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Disney vs. MGM

Friday, July 17, 2009

Until 2008, the Disney-MGM Studios was a theme park marriage between Disney and The Metro-Goldwyn-Mayer Inc. studio (MGM) to create a theme park but about right at the opening of the theme park, there was trouble afoot as MGM sued Disney for being duped by Disney.  For years a legal battle ensued with suits and counter suits until finaly a resolution to the matter was announced.  It's something that's been settled for years now but was a focal point for the theme park industry as it pitted two heavy weights against each other, right after they both had agreed to work together.

In 1985, Disney came to MGM about using their films in a new theme park.  The idea sounded like a great idea to MGM, as it would provide lots of great publicity for some of their classic films in the Disney theme parks, where millions of visitors came annually. So MGM, lead by millionaire Kirk Kerkorian, signed the licensing agreement in 1985 and all seemed fine.  That is, until the Disney-MGM Studios opened on May 1st, 1989 and MGM felt they were mislead.  

In 1989, MGM filed a $100 million fraud suit against Disney, claiming that by operating a working studio at the Disney-MGM Studios.  MGM thought it was simply giving Disney license to use their attractions, not allow Disney to put their creations at a working studio, which would be direct competition.  "We thought we were licensing it to an attraction, a mock studio," a spokesman for the MGM studio said.

Not only did Disney vow to fight MGM in court, they counter-sued MGM, claiming that an upcoming project by MGM, a hotel and theme park in Las Vegas, was in violation of the same licensing agreement both companies agreed to in 1985.  According to Disney, MGM Studios "conspired to violate Disney's right to exclusive use of the name MGM at theme parks worldwide and would harm its reputation by building a theme park in Las Vegas."  This also came at the time that Disney was working on adding a second theme park in France as part of it's Eurodisney park to be based in part on the Disney-MGM Studios.  By MGM building a theme park in Las Vegas, it was directly competing with Disney in something their agreement stipulated was not to happen.  MGM's plans for their desert resort weren't small by any means.  It called for a 5,014-room hotel on a 112-acre site and includes a 170,000-square-foot casino, a sports arena and a 33-acre theme park with "thrill and water rides."  The entire project was being financed by the head of MGM, Kirk Kerkorian.

The suits against each company dragged on for years and unfortunately for MGM, things only got worse.  In 1990, Kerkorian sold MGM Studios for $1.36 billion to Giancarlo Paretti, an Italian financier,  who borrowed money from the French bank Credit Lyonnais. Paretti later defaulted on the loans and ownership of the Studios fell to the bank, which under Mr. Kerkorian's ownership was stripped of many assets.

Finally, on October 24, 1992, Superior Court Judge Curtis Rappe came to the conclusion that the Walt Disney Company could use the MGM name and lion logo, at its Disney-MGM Studios park and other theme parks.  The judge also ruled that the billion dollar MGM Grand Hotel and Theme Park under construction in Las Vegas could also use the MGM name and a stylized version of the logo as long as its theme park is not based on the movies like Disney's.

In the end, the perception was that Disney had "won" and for MGM, it was a major defeat.  While fighting this legal matter and as a result of cutbacks and management turmoil, MGM struggled to regain it's footing as a major player in Hollywood. Once a prominent maker of television series, the company quit network production to soley produce films.