Warner Bros. Discovery sued Paramount Global looking to enforce the streaming rights of "South Park," setting the stage for a legal battle between two media behemoths as the streaming wars intensify.
On Friday Warner Bros. Discovery filed a lawsuit against Paramount, South Park Digital Studios and MTV Entertainment seeking hundreds of millions of dollars for what it believes was a breach of contract.
Warner said it agreed in 2019 to pay more than $500 million, or approximately $1.69 million per episode, to license "South Park," the longstanding cartoon featuring bad-mouthed elementary school children that has been airing on Paramount's cable-TV network Comedy Central for decades, for its own streaming platform HBO Max.
During the bidding process for the "South Park" rights, the filing said, Paramount allegedly asked whether Warner Bros. Discovery would consider sharing the rights to the show for Paramount's own streaming service.
"Warner/HBO rejected the proposition as a 'non-starter,'" according to the lawsuit.
However, Warner alleged in its lawsuit that Paramount went back on its contract and withheld "South Park" specials and other related content. The suit points to Paramount's own fledgling streaming service, Paramount+, as the reason.
A Paramount spokesperson denied the claims made by Warner in Friday's lawsuit, adding that Warner has stopped paying licensing fees.
"We believe these claims are without merit and look forward to demonstrating so through the legal process," a Paramount spokesperson said in a statement. "We also note that Paramount continues to adhere to the parties' contract by delivering new South Park episodes to HBO Max, despite the fact that Warner Bros. Discovery has failed and refused to pay license fees that it owes to Paramount for episodes that have already been delivered, and which HBO Max continues to stream."
Although the agreement called for HBO Max to receive the first episodes of the latest season of "South Park" in 2020, Paramount said it notified Warner in March that it would halt production of the season as a result of the pandemic
Warner then claims that "South Park" and its creators moved forward with the production of other types of content, such as two pandemic-themed specials that aired between September 2020 and March 2021.
Warner further alleges the scheme was in the works when Paramount's subsidiary MTV signed a deal with the "South Park" creators in 2021, which called for exclusive content for Paramount+, reportedly worth $900 million.
"We believe that Paramount and South Park Digital Studios embarked on a multi-year scheme of unfair trade practices and deception, flagrantly and repeatedly breaching our contract, which clearly gave HBO Max exclusive streaming rights to the existing library and new content from the popular animated comedy South Park," a Warner Bros. Discovery spokesperson said in a statement Friday.
The showdown comes as streaming services have been vying for subscribers and looking to reach profitability in the near future. Media companies have been spending billions of dollars on content to attract customers, and have recently begun cutting costs as increased competition has led to slowing subscriber growth.
This week Warner Bros. Discovery reported a big loss in its quarterly earnings as the company faces a softening advertising market, which has weighed on its revenue. The company said, however, that it added 1.1 million global streaming subscribers, bringing its total to 96.1 million for services including HBO Max and Discovery+. Losses for the streaming business also narrowed to $217 million for the period, "a $511 million year-over-year improvement."
Warner Bros. Discovery plans to launch a combined HBO Max and Discovery+ streaming service this spring.
Meanwhile, Paramount said last week Paramount+ hit 56 million subscribers in its most recent quarter. The company plans to increase the price of its streaming service when it combines Paramount+ and Showtime later this year. Paramount also said it was affected by the tough ad market.
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