Fox Employees ‘Walking on Eggshells’ as Heavy Layoffs Continue Under Disney

Read on: TheWrapTheWrap.

When Disney executives visit the Fox lot in Century City, the home of their newly acquired TV and film studios, they’re greeted by a big new banner that says “Welcome to Fox” and doors newly painted with the word “FOX.”

It’s not so much a welcome as a way of marking territory, one Fox insider told TheWrap Friday, three days after Disney closed its $71.3 billion acquisition of 21st Century Fox’s film and TV assets — and two days after it started layoffs that are expected to cost as many as 4,000 Fox employees their jobs.

The insider said the banner and “FOX” logos, which went up Thursday, were a way of reminding Disney that under the new deal, it is renting the Century City property from Fox: “This is still our lot.”

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The person said a “surreal” day of layoffs Thursday began with the unfamiliar sight of two black Teslas parked in front of Fox film’s Building 88 in spots that are not normally reserved.

To some Fox employees, they were harbingers of a dark day to come.

Among those let go were Fox head of distribution Chris Aronson and president of international distribution Andrew Cripps. The marketing team at the studio was also gutted and the Fox 2000 label, run by Elizabeth Gabler, will shut down after its films that are currently in production are done.

Now, those who still work beyond that big banner are in “wait and see” mode, one employee said.

“When you reached out to me this morning nothing had changed and about an hour ago everything changed,” a Fox film executive told TheWrap on Thursday.

The executive remembered scrambling to inform employees of the coming bad news via video conference, only to have a news story break it first.

“I give [Disney] credit for having our guys in HR make the call, rather than getting that call from some stranger, but that’s about all I give them credit for,” the executive said.

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Though the layoffs on Thursday were particularly heavy on the film side, another Fox employee told TheWrap on Friday that many of these departures were expected and unavoidable, though the impending end of Fox 2000 seems “particularly unfair.”

“That really hurts,” the employee said.

People on the TV side feel “very much in the dark” about what will happen next, even as the film department was “licking its wounds” Friday, another employee said.

The biggest TV executives to lose their jobs so far were 20th Century Fox Television Distribution president Mark Kaner and Twentieth Television president Greg Meidel.

Also Read: Disney Keeps Key Leaders in Place After Day of Layoffs at Fox

The employee said 20th TV veterans were “walking on eggshells” trying to make a good impression on their new Disney bosses. But the employee was confident TV would be spared many more layoffs since Disney has already said senior Fox veterans Peter Rice and Dana Walden, will have leadership roles post-takeover.

Walden will serve as chairman of ABC Entertainment and the newly named Disney Television Studios, which encompasses ABC Studios, ABC Signature, 20th Century Fox TV and Fox 21. John Landgraf and Gary E. Knell, who serve as the chairs of FX and Nat Geo Partners, respectively, will report to Rice, who is chairman of Walt Disney Studios and co-chair of Disney Media Networks. Warner Bros. veteran Craig Hunegs was hired to run the newly-combined Disney Television Studios.

It was announced months ago that Ben Sherwood would exit as co-chair of Disney Media Networks and the president of the Disney-ABC Television Group.

Also Read: Twentieth Television President Greg Meidel Out as Disney-Fox Layoffs Continue

In a memo to staff on Friday, Hunegs called out individual studio heads — Patrick Moran at ABC Studios, Jonnie Davis and Howard Kurtzman at 20th Century Fox TV, and Bert Salke at Fox 21 — a strong sign they will remain in their posts.

“Disney brought over Dana and Peter to run the TV side and Dana and Peter brought over their people and intend to keep them,” the employee familiar with the TV changes told TheWrap. “Disney was interested in Fox more for TV to begin with because we were a missing piece, as their studio is smaller and 20th is very well established and brings so much to them. So there were always going to be fewer cuts on the TV side, with the bigger redundancies being a concern for the film studio.”

“Dana is assuring her direct reports they are safe and wants to keep them happy during this transition,” the person said.

