Why Marvel Star Scarlett Johansson Sued Disney for Streaming 'Black Widow'

Plaintiff Periwinkle Entertainment, Inc. f/s/o Scarlett Johansson (“Ms. Johansson” or “Plaintiff”) alleges against The Walt Disney Company (“Disney”) as follows:

I. INTRODUCTION

1. Over the past decade, Scarlett Johansson’s work has generated billions of dollars for Marvel Studios, and, by extension, its parent company, Disney. In recognition of and reliance on this impressive track record, Marvel[1] and Ms. Johansson agreed that her compensation for starring in the latest motion picture addition to the Marvel Cinematic Universe (“MCU”), Black Widow (the “Picture”), would be based largely on “box office” receipts generated by the Picture. To maximize these receipts, and thereby protect her financial interests, Ms. Johansson extracted a promise from Marvel that the release of the Picture would be a “theatrical release.” As Ms. Johansson, Disney, Marvel, and most everyone else in Hollywood knows, a “theatrical release” is a release that is exclusive to movie theatres. Disney was well aware of this promise, but nonetheless directed Marvel to violate its pledge and instead release the Picture on the Disney+ streaming service the very same day it was released in movie theatres.

2. The reasons for this were twofold. First, Disney wanted to lure the Picture’s audience away from movie theatres and towards its owned streaming service, where it could keep the revenues for itself while simultaneously growing the Disney+ subscriber base, a proven way to boost Disney’s stock price. Second, Disney wanted to substantially devalue Ms. Johansson’s agreement and thereby enrich itself. In the months leading up to this lawsuit, Ms. Johansson gave Disney and Marvel every opportunity to right their wrong and make good on Marvel’s promise. Unlike numerous other movie studios, however – including Warner Brothers who, on information and belief, settled with its talent on films such as Wonder Woman after it released those films “day-and-date” to its streaming service HBO Max last year – Disney and Marvel largely ignored Ms. Johansson, essentially forcing her to file this action.

3. Ms. Johansson is one of Hollywood’s most well-known and talented actresses, with decades of acting experience and a lengthy filmography of critically acclaimed and financially successful performances. After making her feature film debut at just 10 years old, she has appeared in both comedies and dramas, including numerous award-winning films such as Lost in Translation, Vicky Cristina Barcelona, Marriage Story, and Jojo Rabbit.

4. In 2010, Ms. Johansson proved that she could also perform in an action-packed blockbuster when she appeared in Iron Man 2, a superhero film based upon characters and stories from Marvel Comics. In that film, Ms. Johansson played “Natasha Romanoff,” better known by her superhero name: “Black Widow.” For her work, she garnered significant acclaim, including a Best Supporting Actress nomination from the Academy of Science Fiction, Fantasy & Horror Films. She went on to reprise the role of Black Widow in six more films, helping to build what would eventually become the MCU, one of the biggest and most lucrative film franchises ever created.

5. In 2019, Marvel Studios officially announced that Black Widow and Ms. Johansson would have their own film. Prior to this announcement, representatives for Marvel and Ms. Johansson had finalized a deal for her services in connection with the Picture. That deal is set forth in an agreement dated as of May 9, 2017 and a series of amendments thereto (collectively referred to herein as the “Agreement”). At issue in this lawsuit is the portion of this Agreement that guaranteed her a share of “box office receipts,” meaning receipts from movie theatre ticket sales. To protect her financial interests in these box office receipts, Ms. Johansson obtained from Marvel a valuable contractual promise that the release of the Picture would be a “wide theatrical release.” Both parties, as well as Disney, understood this meant that the Picture would initially be released exclusively in movie theatres, and that it would remain exclusively in movie theatres for a period of between approximately 90 and 120 days. This roughly 90-120 day theatrical “window” was not only industry-standard at the time the Agreement was finalized but also standard practice for prior Marvel movies distributed by Disney, including those starring Ms. Johansson.

6. In November 2019, approximately six months after the Agreement was entered into, Disney launched Disney+, its wholly owned flagship subscription video-on-demand (“SVOD”) service. Leading up to this launch, the SVOD market was crowded, with established players such as Netflix, Amazon, and Hulu and newcomers such as HBO Now and Apple TV+ all competing for subscribers. In order to convince consumers that Disney+ was worth the $7 (now $8) monthly access fee—and to convince investors that the service would be profitable—Disney announced that the offerings on Disney+ would include Disney’s entire library of films, a number of library television series, original content, and—crucially—that Disney+ would eventually be the go-to source to stream the MCU.

7. In light of these announcements, Ms. Johansson’s representatives sought assurances that Marvel would hold up its end of the bargain with respect to the theatrical release of the Picture guaranteed in her contract. In response, Marvel’s Chief Counsel confirmed to Ms. Johansson’s representatives in May 2019:

We totally understand that Scarlett’s willingness to do the film and her whole deal is based on the premise that the film would be widely theatrically released like our other pictures. We understand that should the plan change, we would need to discuss this with you and come to an understanding as the deal is based on a series of (very large) box office bonuses.

