Disney reveals $65 million compensation payout in latest earnings report

Today’s third-quarter earnings report revealed that Disney’s combined streaming services are finally turning a profit, but the Mouse House’s legal costs are still quite high.

Exactly, it costs $65 million.

“During the current quarter, the company recorded a $65 million charge related to a legal judgment,” Disney said in its just-released third-quarter earnings summary. “During the prior-year quarter, the company recorded a $101 million charge related to a legal judgment, largely offset by a $90 million gain on its investment in DraftKings, Inc. (DraftKings Gain), which was sold during the prior-year quarter,” Disney continued.

Disney did not respond to a request for comment or clarification on what the Q3 2024 “legal ruling” entailed or who the $65 million was paid to. If the company provides information, this post will be updated.

Among the many legal actions Disney has been involved in recently, one clue may be the settlement the House of Mouse reached with TSG Entertainment Finance in late January.

In a sometimes vociferous complaint originally filed in the summer of 2023, a wealthy sponsor of Oscar winners The Shape of Water AND JoJo Rabbit, plus Deadpool, Avatar: The Way of Water and many others claim to have fallen victim to some shady Hollywood accounting. TSG claims it was defrauded out of “at least $54.5 million” in defined gross revenues “from the entire slate of qualifying films” in its deal with Fox when Disney fully acquired the studio formerly owned by Rupert Murdoch in 2019.

After accusations of “uncontrolled dealings” and arguments between several lawyers, on January 16 a Disney spokesman stated briefly that “the matter has been resolved.”

Could this settlement be at the heart of the $65 million Disney paid out last quarter? Maybe. Maybe not.

Falling down yet another financial rabbit hole, the Securities and Exchange Commission filing for the quarter and nine months ended July 1, 2023, refers to $101 million from last year as an “adverse judgment.” It then documents the $101 million as the “value (monetary amount) of damages the plaintiff is seeking in the legal case.”

Again, there is no specific information about who the dispute was with and who received the payment.

It should be noted that such legal expenses are not exclusive to Disney; today it is simply the time for the Bob Iger-led company to be in the spotlight when it comes to earnings. In fact, such legal payouts are not uncommon in corporate media earnings reports or SEC filings in the American litigious culture.

For example, as subscribers began watching movies on their computers, a $4.1 million patent settlement win gave a big boost to a small DVD rental company called Netflix in 2007. On the other hand, a confidential settlement that Netflix reached in early September 2022 for $5 million The Queen’s Gambit A defamation lawsuit filed by Cold War chess icon Nona Gaprindashvili apparently never saw the light of day in the company’s reports that year.

In its 2022 financial report filed with the SEC, Netflix only hinted at further proceedings, using standard legal language.

From time to time, in the normal course of business, the Company is subject to litigation and claims, including claims related to employment relations, business practices and patent infringement. Litigation can be costly and disruptive to normal business operations. In addition, the outcomes of complex legal proceedings are difficult to predict, and the Company’s views on such matters may change in the future as litigation and related events develop. The Company accounts for legal fees as they arise. The Company records a provision for contingent losses when it is probable that a liability has arisen and the amount of the loss can be reasonably estimated. An unfavorable outcome in any legal matter, if material, could have an adverse effect on the Company’s business or its financial condition, liquidity or results of operations.

The Company is involved in litigation matters not discussed herein, but does not believe that these matters are material, either individually or in the aggregate, at this time. The Company’s view of the matters not discussed herein may change in the future as the litigation and related events develop.

Some companies are more specific.

A few years ago, when sexual harassment allegations and scandals were erupting at Fox News, part of the 2017 program^saint Century Fox’s SEC quarterly report stated: “Other charges for the three and nine months ended March 31, 2017 included approximately $10 million and $45 million, respectively, of costs related to settling pending and potential litigation following the resignation in July 2016 of Fox News Channel’s chairman and CEO following a public complaint alleging sexual harassment.”

The total amount in the “Other” category in the nine months to the end of March this year at the then Rupert Murdoch-owned company was $71 million.

Whichever way you look at it, today’s revelation of a $65 million check from Disney doesn’t look good on the books. It’s a bad look at a time of layoffs, cost-cutting, and slow production. It’s especially bad when your streaming trio of Disney+, Hulu, and ESPN+ made just $47 million in direct-to-consumer operating income in the most recent quarter.