On the film side, Emma Watts, as well as several other Fox film executives, will make the move to Disney’s studio entertainment management team. Watts will report directly to Disney studio head Alan Horn and will serve as vice chairman for 20th Century Fox Film and president of production at Fox. Nancy Utley and Stephen Gilula will stay on as co-chairs for Fox Searchlight and will also report directly to Horn.

Elizabeth Gabler will serve as president of production at Fox 2000 — for as long as there is a Fox 2000.

Umberto Gonzalez contributed to this story.

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‘Daredevil’ Creator Drew Goddard Signs Overall Deal at 20th Century Fox TV

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Twentieth Century Fox TV has signed an overall deal with “Daredevil” and “The Defenders” creator Drew Goddard, the studio announced Thursday.

Under the multi-year deal — the studio’s first since the completion of its acquisition by Disney — Goddard will develop and produce original series for the studio for all platforms. The deal reunites him with the studio and Disney Television Studios and ABC Entertainment chairman Dana Walden more than a decade after getting his start as a writer on “Buffy the Vampire Slayer.”

Goddard was the creator and an executive producer on Netflix’s first Marvel superhero series, “Daredevil,” as well as its spinoff, “The Defenders.” He most recently wrote and directed the film “Bad Times at the El Royale.”

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His other TV credits include “Lost,” “Alias,” “The Good Place” and the “Buffy” spinoff “Angel.”

“We have wanted to be in business with Drew since the day his work on our series ‘Angel’ was over. That was in 2004,” said Walden. “Having a new deal with him after all of this time makes me unspeakably happy. As a writer and director, he’s a 10; as a collaborator and magnet for other incredible writers, directors and actors, he is off the charts. Our goal is to support Drew as he builds his own spectacular production company inside of the Disney Television Studios.”

“I am thrilled to be working so closely with Dana and her team,” added Goddard. “My relationship with Dana stretches back to the beginning when I first started at ‘Buffy.’ Since then, I have had the privilege of working with Disney and Fox for the majority of my career in television, and I look forward to continuing those relationships over the next few years.”

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Disney Boss Bob Iger Says 20th Century Fox Will Continue to Make Films Under Its Own Brands

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Major questions still loom as Disney prepares to close its multi-billion dollar acquisition of Fox’s film and TV assets. Such as, what structure will the studio take? And will Disney continue to operate Fox’s film assets as is, or rebrand the studio that has been around for more than 80 years?

Disney CEO Bob Iger took a step toward answering some of those questions on Thursday during the company’s annual shareholder meeting in St. Louis, Missouri.

He said the Fox brand will remain intact, and that Mouse House plans to continue releasing 20th Century Fox films.

“The company itself will be The Walt Disney Co., but there will still be companies, especially on the movie side, with the Fox name,” Iger said during the meeting, which Disney live-streamed. “We will continue to make movies under the Fox brand and Fox Searchlight brand. And FX, which isn’t Fox, but sounds like it will keep its name.”

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Iger’s comments provide a little more detail behind how Disney plans to incorporate and operate the film and TV entertainment assets acquired from Fox in its $71.3 billion deal.

During the Disney quarterly earnings conference call with the Wall Street community in February, Iger said that despite Disney’s PG-rated, family-friendly identity, the studio plans to continue in the business of making R-rated movies like Fox’s “Deadpool” and “Logan.”

And the studio will certainly want to keep up production at Fox Searchlight, which has been a staple in awards races while also producing some successful indie films at the box office, such as last year’s “The Favourite.”

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At the time of Disney’s February conference call, Iger noted the popularity of the films Fox makes, saying that it will be important for Disney that they clearly brand and market them.

Iger also said during Disney’s shareholder meeting that the Fox acquisition does not include Fox’s studio lot, but that Disney has a lease agreement to use the lot and sound stages “for a really long time.”

Disney and Fox shareholders voted in July 2018 to approve the $71.3 billion bid to buy the lion’s share of Fox’s entertainment assets. The deal, Iger said during the meeting, is expected to close “soon.” Disney previously had been promising a first half of 2019 close. Executives and rank and file employees at Fox have been in a state of uncertainty about their futures since the two companies agreed to the deal.

