One is May 9, 2017, the day that a crucial amendment was added to Johansson’s contract to play the character of Black Widow in the Marvel Cinematic Universe movie franchise that has been incredibly profitable for Disney. The other is Aug. 8, 2017, the day Disney raised the curtain on its plan to launch the subscription streaming platform that became Disney Plus.
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For an industry in transition, the birth of Disney Plus — as mentioned by then-CEO Bob Iger on a conference call with Wall Street analysts — is a good marker for the transition that has spurred a furious round of media M&A and a wholesale realignment of film and television operations. Johansson’s Marvel deal came mere months before the plates shifted underneath the Magic Kingdom. As the aftershocks from those changes spread across the industry, the benchmarks of success have been radically altered. But talent compensation packages didn’t keep pace. “It’s indicative of a larger struggle taking place in our business as talent shifts from one way of getting paid to another,” says Jason Blum, the producer of “Get Out.”
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Blum built his business by persuading actors like Patrick Wilson (“Insidious”) and Ethan Hawke (“The Purge”) to exchange upfront fees on his low-budget horror films for profit participation that could pay off for decades. But that type of arrangement, which could lead to millions of dollars in payouts, stopped being as lucrative for actors when box office numbers plummeted after COVID-19 scared people away from movie theaters.
In the era of streaming, back-end revenue streams are slowing to a trickle while the salary demands of A-list actors are reaching astronomical heights. Talent is grabbing as much as possible on the front end because the traditional route to after-market profits through syndication sales and international licensing is disappearing as conglomerates build content war chests to feed global platforms.
At stake is the future of how Hollywood stars negotiate their salaries, and how much they can command. Already, insiders at the studios have long griped, movie stars were demanding too much, as the ability to attract crowds shifted from a handful of charismatic actors to properties such as those of Marvel or DC Comics. (Just look at how many fans went to see “Dolittle” with Robert Downey Jr. out of Iron Man’s suit last year.)
Johansson’s July 29 filing in Los Angeles Superior Court exposes the undercurrents of fear and uncertainty roiling the creative community. But the way the drama has unfolded on the public stage also reflects the bare-knuckles business environment that has emerged as the industry battles the tiring effect of whipsaw revamping.
Both Disney and Johansson declined to comment on the record for this story.
But there’s been plenty of finger pointing behind the scenes. Sources in the Disney camp say they were not given the courtesy of a heads-up that a legal complaint was coming. Johansson’s team was aghast, after the news broke, when Disney blasted back with an edgy statement that shattered industry decorum by revealing the star’s $20 million upfront salary.
How this plays out is making a statement for the post-Iger era under CEO Bob Chapek. Industry sources note that in the past, a dispute like this would have been settled quietly with a big check. Chapek supporters within the studio push back at any suggestion that he doesn’t value artistic talent. They note that in recent months, Disney has signed long-term deals with the likes of Ryan Coogler and “WandaVision” head writer Jac Schaeffer.
This time around, Disney’s unresponsiveness clearly is one of the issues that most frustrates Johansson’s team. Disney sources counter that the company has honored Johansson’s contract because the pact did not call for an “exclusive” theatrical release. The studio argues that the film had a wide release, debuting in more than 4,000 theaters in North America, thus fulfilling its legal obligations to the actress. The dispute hinges on the definition of what constitutes a traditional theatrical release at a time when COVID has scrambled distribution models beyond recognition. Sources say that Johansson’s representatives were simply asked to wait a few weeks more to see how “Black Widow” performed at the box office and on Disney Plus before determining a backend payout.
Johansson has maintained that Disney’s corporate interest in supporting Disney Plus with high-wattage new programming shouldn’t come at the expense of her box office bonuses for “Black Widow.” Disney cites the COVID-19 pandemic as the reason for the extraordinary step of releasing key tentpole titles day-and-date in theaters and for $30 download via Disney Plus Premier Access. Johansson gets a cut of that revenue, but a significant point of her complaint is that MCU titles generate boffo repeat theatrical business among Marvel fanatics. That’s impossible if a family can download the title once for unlimited viewings.