(Emphases added.) Marvel thereby confirmed the parties’ understanding that (1) the box office bonus component of Ms. Johansson’s Agreement represented the lion’s share of her expected compensation, and (2) the wide theatrical release that Marvel had promised would be “like our other pictures,” meaning the standard Marvel/MCU 90-120 days of theatrical exclusivity.

8. In late March 2021, however, in direct violation of these promises and her Agreement, Disney announced that the Picture would be simultaneously released in theatres and on Disney+ Premier Access, a service available only to Disney+ subscribers that provides unlimited on-demand access to select films for an additional $30-per-film fee beyond the monthly subscription cost. On information and belief, this was the direct result of Disney directing Marvel to ignore Ms. Johansson’s Agreement and/or overruling Marvel’s wishes to comply with it. In the marketing campaign that followed, Disney frequently highlighted the Picture’s upcoming availability on Disney+, usually side-by-side with Ms. Johansson’s image. Throughout this process, Ms. Johansson, through her representatives, attempted to negotiate with Marvel to reach the aforementioned alternative “understanding” that Marvel’s Chief Counsel had promised under these circumstances. Ultimately, however, Marvel ignored this outreach, no resolution was reached, and the Picture was simultaneously released in theatres and on Disney+ Premier Access on July 9, 2021.

9. To no one’s surprise, Disney’s breach of the Agreement successfully pulled millions of fans away from the theatres and toward its Disney+ streaming service. According to Disney’s own self-congratulatory press releases, the Picture grossed more than $60 million on Disney+ Premier Access in its first weekend alone.

10. As numerous publications noted, this strategy dramatically decreased box office revenue for the Picture. According to an article from one well-known Hollywood trade journal published three days after the Picture was released: “Veteran distribution executives say it’s clear that the availability of the movie on Disney+ cannibalized box office, noting that an entire household might have gone to see the movie in the theatre but could instead pay just $30 to watch it together at home.” Another article from a different, but equally well-known and established, industry publication declared: “There’s no question that the Disney+ Premier availability of Black Widow ate into its domestic opening weekend box office.” Notably, however, Disney’s stock price jumped 4% in the days following the Picture’s release.

11. Of course, this was Disney’s plan all along. Disney knew that a “day-and-date” release on Disney+ would drive up the total number of Disney+ subscribers—a key metric impacting Disney’s stock price—both by luring new subscribers to Disney+ and by giving existing ones reasons to keep paying their monthly fees, thus reducing subscriber “churn.” Disney also knew that having such a well-known film as the Picture debut on Disney+ would help it justify future price increases to the Disney+ monthly subscription fees. Moreover, Disney knew that its ability to deliver blockbuster content like Black Widow to its subscribers would perpetuate the view of many investors—as reflected in Disney’s share price—that Disney+ is the only streaming platform that has a chance to one day compete with rival streaming giant Netflix, providing another way to bolster Disney’s market valuation. In short, Disney chose to placate Wall Street investors and pad its bottom line, rather than allow its subsidiary Marvel to comply with the Agreement.

12. The icing on the cake for Disney was that, with the bulk of Ms. Johansson’s compensation being tied to box office receipts, Disney knew that the cannibalization of such receipts by Disney+ would save Marvel (and by extension, Disney) “very large” amounts of money that it would otherwise owe Ms. Johansson. On information and belief, Disney intentionally induced Marvel’s breach of the Agreement, without justification, in order to prevent Ms. Johansson from realizing the full benefit of her bargain with Marvel.

13. Disney’s financial disclosures make clear that the very Disney executives who orchestrated this strategy will personally benefit from their and Disney’s misconduct. In fiscal year 2021, Disney’s Chief Executive Officer, Robert Chapek, was awarded equity grants totaling 3.8 times his $2.5 million base salary. The primary justification for that award, according to Disney’s compensation committee (as detailed in the company’s 2021 Annual Report), was that Mr. Chapek “worked to quickly program new offerings on our DTC [direct-to-consumer] and linear channels” and “launched our direct-to-consumer services in several key markets.” Robert Iger, Mr. Chapek’s predecessor, also received the overwhelming majority of his compensation— just over $16.5 million—in the form of stock grants. The reason for his mammoth award (according to the same Annual Report) was that he “[s]uccessfully launched Disney+ and drove unprecedented subscriber growth in the first year.” In short, the message to—and from— Disney’s top management was clear: increase Disney+ subscribers, never mind your contractual promises, and you will be rewarded.

[1] The contracting entity named in Ms. Johansson’s Agreement is MVL East Coast Productions, LLC (“Marvel”).