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A referee awarded $ 179 million in damages to stars and the creative team behind Fox's "Bones" show.
As stated in an in-depth article in The Hollywood Reporter, this decision could have more significant consequences for the streaming world, especially as large media companies plan to launch their own streaming services, which will presumably started from their existing content libraries.
The stars David Boreanaz and Emily Deschanel, as well as executive producer Barry Josephson and Kathy Reichs (who wrote the novels on which "Bones" was based), sued 21st Century Fox in 2015. They alleged that Fox Studio had licensed the program for lower rates than the Fox network and then Hulu, to deceive them of their legitimate share of profits.
The dispute finally resulted in arbitration. Now referee Peter Lichtman has ordered Fox (who currently holds a 30% stake in Hulu and is being acquired by Disney) to pay one of the largest share-sharing awards. profits from the history of Hollywood.
As part of his decision (integrated below), Lichtman reviews Fox's agreement to broadcast rebroadcasts of "Bones" on Hulu. This type of transaction – where studios sell content to a sister company – is not unusual, but there is still expectation that the company will pay a fair market value.
It seems that in this case, Hulu was just giving Fox a share of the advertising revenue, which Lichtman skeptically describes as follows: "So, when Fox claims that there is no evidence of a better deal struck by another studio in terms of advertising revenue percentage, this is true because no other studio would make such an agreement based on the percentage of advertising revenue"(Emphasis in the original).
Mr. Lichtman then goes on to discuss what he calls "perhaps the most shocking piece of evidence related to Hulu's issues," namely, the fact that the executive Dan Fawcett signed the ### License agreement on behalf of Fox and Hulu.
"As stated above, Mr. Fawcett has literally signed the agreement for both parties in his capacity as representative for both parties," writes Lichtman. "Obvious inferences of auto-transactions, conflicts of interest and the absence of any arm's length bargaining are taking a leap forward."
In the end, Lichtman concludes that there is an obvious reason why Hulu got such an offer.
"It is indisputable that the Fox conglomerate had a stake in Hulu, and the evidence has established that" Fox as a whole "has essentially surrendered the digital rights at a low cost to increase the value of this business." he says.
Fox, for its part, challenges the decision and says most damage should be avoided.
"The decision of this private arbitrator is categorically wrong on the merits and exceeds his powers of arbitration," said the company in a statement. "Fox will not allow this flagrant injustice, fraught with errors and gratuitous attacks of character, to defend itself and vigorously challenge the judgment in court."
Whatever the case may be, it's unlikely to be the last time Hollywood talent will challenge studios over streaming profits.
Update: Chief Executive Bob Iger made the following statement to Disney:
[Fox executives] Peter Rice and Dana Walden are highly respected leaders in this sector and we have full confidence in their character and integrity. Disney did not participate in the arbitration. We understand that the decision is disputed and we will leave it to the courts to decide.
Bones arbitration decision by TechCrunch on Scribd
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