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In October of last year, Disney laid out plans detailing which executives would make the move from Fox over to the Mouse House.

Emma Watts will report directly to Disney studio head Alan Horn and will serve as vice chairman for Twentieth Century Fox Film and president of production at Fox. Nancy Utley and Stephen Gilula will stay on as co-chairmen for Fox Searchlight and will also report directly to Horn, along with Elizabeth Gabler, who will serve as president of production at Fox 2000.

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Why ‘Bones’ Victory vs Fox Won’t Result in a Ton of Copycat Lawsuits – or at Least, Not Winning Ones

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“Bones” stars and executive producers were awarded $179 million earlier this month in a profit participation lawsuit with Fox that ended up in arbitration — but don’t expect a sudden surge of copycat lawsuits, experts tell TheWrap. At least, not successful ones.

One prominent dealmaker told TheWrap that although this judgement — which ruled in favor of “Bones” stars David Boreanaz and Emily Deschanel, executive producer Barry Josephson and Kathy Reichs, the forensic anthropologist whose books inspired the show — may lead other hit shows to hire someone to scrutinize how their studio shared profits, not everyone will have the right situation or the finances to take it to court.

“It’s the confluence of a successful show, where people are underpaid, where there are enough points that reside with one or two or three people such that it’s worth it to take on Fox,” the dealmaker, who requested anonymity due to ongoing work within the entertainment industry, told TheWrap. “You’ve got to have some cojones, you’ve got to have some real staying power or assets or upside that is around the corner in order to take this on. And that’s not always the case.”

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Tom Nunan, founder and partner of Bull’s Eye Entertainment and UCLA lecturer, agrees.

“Most profit participants suspect that on some level — either trivial or substantive — studios aren’t being fair, but at the same time, few have either the means or the stamina to sue,” he said. “There’s a real chance that we’ll see a surge in lawsuits, but few will succeed, as the studios count on the complainant to either run out of money or time, in pursuing what they figure they’re owed.”

Attorney Bert Fields, partner at Greenberg Glusker, offered another theory as to why you won’t see many copycat lawsuits prevail: studios will think twice about letting legal disputes go to arbitration.

“Maybe studios aren’t going to be so anxious to arbitrate in the future,” he said. Fields characterized “Bones” case arbitrator Peter Lichtman’s harsh words in his 66-page ruling — in which he accused three Fox executives of perjury — as “something a judge rarely does.”

“This seems to be a case where somehow these people and the studio side just drove this arbitrator up the wall,” Fields said.

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Still, everyone we spoke with for this story seems to agree that it’s certainly worth checking the math.

“I think it would be remiss of anyone who represents a profit participant on a hit show, which was both produced by a studio and broadcast or cablecast by a network which are vertically integrated, to not do a thorough analysis of the resulting participation statements before the relevant audit periods expire,” Peter Nichols, entertainment lawyer and founding partner of Lichter, Grossman, Nichols, Adler & Feldman, Inc., told us.

One of the main issues at hand in the “Bones” case is the industry practice of “self-dealing,” a tradition almost as old as Hollywood itself, where a network or streaming service pays for a film or TV show from a studio owned by the same company. It’s that matter at the heart of the “Bones” case.

The show was produced by 20th Century Fox, which licensed the series to air on the Fox broadcast network. Streaming rights were also licensed to Hulu, a platform in which Fox currently has a 30 percent stake.

The amount that Fox was hit with was one of the largest rulings of its kind in television history. That facet alone has made those in the industry wonder if we’re headed for a sea-change in Hollywood deal-making, especially as Disney is set to increase its market share by swallowing up most of 21st Century Fox’s assets in a merger set to close in the coming months.

But experts aren’t so sure.

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It shouldn’t be taken as some radical change in the entertainment business,” Fields said. “This is not a new problem. This is just presented so dramatically because the numbers are so big.”

Nichols is also “not sure” if the “Bones” ruling “changes anything.”