The actor’s team has accused Chapek and the company’s investors of enriching themselves by sending “Black Widow” to Disney Plus, boosting their stock price while cheating Johansson out of $50 million in bonuses. The complaint goes so far as to name-check Chapek and his predecessor, Iger, noting their annual compensation packages as motivation for channeling resources to Disney Plus despite the studio’s contractual commitments to talent. Legal observers say Johansson’s case could turn on whether a Los Angeles jury believes Disney was acting in good faith as a partner to Johansson in making decisions about “Black Widow” and whether it disregarded the possibility of limiting its box office revenue and thereby, her chance to reach bonus thresholds.
Disney calls the Disney Plus move an innovative solution to content distribution at a time when traditional moviegoing is depressed by pandemic conditions. Disney attorney Daniel Petrocelli described the Premier Access revenue attributed to Johansson’s tally as “enhanced economics” given the current market for blockbuster movies, where tickets sales have shrunk considerably. Johansson’s team dismissed that as enhanced spin. The “Black Widow” litigation points to settlements to the tune of $350 million that Warner Bros. reached with creative talent earlier this year after taking the bold step of mounting simultaneous premieres in theaters and on HBO Max for its entire 2021 theatrical slate.
There’s a growing sense that the old way of making money for A-list talent has atomized. A few weeks before Johansson’s suit took Hollywood by storm, Matt Damon told journalists at the Cannes Film Festival about his decision in the aughts to turn down an offer to star in James Cameron’s “Avatar” for 10% of the profits.
“You will never meet an actor who turned down more money,” Damon lamented, noting he would never get an offer like that again. At the same time, the upheaval in the entertainment landscape is allowing artists to profit in unprecedented ways. Case in point: Reese Witherspoon, the Oscar-winning actor who just sold Hello Sunshine for $900 million to a consortium of investors backed by Blackstone. LeBron James’ Springhill Co., Ron Howard and Brian Grazer’s Imagine Entertainment, and Will Smith and Jada Pinkett Smith’s Westbrook have fielded interest from buyers or are expected to land megadeals.
“Owners do better than talent, consistently, every time, always, without fail,” says Corey Field, the author of “Entertainment Law: Fundamentals and Practice.”
And even though the days when Jack Nicholson could command $60 million or more in profit participation for starring in “Batman” are gone, streaming services are still offering massive paydays for talent willing to forgo traditional theatrical releases. Daniel Craig, for instance, will bank $100 million to star in “Knives Out 2” and “Knives Out 3” thanks to a mega-pact that he signed with Netflix, while stars like Julia Roberts, Leonardo DiCaprio and Jennifer Lawrence are earning upwards of $25 million to appear in movies for streamers. That’s because Netflix and Apple factor in the box office back end actors are sacrificing.
“For the longest time if you had a movie property or a TV property and you took it to market, it was a monolithic experience,” says Mike Larocca, co-founder of AGBO, a production company created by the Russo Brothers. “It was the same model with maybe some bells and whistles. But for the past 12 or 18 months, every distributor developed different needs and different ways of apportioning compensation. It’s in flux, so you have to be innovative.”
Blum is one of those innovators. Last month, he signed a $400 million-plus deal to make three sequels to “The Exorcist” for Peacock and Universal, a pact that would have been unthinkable for the low-budget horror maestro even a few years ago. “That’s me doing my best to embrace the new Hollywood,” says Blum, who still would like to see streaming services adopt some type of bonus structure tied to viewership. “Better movies and TV shows are made when creators’ financial interest is tied to how users access that content.”
The ability to command a rich profit participation was once the flashiest status symbol of all for creative talent in Hollywood. But some see an upside to the new model. Profit participation payouts can be hard to collect — some even go to the length of hiring “forensic” accountants to scrutinize statements for inflated studio distribution fees and overhead charges.
