MoviePass Parent Now in Litigious Crosshairs

Misery loves company.

Helios and Matheson Analytics, the fiscally-challenged owner of theatrical ticket subscription service MoviePass, appears helpless watching its stock plummet following a 1-for-250 shares reverse-stock split engineered less than a week ago in hopes of resuscitating moribund shares.

With the stock freefalling another 45% July 30 in early trading, a New York-based law firm issued a press release soliciting investor input regarding potential litigation as to whether HMNY and certain of its officers and/or directors may have violated federal securities laws.

Specifically, Bronstein, Gewirtz & Grossman, LLC says it is investigating circumstances related to MoviePass’ July 26 service outage that necessitated an emergency $6 million loan to resume operations.

The move sent HMNY’s post-split shares into a tailspin – further angering beleaguered shareholders.

“Our primary expertise is the aggressive pursuit of litigation claims on behalf of our clients,” the law firm said in a statement.

HMNY shares, which briefly “peaked” at $21 on the morning of July 25, are currently trading at $1.18 per share

 

 

CBS Postpones Annual Shareholder Meeting

CBS canceled its planned May 18 annual shareholder meeting following a week of litigation and drama between the media giant and its majority shareholder National Amusements, which is headed by Shari Redstone and her ailing 94-year-old father Sumner Redstone.

On May 17, the board of directors of CBS voted 11-3 to dilute the voting power of National Amusements from 80% to 20%. That vote was largely for naught since Shari Redstone – before the board vote – changed the company’s bylaws, requiring a supermajority vote to enact changes by the board.

“CBS management and the special committee cannot wish away the reality that CBS has a controlling shareholder [i.e. National Amusements],” Shari Redstone said in a statement. “NAI yesterday exercised its legal right to amend the company’s bylaws to require a supermajority vote on certain board actions with respect to dividends, effective immediately. In light of the Board’s action today, that action was plainly necessary, and it is valid.”

Indeed, a judge from the Delaware Chancery Court May 17 ruled against CBS’ request for a temporary restraining order prohibiting the Redstones from blocking the expected CBS board vote diluting their voting power.

In the rapidly changing media landscape, Shari Redstone is seeking to re-merge CBS and Viacom, with Viacom CEO Bob Bakish assuming the No. 2 position to CBS CEO Les Moonves. The latter reportedly has no real interest in CBS rejoining Viacom, including assets Paramount Pictures, BET, MTV, Nickelodeon and Comedy Central, among others.

CBS Sues Controlling Shareholder for Independence

CBS Corp. May 14 filed a lawsuit in Delaware Court of Chancery alleging breaches of fiduciary duty by majority shareholder National Amusements, which is run by Sumner Redstone and his daughter Shari Redstone.

CBS is seeking to prevent the Redstones from allegedly interfering with a special meeting of its board of directors to consider declaring a dividend of shares that would dilute the value of National Amusements’ voting rights to 17% from 80% — as is permitted under CBS’s charter.

The dividend would not dilute National Amusements’ economic interests, or any other CBS stockholder.

CBS said it took this step because it believes it is in the best interests of all its shareholders, and necessary to unlock significant stockholder value.

If consummated, the dividend would enable CBS to operate as an independent, non-controlled company and more fully evaluate strategic alternatives — including merging with Redstone-controlled Viacom.

CBS contends that without the litigation National Amusements would seek to oust its board members and/or change its bylaws — allegations National Amusements denies.

“National Amusements had absolutely no intention of replacing the CBS board or forcing a deal that was not supported by both companies,” the company said in a statement. “National Amusements’ conduct throughout supports this and reflects its commitment to a well-governed process.”

 

AT&T Says Divesting Time Warner Assets Would Undermine Merger Value

AT&T reportedly told the federal judge in the AT&T/Time Warner antitrust case any government request to divest DirecTV or Turner would undermine the value of the $85.4 billion merger.

The statement is part of closing briefs submitted by both sides May 3 in the trial Judge Richard Leon is expected to rule on by mid-June.

A lawyer representing the Justice Department told Leon that AT&T should make a “partial divestiture” of either DirecTV or Turner (which includes CNN, TBS and TNT) so it can’t monopolize content and consumer pricing, among other issues.

AT&T said such a move would “destroy the very consumer value this merger is designed to unlock,” while hiking prices for DirecTV subscribers. Divesting Turner, AT&T said, would eliminate “content innovations” and the advertising “benefits” that help reduce consumer pricing.

Indeed, Time Warner cited advertising revenue from the recent March Madness Men’s College Basketball National Championship tournament for upping Q1 revenue 10% to $3.34 billion.

“The government did not even begin to make a credible case that the merger would likely harm competition, substantially or even just a little,” AT&T said in the brief, as reported by Reuters. “This is not a close case. The government failed to meet its burden for multiple independent reasons.”

The divestitures, in addition to the DOJ lawsuit itself, took on political overtones when President Trump, campaigned against the merger during the election. More importantly, Trump has called out CNN – a frequent critic of the president – as “fake news” and part of the “dishonest media.”

Judge Leon previously denied an AT&T request forcing the DOJ to turn over records to determine whether Trump pressured the Justice Department to file litigation – after the merger had met regulatory approval.

AT&T has to pay Time Warner $500 million should the merger fail.

 

 

Studios, Streamers Sue Online TV Service for Pirating Content

Hollywood studios and over-the-top video behemoths Amazon Prime Video and Netflix have joined together in a lawsuit against “SeTV Now,” an online service allegedly streaming pirated content globally.