“But it certainly underscores the importance of demanding that studios be required to negotiate with all corporate affiliates, whether wholly owned or not, on an ‘arm’s length’ basis,” he said.

Many legacy media companies, including Disney and WarnerMedia, are pushing further in the streaming space, which has already opened a new line of revenue for studios looking to cash in on the shows they own. And Disney will become the majority owner of Hulu after its Fox deal closes.

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This could lead to a schism, where on one side you have streamers like Netflix, Amazon and Apple’s upcoming service — that aren’t tied to a larger content producer — and on the other side, you have Disney+, Hulu and WarnerMedia.

BTIG analyst Rich Greenfield believes that streaming licensing deals may come under further scrutiny.

“This illustrates the need for a true fair market value process — if Warner wants to put ‘Friends’ on WarnerMedia, it needs to pay talent as much as Netflix would pay,” he said. “What would Netflix pay for a ‘Star Wars’ TV series that reaches 150 million vs Disney+, which reaches zero at start?”

He added that, even if its own deals are more scrutinized, Netflix could still end up benefiting. “It shows how studios’ fiduciary duty helps Netflix — as they have size and scale to pay dollars that others cannot,” Greenfield said.

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Here’s Why Fox Could Win ‘Bones’ Arbitration Appeal – And Why It Couldn’t

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Fox is fighting a $179 million judgment against the company — one of the largest rulings of its kind in television history — over profit participation on the 2005-2017 series “Bones.” But it isn’t fighting the entire judgement.

In a ruling made public on Wednesday, arbitrator Peter Lichtman said Fox violated a profit participation agreement with stars David Boreanaz and Emily Deschanel, executive producer Barry Josephson and Kathy Reichs, the forensic anthropologist whose books inspired the show, and accused three Fox executives of perjury.

In addition to a finding of actual damages, the arbitrator awarded $128 million in punitive damages, which he called “reasonable and necessary to punish Fox for its reprehensible conduct and deter it from future wrongful conduct.”

Fox seeks to void these punitive damages, and says the ruling is a “flagrant injustice, riddled with errors and gratuitous character attacks.”

Also Read: Fox Slapped With $179 Million Judgment in Battle Over ‘Bones’ Profits

But does Fox have a chance of voiding the punitive damages? It depends on who you ask.

According to one prominent entertainment lawyer in Los Angeles, who requested anonymity because they have business dealings with Fox, the company really doesn’t have a leg to stand on. The arbitrator’s opinion here “is exceedingly well reasoned, exceedingly comprehensive and well-detailed, and not incited by bias or anything like that. But is instead incited by just callous disregard for the truth,” the attorney told TheWrap.

But an individual with knowledge of the arbitration told TheWrap that, while the chances of getting an arbitration ruling thrown out are very slim, Fox has a good shot in this case because it can argue that the arbitrator “exceeded his arbitration powers.” The individual says that at no point during this litigation, which dates back to 2015, did Fox agree the arbitrator could award punitive damages.

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That’s the argument the company made in a statement Wednesday, and it hired top defense attorney Daniel Petrocelli, who filed a motion today in Los Angeles advancing the same point. Attorneys for Josephson, Boreanaz, Deschanel, and Reichs filed a motion backing the damages.

However, according to another individual familiar with the arbitration, both parties agreed on what issues would be brought into this arbitration and what the arbitrator would have the jurisdiction to decide on — and one of those points was that the arbitrator could rule on punitive damages. This insider says Fox and the “Bones” team outlined their plans in a document that went to Lichtman before arbitration began.

Lichtman, for his part, said in his ruling that the availability of punitive damages was an “issue raised by Fox for the first time during its closing argument and in its Post-Hearing Brief” and “argues that the Agreements expressly bar Participants’ claim for punitive damages.”

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He added that Fox “overreaches with its argument” and the language from its agreements “does not apply to prevent an award of punitive damages against the non-Studio Claimants for intentional torts and against TCFTV for fraud.”

Attorneys for Fox, and for Josephson, Boreanaz, Deschanel, and Reichs, did not respond to TheWrap’s request for comment.

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