Remember Epix?
That’s the pay TV company that launched in 2008 with the backing of MGM, Viacom and Lionsgate and released some original shows like Graves and Berlin Station. In 2017, MGM bought out its venture partners and became sole owner, two years later launching the streaming service Epix Now, which became a home for shows like Belgravia and Godfather of Harlem. In 2023 it was all rebranded as MGM+, which lives on as a standalone streaming service and pay TV channels today.
Now, the Directors Guild of America pension plan is unearthing some of this old streaming-wars history as it sues MGM Pictures for allegedly self-dealing in its licensing agreements with Epix and failing to make appropriate benefits contributions to the workers behind those shows. On Friday the DGA-Producer Pension Plans and its trustees filed suit in California seeking records and pension plan contributions they say the company has neglected to provide for years.
Here’s how licensing payments connect to the DGA’s pension plan. The pension plan is funded in part by a percentage of revenue generated by employers like MGM for union projects. Accordingly, when MGM licenses one of its projects for distribution on, say, a TV channel or streamer, it must report that revenue and set aside a portion of it to pay into the pension plan.
According to the plaintiffs, MGM entered into a “sweetheart distribution license arrangement” with Epix that allowed it “to report artificially low license revenue” and thus shortchanged the pension plan. The lawsuit states that “the Pension Plan only learned that MGM had used its self-dealing arrangement with Epix to shirk its pension contributions years after the Pension Plan received MGM’s understated contributions, and the Pension Plan still has not received information that would reveal the full scope of the underpayments.”
The Hollywood Reporter has reached out to Amazon MGM Studios, the parent company for MGM since 2022, for comment.
According to the plaintiffs, a residuals auditor that occasionally takes a look at the books at MGM learned in 2016 that the company was not only licensing its projects to Epix, but allowing Epix to “subdistribute” at least some of their projects to other streamers. Around the same time, the auditor found that the licensing payments due from Epix to MGM were “lower than those in licenses Defendant had previously negotiated with Showtime for pay television rights” — even though MGM had allowed Epix “additional and extremely valuable SVOD subdistribution rights for no additional consideration.”
All of that raised alarms, and when the auditor requested documentation to determine whether the distribution rights were “properly valued” and whether MGM was accounting for subdistribution revenue from Epix, MGM allegedly refused to provide the materials. In two subsequent audits, MGM again declined to furnish the auditor with this documentation, the lawsuit states.
For a time, the DGA pension plan and MGM agreed to pause the statute of limitations (through what is called a “tolling agreement”) on the pension plan’s claims to potential additional funding. But the plaintiffs say their hand was forced after MGM recently refused to renew a tolling agreement for unresolved issues that came out of the 2017-2022 audit period.
The pension plan is suing on four counts including failure to comply with audit obligations, breach of contribution obligations to the pension plan as well as its trustees and breach contribution obligations for the 2017-2022 audit period.
In addition to failing to offer some transparency on its licensing revenue, the lawsuit charges, MGM owes the DGA pension plan $540,426 in unpaid contributions from the 2017-2022 audit period. So far, the lawsuit states, MGM has refused to pay this sum.
The DGA-Producer Pension Plans are managed by an equal number of trustees from the labor side and from the employer side. The benefits the plan provides flow to union members of the DGA, which includes their namesake directors as well as assistant directors, associate directors, unit production managers and stage managers.
