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Village Roadshow Entertainment Group sued Warner Bros. on Monday for breach of contract over the studio’s decision to release Matrix Resurrections simultaneously on HBO Max and in theaters.
The lawsuit escalates growing hostility between those in the movie industry who stand to make millions of dollars through big theatrical releases and major media companies that have turned to prioritize growing their streaming services.
“WB’s sole purpose in moving the release date of The Matrix Resurrections forward was to create a desperately needed wave of year-end HBO Max premium subscriptions from what it knew would be a blockbuster film, despite knowing full well that it would decimate the film’s box office revenue and deprive Village Roadshow of any economic upside that WB and its affiliates would enjoy, especially as compared to a 2022 exclusive theatrical release,” states the complaint filed in Los Angeles Superior Court.
Warner Bros. said in a statement, “This is a frivolous attempt by Village Roadshow to avoid their contractual commitment to participate in the arbitration that we commenced against them last week. We have no doubt that this case will be resolved in our favor.”
Village Roadshow alleged the non-industry-standard practice caused Matrix Resurrections, which it claimed was slated to be released in 2022 but was moved up by Warner Bros., to underwhelm at the box office. The blockbuster sequel has grossed only $37 million domestically compared to nearly $750 million by Spider-Man: No Way Home, which is also a sequel to a blockbuster franchise and was released around the same time.
Actors, producers and other financial partners whose compensation is impacted by forgoing exclusive theatrical releases have pushed back against the prioritization of streaming.
In July, Scarlett Johansson sued Disney claiming her contract was broken when Black Widow was made available on Disney+ on the same day it was released in theaters. She claimed Disney sought to steer viewers toward watching the movie on its streaming service instead of in theaters to boost its value and lower her compensation, which was tied to Black Widow’s box office performance.
Disney maintained that it renegotiated Johansson’s contract so she could be made whole. The case settled in September. Terms of the deal weren’t disclosed.
In the lawsuit filed Monday, Village Roadshow alleged Warner Bros. executives’ “Project Popcorn” effort drove viewers away from theaters and onto HBO Max. As part of the plan, Warner Bros. moved up the release of Matrix Resurrections from 2022 to the end of 2021.
“WB agreed to allow its sister company to stream Village Roadshow’s tent pole film, on the same day of its theatrical release, for no additional revenue so that its sister company could increase its subscribers and subscription revenues with the additional benefit of boosting its parent company’s stock,” writes Mark Holscher, a partner at Kirkland & Ellis representing Village Roadshow.
Warner Bros. renegotiated contracts tied to box office performance when it announced that it would put its entire slate of 2021 movies onto HBO Max and in theaters.
But no such deal was reached with Village Roadshow over Matrix Resurrections, the lawsuit said, adding that the rushed release caused it to be rampantly pirated, further hurting its box office returns. The complaint argued that the movie’s poor financial performance dilutes the value of the franchise since it now appears that no more installments will be made.
In the lawsuit, Village Roadshow also raises disputes it has with Warner Bros. over other projects that are in the works. It argued the studio has refused to recognize its right to partner in Wonka by claiming that it’s not a prequel to Charlie and the Chocolate Factory, which the two sides co-own.
Warner Bros. is additionally trying to cut Village Roadshow out of a television series based on Edge of Tomorrow, according to the lawsuit.
“Instead of treating Village Roadshow as co-owner of the film and as the long-standing partner it is, WB proposed a financing deal that would have had Village Roadshow forgo its contractual rights and be relegated to a second-class participant,” the complaint reads.
Warner Bros. has allegedly refused to proceed with any project concerning Edge of Tomorrow that involves Village Roadshow as a financial partner.
Village Roadshow is withholding substantial payments for its share of production expenses over Matrix Resurrections because of the alleged breach of contract, according to the lawsuit. It seeks an accounting of all of Warner Bros.’ earnings over Matrix Resurrections, including the value earned by using the movie to steer subscribers to HBO Max, and an order forcing the studio to consult with it for distribution plans in the future.
WarnerMedia, parent company of Warner Bros., made the decision to release all of its 2021 slate on HBO Max on the same day they were released in theaters in a bid to grow the streamer’s subscriber base as the COVID-19 pandemic accelerated Hollywood’s shift away from movie theaters. The streaming service hosted the movies for a month before they returned to following the typical distribution procedure.
WarnerMedia’s move sparked a backlash from top talent and partners of Warner Bros., including Dune filmmaker Denis Villeneuve and Tenet director Christopher Nolan, who denounced the plan in 2020 and called HBO Max “the worst streaming service.”
WarnerMedia chief Jason Kilar admitted that he rushed the day-and-date plan, even if he stood by the strategy, saying last September at the Code Conference: “I will be the first one to say, and the responsibility rests on my shoulders, that, in hindsight, we should have taken the better part of a month to have over 170 conversations — which is the number of participants that are in our 2021 film slate.”
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