In December 2017, Rupert Murdoch stunned Hollywood by announcing the sale of most of 21st Century Fox to Disney. “A momentous occasion,” Murdoch called the $71.3 billion deal, which came as digital streamers were disrupting the entertainment status quo. Netflix and Amazon Prime may now be just as important as broadcast television ever was. Meanwhile, the old studio vanguard has slowly embraced digital waters — dipping their toes in first with Hulu before making plans to launch Netflix competitors such as Disney+ and WarnerMedia. This coming era of vertically integrated businesses delivering content directly to consumers online wasn’t in the cards for the elder Murdoch. And maybe that’s for the best, given a stunning new $179 million award handed down by an arbitrator.
The decision, made earlier this month but until now a secret, pertains to the Fox-produced series Bones, which starred David Boreanaz and Emily Deschanel and ran on the Fox network between 2005 and 2017. But the 66-page ruling by arbitrator Peter Lichtman, who concludes Fox executives lied, cheated and committed fraud at the expense of the show’s stars and executive producer Barry Josephson, is about a whole lot more. The nearly $200 million award amounts to the second-largest in television industry history, after a 2011 jury verdict punishing Disney to the tune of $319 million over profit-sharing for Who Wants to Be a Millionaire? It will not only put Murdoch’s Fox sale in a whole new light, but may also raise questions about the future viability of Hulu, plus any platform enjoying what’s pejoratively known as “Hollywood accounting.” The ruling also comes as the D.C. Circuit Court of Appeals has allowed to stand another mega-merger between AT&T and Time Warner, an example of vertical integration between a distributor of content and a producer.
In coming to a decision, Lichtman describes how some of Fox’s top executives, including 21st Century Fox president Peter Rice and Fox TV CEO Dana Walden (soon to be top executives at Disney) plus Fox TV chairman Gary Newman (leaving Fox) “appear to have given false testimony in an attempt to conceal their wrongful acts.” According to the ruling, Fox has taken a “cavalier attitude toward its wrongdoing” and exhibits a “company-wide culture and an accepted climate that enveloped an aversion for the truth.”
Slamming the company with a punishment that includes $128 million in punitive damages — or five times the amount of compensatory damages — Lichtman points out that the award is 0.6 percent of 21st Century Fox’s stipulated net worth.
He muses whether it’s really enough.
“In fact, one could question whether a five to one ratio given Fox’s financial condition and lack of contrition serves to deter the wrongful conduct at issue here, or whether it will be considered part of the cost of doing business,” writes the arbitrator.
“What we have exposed in this case is going to profoundly change the way Hollywood does business for many years to come,” says John Berlinski, who represented the actors and Kathy Reichs — a forensic anthropologist who authored the Temperance Brennan novels that formed the basis for the series — in the case.
Dale Kinsella, on behalf of Josephson, filed a petition Wednesday to confirm the arbitration award.
Fox vehemently disagrees with the decision. The company has now tapped star litigator Daniel Petrocelli, fresh off a win defending the AT&T/Time Warner merger, in an attempt to overturn it.
“The ruling by this private arbitrator is categorically wrong on the merits and exceeded his arbitration powers,” reads a statement from 21st Century Fox. “Fox will not allow this flagrant injustice, riddled with errors and gratuitous character attacks, to stand and will vigorously challenge the ruling in a court of law.”
“Peter Rice and Dana Walden are highly respected leaders in this industry, and we have complete confidence in their character and integrity,” Bob Iger, chairman and CEO of The Walt Disney Co., said Wednesday in a statement. “Disney had no involvement in the arbitration, and we understand the decision is being challenged and will leave it to the courts to decide the matter.”
(Excerpt) Read more in: The Hollywood Reporter