably, Disney competitors foresaw and preempted issues that may have arisen regarding actors’ profit-participation contractual terms following dual-format releases. WarnerMedia, which helms HBO Max, took pains to renegotiate talent agreements and paid more than $200 million to talent when attempting same-day-streaming releases.[8]
While the suit has been settled, the takeaways from this conflict are clear: profit-participation terms, although standard in the industry, are tricky; and corporations that fail to perform in the spirit of these open-ended contractual terms may be pursuing corporate objectives at the expense of risking costly litigation. Movie companies beware.
[1]Kim Masters & Tatiana Siegel, Scarlett Johannson, Disney Settle Explosive ‘Black Widow’ Lawsuit, Hollywood Rep. (Sept. 30, 2021), https://www.hollywoodreporter.com/business/business-news/scarlett-johansson-disney-settle-black-widow-lawsuit-1235022598/.
[2]Id.
[3]Id.
[4]Frequently Asked Questions, Disney+ (May 2021), https://www.disneyplus.com/welcome/new-2.
[5]Spider-Man: Far From Home, Box Office Mojo (Aug. 23, 2019), https://web.archive.org/web/20190823164017/https://www.boxofficemojo.com/movies/?id=spidermanhomecoming2.htm.
[6]Black Widow, Numbers (Oct. 10, 2021), https://www.the-numbers.com/movie/Black-Widow-(2021)#tab=summary.
[7]Shang-Chi and the Legend of the Ten Rings, Numbers (Oct. 10, 2021), https://www.the-numbers.com/movie/Shang-Chi-and-the-Legend-of-the-Ten-Rings-(2021)#tab=summary.
[8]Joe Flint & Erich Schwartzel, Scarlett Johansson Sues Disney Over ‘Black Widow’ Streaming Release, WSJ (July 29, 2021), https://www.wsj.com/articles/scarlett-johansson-sues-disney-over-black-widow-streaming-release-11627579278.