A new front opened in Hollywood’s so-called streaming wars last week when Scarlett Johansson filed suit against the Walt Disney Co., alleging that the studio breached her contract by releasing Black Widow in theaters and on Disney+ at the same time. The longtime Marvel star is arguing that Disney bilked her out of millions of dollars by making Black Widow available to purchase on its streaming service, as her compensation for the film was “based largely on ‘box office’ receipts.”
The lawsuit was an extraordinary measure, an extremely rare instance of a major star publicly taking a powerful studio — indeed, Hollywood’s most powerful studio — to task. By all accounts, industry insiders were shocked, and Disney was visibly incensed, firing back at Johansson with a blistering statement accusing the actress of “callous disregard for the horrific and prolonged global effects of the COVID-19 pandemic.” (The statement added that there is “no merit whatsoever” to Johansson’s complaint.)
And yet the lawsuit itself, which insiders agree will almost certainly settle out of court, is almost beside the point. Wrapped up in it are many of the major concerns currently facing the film industry, including the pandemic, studios’ shift toward streaming, and the future of the theatrical experience. As the tides of the movie business continue to move with great turbulence and rapidity, this dispute marks the beginning of open (or at least public) conflict between talent and studios over what the industry will look like when those tides finally settle.
Jay Maidment/Marvel Studios Scarlett Johansson in ‘Black Widow’
“Johansson’s lawsuit represents everything that’s going on in the business right now as it shifts to streaming,” says Matt Belloni, a founding partner of the new outlet Puck News, author of a widely read newsletter on the entertainment industry, and former editorial director of The Hollywood Reporter. “The battle lines are being drawn over how stars are going to be paid in that new economy, and this is the biggest flashpoint for that.”
“All [the lawsuit] is going to do is slam the door in terms of box office points,” adds Jeff Bock, a senior box office analyst at Exhibitor Relations. “It’s going to be one final payout for Disney, and they’re going to say, ‘Never again.’ I don’t think there’s much conversation beyond that, honestly.”
Stars’ compensation for movies has been tied to box office revenue for decades, with A-list actors typically guaranteed a share of the film’s profits. The increased prominence of streaming has so far done little to change that; while Netflix is known for making massive deals with talent up front in exchange for forgoing theatrical releases, traditional studios have, until recently, continued to do business the old-fashioned way. Indeed, Johansson’s lawsuit evokes the turmoil at Warner Bros. when the studio announced that its 2021 films would be released in theaters and on HBO Max simultaneously last year. With key talent poised to revolt over a strategy that would potentially siphon away their movies’ box office dollars, Warner Bros. moved quickly to smooth things over, reportedly paying millions to the likes of Gal Gadot and Patty Jenkins to quash any public dispute.
That’s part of why insiders are so baffled that Disney didn’t reach a new deal with Johansson on Black Widow — and, if the actress’ complaint is to be believed, didn’t even pursue one.
“The complaint suggests that there were efforts on Scarlett’s side to reach some kind of resolution, but those efforts were not reciprocated. And that’s surprising,” says Jeff Finkelstein, a partner at the entertainment law film Del Shaw Moonves Tanaka Finkelstein & Lezcano. “After they made Scarlett’s deal, Disney did go on to make deals that contemplated the possibility of [movies] streaming on their own service, and paying bonuses that were otherwise based on box office. Assuming this is the case, it’s strange that they would not have gone back to Scarlett’s representatives and tried to work something out in good faith.”
He adds, “Speaking as a talent representative, I think all talent representatives’ radar is that much more heightened to be on the alert about this.”
Marvel Studios Scarlett Johansson in ‘Black Widow’
Despite reports of growing unrest and litigiousness among actors, Finkelstein and Belloni, who’s also a former entertainment lawyer, don’t necessarily expect a slew of lawsuits to follow Johansson’s. But Belloni adds that dealmaking is already changing, as actors and their representatives demand more money up front. He points to the news, also announced last week, that Universal and Peacock paid $400 million for a new Exorcist trilogy, all of which has yet to be filmed.