The suit – filed April 20 in Los Angeles District Court – by Amazon Content Services, Columbia Pictures Industries, Disney Enterprises, Netflix Studios, Paramount Pictures, Sony Pictures Televsision, Twentieth Century Fox Film Corp., Universal City Studios Productions, Universal Cable Productions, Universal Television and Warner Bros. Entertainment, alleges “SeTV Now” and co-defendants Jason Labossiere and Nelson Johnson are pirating “mass copyright infringement” of plaintiffs’ movies and TV shows and marketing access to them via software to consumers for “only $20/month.”

“Whether their customers choose a subscription or a preloaded box, what [Florida-based] defendants actually sell is illegal access to plaintiffs’ copyrighted works … without authorization. These streams are illegal public performances of plaintiffs’ copyrighted works,” read the complaint.

The studios, Amazon and Netflix filed the litigation in California, citing the state as the “locus of most of plaintiffs’ productions and distribution facilities.”

The suit alleges “SeTV Now” sells “click-and-play” no-contract subscriptions and set-top box devices in California, in addition to offering technical support and marketing on social media in the state.

“On April 10, 2018, a ‘SeTVnow’ customer who selected the ‘new releases’ category would have had the ability to access immediately hundreds of titles, including movies still in theaters,” read the complaint.

The defendants were not immediately available for comment.

The studios, Amazon and Netflix seek a jury trial and unspecified monetary damages.

Pension Fund Sues Netflix Over Executive Bonuses

A Netflix shareholder has filed a lawsuit against the streaming video behemoth’s board of directors alleging performance bonuses paid to senior executives were rigged in favor of the company getting lower tax burdens.

The suit, filed by the City of Birmingham Relief and Retirement System in U.S. District Court in San Francisco, alleges performance-based bonuses totaling more than $18 million were awarded by the board to executives CEO Reed Hastings, CCO Ted Sarandos, CFO David Wells, Chief Product Officer Greg Peters and General Counsel David Hyman, among others, for easily-obtainable goals thereby enabling Netflix to reward senior management while also lowering its tax burden.

The plaintiff argues the monies should have been returned to shareholders.

“Through their conduct, defendants rigged the compensation process, guaranteeing Netflix officers huge cash payments while misleading investors into believing that these payments were justified by attainment of real performance goals,” read the complaint.

Netflix scrapped its executive bonus plan at the end of 2017 following the GOP-led tax overhaul. It now pays straight salary to executives as bonuses are no longer deductible under the new corporate tax structure.

Notably, while the suit bemoans “exorbitant, $1+ million per year compensation,” it makes no mention of stock options, which represent of the bulk of Netflix executives’ fiscal largess.

Hastings is slated to receive $28.7 million in stock options in 2018, which Netflix pays no taxes on. Indeed, only Hastings’ $700,000 base salary this year will affect Netflix’s taxes.

 

 

Studios, SVOD Win Court Injunction Against TickBox TV

Hollywood studios and subscription streaming video services have been granted a preliminary injunction against TickBox TV, the Atlanta-based company allegedly selling illegal access to myriad TV shows and movies through a proprietary set-top box.

U.S. Federal District Judge Michael Fitzgerald Jan. 30 in Los Angeles ruled TickBox must maintain changes it made to its user interface and marketing after Universal Pictures, Columbia, Walt Disney Studios, 20th Century Fox, Paramount Pictures, Warner Bros., Amazon and Netflix filed a lawsuit last October.

TickBox argues it merely sells hardware and cannot be liable for the actions of third-parties, i.e. its consumers.

Indeed, at the bottom of its website, TickBow said its hardware “should not be used to download or stream any copyrighted content without permission from the copyright holder.”

But Fitzgerald ruled that while TickBox had not necessarily “caused” users to illegally stream or download copyrighted content, it had sold them the means to do so.

“TickBox may be held responsible for the instances of infringement that would not have otherwise occurred in the absence of the Device,” Fitzgerald wrote.

The judge ordered TickBox and plaintiffs to iron out technical safeguards that protect the latter’s copyrighted content, in addition to implementing software updates that could reset devices already sold.

The Alliance for Creativity and Entertainment, which represents studios and digital companies such as Amazon, Netflix and Hulu, hailed the judge’s decision.

“This is an important step, particularly given the court’s conclusion that the ACE members are likely to succeed on the merits of their case,” spokesperson Zoe Thorogood said in a statement. “We look forward to further developments in this case.”

Redbox Cites ‘First Sale Doctrine’ Defense Selling Disney Digital Movie Codes

Redbox has filed a counter-claim against The Walt Disney Co.’s lawsuit claiming the kiosk vendor is illegally selling digital codes to select movies.

Filed Jan. 16 in U.S. District Court in Los Angeles, Redbox claims it has the right under the “first sale doctrine” to sell digital codes included in packaged media retail releases. The doctrine enables consumers of books, music CDs and physical media the right to resell the content.

Redbox, which has no distribution agreement with Walt Disney Studios Home Entertainment, acquires Disney titles through third-party sources, offering digital codes at a significant discount to other third-party online vendors.

Disney argues its packaged media release include specific language prohibiting the sale or transfer of included digital codes.

Redbox, per the complaint, said it has invested more than $700,000 launching a digital service. It says Disney’s legal action is anti-competitive.

Redbox in October began selling digital codes — typically included in Blu-ray Disc releases — of select Disney movies accessible on the kiosk vendor’s website and playable on compatible media devices.

Dubbed “Digital Codes At The Box,” the program offers access to Beauty and the Beast, Alice Through the Looking Glass, Guardians of the Galaxy Vol. 2, Maleficent, Inside Out, The Jungle Book, Pete’s Dragon, The BFG, Rogue One: A Star Wars Story, Doctor Strange, Finding Dory and Moana.