“Instead of chasing around after money, let’s spend that time and energy making better movies,” says a top film agent. “With streaming, back end was already going away. [Front-end] fees make it easier to know where you stand.”
Disney has been on a campaign to carve out templates for its TV production imprints that trade traditional profit points for performance-based bonuses determined by viewership metrics, award wins and social media engagement. Industry sources note that the restructuring of Disney and NBCUniversal to separate content creators and programmers from those involved in distribution and sales has had the effect of putting distance between the executives who work in the creative trenches and those who evaluate the value of a given series or movie for Disney Plus or Hulu.
It’s understandable that sparks will fly among employers and talent as the industry grapples with a profound metamorphosis. It often takes someone with the stature of Scarlett Johansson to take a stand that has impact throughout the industry.
Attorney Roman Silberfeld, a partner at Robins Kaplan, has been involved in self-dealing litigation against Disney for more than 25 years, representing the producers of ”Home Improvement” in various suits since 1997. He also secured a $319 million judgment against Disney in 2010 for the U.K.’s Celador, owner of the ”Who Wants to Be a Millionaire?” format, after a jury found Disney sold the quiz show to ABC for a below-market rate.
“All the clients ever want is to be treated fairly by the studio,” Silberfeld says. “And they want to have even ambiguous agreements interpreted fairly.”
There has been speculation that other stars will file lawsuits against Disney, but it’s just as likely, if not more so, that Johansson will stand alone.
“This may be an outlier case,” says Neville Johnson, an attorney who handles many profit participation disputes. “How many major stars are going to be willing to sign on for a case like this? Our experience is talent is resistant.”
In striking a blow against the largest entertainment company on the planet, Johansson has been likened to Olivia de Havilland, whose 1943 lawsuit against Warner Bros. challenged the studio system by prompting California to bar studios from locking actors into contracts that were longer than seven years. But if the Johansson case sets any precedent, it will be limited to disputes that arise out of this transitional period. When her contract was written, in 2017, Disney Plus did not exist and it did not seem important to specify that a “theatrical” release would also be “exclusively theatrical.” No one writing a contract now would make that mistake.
“It should have said ‘exclusively in theaters.’ It could have said that, and it didn’t,” Field says. “This is the start of people paying way more attention to this issue in their contracts.”
Other players are going back through past deals to see if they can amend them before cameras start rolling. “We’re all reconsidering our contracts,” says Uri Singer, producer of Netflix’s upcoming adaptation of “White Noise.” “It’s not like it was two years ago, where there was a set definition of a back end. Now, you’re not even sure there will be a theatrical release, and that changes things completely.”
Such transitions keep lawyers employed for decades arguing about how to interpret old contracts. But most of those disputes will take place out of the public eye, in front of arbitrators. Johansson’s suit seeks to avoid arbitration by going after Disney, the parent company, rather than Marvel — which has an arbitration provision in her contract. Arbitrators are seen as being more favorable to employers, who are repeat customers, and such clauses are generally nonnegotiable.
It can be easy, however, to place too much emphasis on the weak position of talent during this transition. It is the case that streaming deals do not offer as much of a back-end payout, but that payout now typically comes upfront — whether a project is a hit or not. And in an era when Wall Street is more interested in subscriber growth than profits, studios are not as constrained in bestowing lavish compensation packages.
Of course, the kind of payday that Johansson is seeking is usually out of reach for even the most powerful stars. In a typical year, studios dole out profit participation on only three or four of their films. Most movies lose money.
And yet, some veterans sound wistful about the old days, when they would know if their movie was a hit and if they were poised to enjoy a big payday by whether a studio chief called them with the grosses or if they gave that job to a lesser executive.
“It was all about how high the person calling you was in the pecking order,” remembers David Permut, producer of “Hacksaw Ridge.” “When it was the studio gate guard calling, you knew you were screwed. But even though you make more money with the streamers, we’re gamblers in the film business. We live by rolling the dice. When that goes away, some of the fun does too.”
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