“In a traditional scenario, that would have been a deal that would pay the filmmakers a lot of money if the movies are successful, but not guarantee anything beyond the first movie,” Belloni explains. “And what [the filmmakers] did, essentially, is they said, ‘We think this is a great property and you can make three movies. Pay us up front and we’ll do it, but pay us as if they were all hits.'”
The question then becomes whether this type of deal makes financial sense for studios, and whether it will make sense for them to continue dropping major blockbusters on streaming once the pandemic has ended. After all, tentpole movies with $200 million-plus budgets essentially require a theatrical release to turn a profit — but ultimately, this may not matter much.
“What the studios care about right now is not necessarily maximizing revenue, it’s maximizing subscribers to the streaming service,” Belloni says. “When Wall Street looks at your subscription numbers, they want to see growth. So they’re not thinking about this in a typical way; they’re thinking about it in a growth way.”
Indeed, this issue is at the heart of Johansson’s lawsuit, which argues that Disney used Black Widow to boost Disney+ subscriber numbers, and thus its executives’ paydays. The studio, of course, disputes this, countering that its release strategy was motivated by COVID-19. It’s worth noting that although Black Widow is now the highest-grossing movie at the domestic box office since the COVID era began, its performance has been widely seen as underwhelming, given its steep week-to-week declines and low overall total for an MCU film. (Currently, only 2008’s The Incredible Hulk has grossed less.) But it’s difficult to parse whether the pandemic or the Disney+ factor had a greater effect in this regard.
“I think that Disney+ cannibalized the box office in likely a significant way, especially with repeat viewing,” Belloni says. “The Marvel movies often have legs, as they say, because people go back and see them over and over. And that’s not happening [with Black Widow]. I also think an underrated aspect of this is piracy; it was very heavily pirated because it was available at home. And I think long-term, it’s damaging because it’s conditioning people to expect this stuff at home.”
Jasin Boland/©Marvel Studios 2021 Simu Liu in ‘Shang-Chi and the Legend of the Ten Rings’
That may also have effects in the short term, as Disney prepares to unleash a blitz of Marvel movies over the next year and a half. While the studio has called an end to “premier access” Disney+ releases for the time being, there’s no reason it can’t go back on that policy.
“Shang-Chi and Eternals definitely aren’t tracking the way that the Avengers films were,” says Bock. “It’ll be interesting to see what Free Guy does for Disney; that’s their first real traditional, theatrical-only release [since the pandemic began]. I would say if that bombs, Shang-Chi is probably going to go to Disney+.”
And looking forward, with Disney and other studios having already refocused their business on streaming, the Hollywood landscape could look very different in a very short amount of time.
“We’re at a very strange inflection point in the film and TV industries,” Finkelstein says. “And what was probably going to happen regardless is happening on a shockingly fast timeline now, because COVID is forcing the studios to accelerate the means by which they find alternative revenue sources to theatrical release.”
Adds Belloni, “There is a school of thought that says all these companies are driving each other off a cliff by spending what they’re spending to attract subscribers. But the greater narrative here is that in five years, there are going to be four or five companies that dominate streaming, and then everyone else will be shut out of this game. So right now, all of these companies are fighting to be in that group of survivors.”
Not that this means movie theaters are “suddenly going to die off like Tower Records did,” as Bock puts it. But it does mean the brave new world of Hollywood giants could look an awful lot like the old one. Finkelstein foresees a world — within the next five years, he says — in which actors, writers, and directors are locked into massive deals with a single company and work exclusively with that company, which controls the entire process of production and distribution end-to-end. Sound familiar?
“The old contract players arrangement that existed in the early days of film industry, funnily enough, I think is something that we’re actually going to return to,” Finkelstein says. “And we may be so far along that continuum that we can’t put the toothpaste back in the tube.”