That’s why you normally see the gross income when studios brag about how much money the next Avengers movie made, opposed to the net income. Each film is structured like a corporation intended to lose money. Within this structure are shell companies, existing primarily in name, designed to drain the film’s profits and redirect them to the studio. These companies manage various aspects, from advertising to distribution, and even general expenses like travel for studio executives. At its core, Hollywood Accounting involves inflating the expenses of a movie to such an extent that, on paper, the film appears to make little to no profit.
Business
What Prowse failed to realize however, was that Guiness’ deal included the merchandising wing of Lucasfilm, not just the Movie itself. This resulted in Prowse still not being paid to this day, whilst Alec Guiness’ estate continues to receive residuals. This practice has been going on for a long time, and certainly pretty much everyone in the industry must be aware of it, but at least the lawyers and agents that negotiate the contracts. They often make payouts based on profits, and there are a myriad of ways Hollywood can reduce profits. Writer Art Buchwald won $900,000 from Paramount for his work writing the story treatment that inspired the 1988 Eddie Murphy comedy “Coming to America.” The movie had made $288 million when Buchwald sued in 1990, but it still had not seen a net profit.
The Three Sets of Books
Wow, 11 months of release and no profit (in spite of huge box office numbers)? Well by August of 1980 after a number of industry accountants cried foul and demanded a recount, Fox changed its story and indicated that by that time the film had made $4 million in profit for the studio. Another look at that ledger shows $130 million allocated for advertising and publicity.
Fox Sports
- In some cases, if they can combine this into making it seem like an expense for a given film, all the better- two birds with one stone.
- This suit was finalized in the early ’80s before News Corporation purchased 20th Century Fox, before there was a Fox Network, a Fox News Channel or a Fox Sports Net.
- The California Superior Court heard Buchwald v. Paramount and reached a verdict in 1990, deciding in favor of Buchwald.
- When Lee raised the issue in court, the matter was quickly and quietly settled out of court.
The story was about a member of African royalty (planned to be played by Eddie Murphy) coming to the United States and his misadventures while attempting to fit in, including a stint in poverty. The screenplay went through many iterations with many writers and director John Landis was approached to direct, but the film went into development hell so Warner Bros. optioned the treatment. While not all of that settlement has been disclosed to the media, the suit itself does give us a bit of a look into why this creative accounting takes place. The arbitrator didn’t agree, noting similarly rated shows had streaming rights sometimes selling for in the hundreds of millions of dollars. And, thus, after all his tallying and tacking on a bit extra just for Fox being allegedly so unscrupulous, he ultimately doled out a $179 million ruling against Fox. After the story blew up, Paramount settled the matter out of court and offered Groom an undisclosed “seven figure contract” for the rights to the sequel to Forrest Gump.
Movie Accounting – How Hollywood Accounting Can Make a Box Office Hit Unprofitable
The film Spider-Man (2002) made more than $800 million in revenue, but the producers claim that it did not make any profit as defined in Lee’s contract, and Lee received nothing. The thing what is hollywood accounting is, these people don’t ever actually see any money from these shares. The reason net points are given so liberally is because they are, by all accounts, essentially meaningless.
Additionally, films are charged exorbitant amounts for advertising, publicity, and other expenses. This approach to hiding profits, rather than losses, is what sets Hollywood accounting apart. Art Buchwald received a settlement from Paramount Pictures after his lawsuit Buchwald v. Paramount (1990). The court found Paramount’s actions “unconscionable”, noting that it was impossible to believe that Eddie Murphy’s 1988 comedy Coming to America, which grossed $288 million, failed to make a profit, especially since the actual production costs were less than a tenth of that. Paramount settled for $900,000,[8] rather than have its accounting methods closely scrutinized. In 1992 Michael Uslan and Benjamin Melniker filed Batfilm Productions v. Warner Bros. in Los Angeles Superior Court.
Hollywood accounting is the practice of big studios of making successful movies into what looks like a financial failures on purpose and through questionable accounting tricks. The goal is to show no profit despite the movie actually being profitable, in order to not having to pay anyone who negotiated for a cut of profits. In the 1960s and 1970s, actors, producers, directors and even writers took part in the gross and net profits of hit movies. Warren Beatty, for example, shepherded the production of and played the lead role in “Bonnie and Clyde.” In addition to earning $200,000 upfront for his work, he also took 40 percent of gross profits. The movie was not expected to make much when the deal was struck, but it has since earned more than $150 million.
This suit was finalized in the early ’80s before News Corporation purchased 20th Century Fox, before there was a Fox Network, a Fox News Channel or a Fox Sports Net. By the time of Order of the Phoenix‘s 2007 release, Warner Bros. parent company owned half of the CW Network and all of HBO, Cartoon Network, CNN, TNT, TBS, HLN, Turner Classic Movies, Time Warner Cable, Warner Bros. Distributing Inc., Warner Home Video, DC Comics, Warner Interactive, Warner Bros. Or maybe the smug among you will smile and say that it’s clear that I, the writer, don’t understand this kind of accounting. That’s because such Hollywood Creative Accounting is designed to be confusing as well as impossible to figure out.