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April 7, 2022 | EntertainmentFrom the blogNews

Matrix 4 Production Company Resurrects Day-and-Date Release Controversy with Lawsuit Against Warner Brothers

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Scarlett Johansson’s lawsuit against Disney last year highlighted the implications of simultaneously releasing films on streaming services and in theaters.  Actors and production companies alike have suffered profit losses from such simultaneous release of movies, otherwise known as a “day-and-date release.”

In response to Johansson’s lawsuit, Disney temporarily ceased simultaneous releases of its movies, giving a 45-day exclusive theatrical release for its films released through the end of 2021.  Nevertheless, such simultaneous releases continue to result in breach of contract claims.

Following in Johansson’s footsteps, production company Village Roadshow launched a lawsuit against Warner Brothers seeking profits lost from the simultaneous release of Matrix Resurrections in theaters and on HBO Max.  HBO Max, the streaming service operated by Warner Brothers’ sister company HBO, is one of the few streaming services that has used day-and-date releases during 2021 to increase subscriptions.

   I. Matrix Resurrections’ Box Office Losses

Village Roadshow and Warner Brothers have been working on projects together for a quarter-century, co-producing nearly 100 movies, including the Matrix trilogy, 2005’s Charlie and the Chocolate Factory and 2014’s Edge of Tomorrow.  Village Roadshow contracted to be both co-producer and co-financier for most of these films.

Matrix Resurrections was originally scheduled to be released in the summer of 2021.  Due to the COVID-19 pandemic, Warner Brothers initially pushed the release date to April 2022.  Subsequently, Warner Brothers moved the release forward to December 2021 and announced a day-and-date release plan in theatres and on HBO Max.

The day-and-date release of Matrix Resurrections substantially limited theatrical ticket sales.  As in the Johansson suit last year, Village Roadshow’s revenue from Matrix Resurrections depends wholly on theatrical ticket sales.  It receives no revenue from streams on HBO Max.  Village Roadshow contends that Warner Brothers’ day-and-date release diverted viewers to HBO Max, reducing Village Roadshow’s revenue.  Due to the reduced revenue, it is unlikely Village Roadshow will be able to recover its production costs.

   II. Village Roadshow’s Claims Against Warner Brothers

Village Roadshow sued Warner Brothers at the beginning of February 2022, alleging that Warner Brothers moved up the release of Matrix Resurrections to December 2021 in order to increase subscriptions to HBO Max.  Village Roadshow’s complaint states that Warner Brothers has breached its fiduciary duty by deliberately limiting the profit of the movie from theatrical box office sales, and failing to compensate Village Roadshow for streams on HBO Max.  However, some critics have suggested that theatrical box office profits may have been limited not only by diversion of viewers to HBO Max, but also due to lack of audience interest in the film.

Village Roadshow’s complaint also alludes to Village Roadshow’s contract with Warner Brothers, which states that Village Roadshow will have the first option to co-finance and co-own certain derivative films, such as prequels and sequels.  Warner Brothers has two projects from which it has excluded Village Roadshow as a co-owner and co-financier: Wonka, a prequel to Charlie and the Chocolate Factory, and a prequel series to Edge of Tomorrow.  Village Roadshow claims it is contractually entitled to co-own and co-finance these projects.

Warner Brothers has moved to compel arbitration, but has yet to answer the substance of Village Roadshow’s complaint.  However, Warner Brothers has made a public statement asserting that Village Roadshow has not fulfilled its obligation to pay for the production of Matrix Resurrections.  Warner Brothers also claims that deals were made with others involved in Matrix Resurrections to ensure proper compensation considering the day-and-date release format, but Village Roadshow – alone among actors and partners connected with the film – rejected any effort to negotiate new deal terms.

   III. What This Lawsuit Could Mean for the Industry

Village Roadshow’s suit may be settled, as was the Johansson suit last year.  However, this lawsuit emphasizes the risk of underpayment that actors, production companies and any other parties relying solely on theatrical box office sales face when confronted with day-and-date releases.  In the future, studios may decide to eliminate simultaneous theatrical and streaming releases altogether.  However, if day-and-date releases continue, actors and production companies will be unwilling to rely on compensation based wholly on theatrical ticket sales.  Consult experienced production counsel for guidance on your existing agreements, and how to negotiate fair terms as these trends continue to develop.

Photo by GR Stocks on Unsplash
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