Village Roadshow sues Warner Bros over hybrid Matrix Resurrections release

Sci-fi action movie The Matrix Resurrections

Village Roadshow, coproducer of tentpole films including The Matrix franchise, has filed a lawsuit against Warner Bros, alleging that the day-and-date release strategy used for The Matrix Resurrections has caused millions of dollars in lost theatrical revenues.

In late 2020, Jason Kilar, CEO of Warner Bros parent company WarnerMedia, unveiled a strategy, dubbed Project Popcorn, through which Warner Bros’ entire 2021 film slate (17 movies) would launch simultaneously in theatres and on HBO Max in the US.

The move, designed partly to address pandemic-related theatre closures as well as boost subscriber numbers for HBO Max, was greeted with anger by many in Hollywood, including filmmakers such as Christopher Nolan, who argued it would erase a large portion of backend revenues generated by a film’s theatrical release. WarnerMedia reportedly ended up spending around US$200m to compensate profit participants for lost theatrical revenues.

“This case is about the deliberate and consistent coordinated efforts of WB to eviscerate the significant value of Village Roadshow’s intellectual property in order to prop up the new HBO Max streaming service owned by WarnerMedia, the ultimate parent of WB, without providing any accounting, and shut Village Roadshow out of its legal and contractual rights to co-own and co-finance the sequels, prequels, spinoffs and other derivative works of the nearly 100 films that Village Roadshow funded and co-owns,” said the lawsuit filed Monday with the Los Angeles County Superior Court.

Village Roadshow pointed to the “abysmal” box-office performance of The Matrix Resurrections, released in December, in comparison to the franchise’s prior installments.

According to the company, the box office total for the fourth film stands at around US$148.7m, compared with US$783.2m, US$1.12bn and US$645.8m respectively for the first, second and third films. (All box office totals adjusted for inflation.)

Warner Bros implemented the day-and-date releasing model, argued Village Roadshow, “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.”

Village Roadshow said that since 1997 it has invested US$4.5bn in the partnership and co-financed 91 films with Warner Bros, including Joker, Charlie and the Chocolate Factory, Edge of Tomorrow, the Ocean’s film franchise and all of The Matrix films.

Village Roadshow, which said it is the co-owner of the copyright to these titles, alleged that Warner Bros is gaining “billions of dollars in enterprise value” due to the fact HBO Max subscriptions are increasing, while “refusing to account to Village Roadshow for any of that value.”

In addition to limiting potential theatrical revenue, the decision to release the film day-and-date “also inflicted serious harm to the entire Matrix franchise,” said Village Roadshow, due to the fact the “film’s lack of profitability generally prevents studios from investing in additional sequels and derivative films in the near term.”

In its response, Warner Bros responded that the lawsuit “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.”

While the day-and-date releasing strategy was unpopular with many inside the industry, it appears to have been effective in terms of boosting subscriber numbers. According to WarnerMedia, HBO and HBO Max have a combined 73.8 million subscribers.

WarnerMedia isn’t the only company to run into legal challenges as they navigate new windowing strategies. Last year, Scarlett Johansson sued Disney after it released Black Widow simultaneously in cinemas and on Disney+ in the US. While ticket sales were impressive in the first weekend, the box office fell sharply after that, with Johansson arguing that the availability of the film on Disney+ (for US$30) meant fewer people watched it in the cinema. Disney ultimately settled the legal dispute for an undisclosed sum.