‘South Park’ Streaming Rights Standoff: Warner Bros. Discovery Wins Ruling Clearing Way for Trial

Paramount must face some claims in a lawsuit from Warner Bros. Discovery accusing it of setting in motion a breach of a $500 million licensing deal for the exclusive rights to South Park.

After a pricey bidding war for new episodes of the massively popular show, Justice Margaret A. Chan of State Supreme Court in Manhattan said that Paramount may have “actively convinced” the joint venture it operates with the show’s creators to breach its contract with WBD, which wasn’t offered the opportunity to stream episodes labeled as “specials” that was considered outside the scope of the deal. Paramount may have “unjustly benefitted,” Chan said in a ruling issued on Tuesday, by getting to carry the content and “reap any advertisers, subscribers, and other profits resulting from streaming those episodes, all without going through the same bidding process as everyone else.”

The ruling opens the door to discovery on Paramount’s understanding of its deal with WBD and whether the company took fraudulent measures to take advantage of ambiguity in the contract. Evidence that the company may have to turn over could include viewership data, as well as subscriber and profitability metrics, since WBD could elect to seek disgorgement of profits.

The legal battle, initiated by WBD in 2023, revolves around a lucrative licensing deal for the exclusive streaming rights to the series library and 30 new episodes across seasons 24-26. WBD claimed that Paramount and South Park Digital Studios — controlled in part by creators Matt Stone and Trey Parker — conspired to effectively double-deal on content allegedly contemplated in the agreement by diverting series specials to Paramount+ to prop up its then-fledgling streaming platform.

The deal didn’t specify how many episodes would be delivered to WBD as part of the agreement or how to decide that content was part of seasons 24-26. There were plans to draft a full contract to iron out the details, but SPDS allegedly convinced WBD not to. WBD has maintained that it was told that three new seasons of 10 episodes each would be made. Paramount, which didn’t respond to requests for comment, and SPDS denied those allegations.

In the summary judgment ruling, the court stressed that WBD believed it was bidding for the exclusive right to stream all the South Park content coming out between 2019 and 2025. It found the company was “blind-sided” when SPDS created episodes it claimed wasn’t within seasons 24-26. The only content that was announced at the time the agreement was struck, the court said, were for those seasons, each with ten episodes.

“Taking advantage of the contract’s ambiguity,” SPDS decided not to make 30 episodes across the three newest seasons and instead made specials that it “unilaterally and arbitrarily” decided were not contemplated in the deal, wrote Chan, who noted that Paramount reaped the benefits of the decision.

“Of concern also is the back and forth by SPDS in fitting the COVID episodes into the final episode count for Season 24,” the ruling added. This refers to SPDS initially telling WBD that the specials, which were made after production of season 24 was suspended due to the pandemic, that the episodes were not part of the season but would be delivered as part of their deal regardless. Over a year later, SPDS back-tracked and decided that the episodes were part of the newest season, with the caveat that they’d count as four of the ten episodes. Two months later, it changed its mind again and decided that the specials would be the only episodes for the season.

“There is an ambiguous contract that is silent on vital details,” Chan wrote, such as how to decide what is considered as part of seasons 24-26 and whether WBD can pursue disgorgement of profits against Paramount, a third party to the deal. She added, “Paramount/MTV didn’t receive third-party fees in the abstract” but instead profited from subscribers who wanted to watch the specials. That money, the judge said, would’ve gone to WBD if it got to carry the episodes on Max.

Other breaches of the contract include SPDS slashing the episode count for seasons 25 and 26 from ten to six and the joint venture contracting with Paramount and MTV to produce four additional 50-minute long specials exclusively for streaming on Paramount+. SPDS considered that content not part of its deal with WBD, which wasn’t given the option to stream them. At the same time, it continued to assure WBD that forthcoming episodes would be delivered, according to the complaint.

The ruling advanced claims of unjust enrichment and tortious interference with contract. After discovery, WBD may have to choose between which of the two claims it will pursue if the court decides they overlap with each other. It continues to pursue a breach of contract claim.

Earlier in the legal battle, the court dismissed fair dealing and consumer protection claims. It followed Paramount dropping its countersuit against WBD over allegedly unpaid licensing fees.