Rupert Murdoch's 21st Century Fox has been ordered to pay $179 million in damages for engaging in fraud with the creators and actors of TV series "Bones," according to an arbitration ruling made public Wednesday.
The ruling against Fox, one of the largest ever in the entertainment industry, illustrates the messiness and potential for fraud when media companies own stakes in both content production and distribution.
The arbiter, Peter Lichtman, ruled that "Bones" producers and actors were systematically cut out of profit sharing from licensing fees by Fox executives who engaged in "self-dealing. This allowed Fox to boost the value of Hulu with "Bones" content without paying market rate. Fox owned 33 percent of Hulu at the time.
The Hollywood Reporter detailed the various rulings against Fox earlier today.
"What we have exposed in this case is going to profoundly change the way Hollywood does business for many years to come," said John Berlinski, an attorney at Kasowitz Benson Torres representing David Boreanaz and Emily Deschanel, who starred in "Bones."
Fox plans to challenge the ruling in court, responding that "the ruling by this private arbitrator is categorically wrong on the merits and exceeded his arbitration powers. Fox will not allow this flagrant injustice, riddled with errors and gratuitous character attacks, to stand."
Whether or not Fox successfully challenges the arbiter's definition of self-dealing, the decision highlights potential pitfalls of vertical integration among large media companies -- a phenomenon that's dominated the industry over the last 12 months.