In the end, Hollywood Accounting is an oft mocked and derided element of film production that many in the industry would happily see die and be replaced by a fairer, more transparent system. However, this isn’t likely to happen unless someone can convince major studios to loosen the kung-fu death-grip they have on the throat of the industry. We can only hope that one day someone makes a movie about the whole thing that somehow fails to turn a profit despite grossing a billion dollars. One of the biggest benefits of all of these shenanigans is the studios not having to pay royalties to the various entities they’d otherwise be entitled to pay, as well as in some cases saving a lot of money on taxes, at least in the immediate. On this latter one, this might be done by shifting the ultimate profits into funding things that increases the overall value of the parent company itself.
Hollywood Creative Accounting, or How to Hide a Hit and Still Profit From It
Did Warner Bros. spend almost the equivalent to the film’s entire budget in order to market this surefire hit? Well, perhaps… but it’s more likely that Warner Bros. paid itself, its properties or other divisions of Time Warner for this marketing (or a large portion thereof). And once these easy things are taken into account, there is no surprise that we can find things like $57 million in “Interest” (albeit completely undefined interest) and $315 million in “Negative Cost and/ or Advance” lurking around that spreadsheet like hungry money pits. Well, it’s all thanks to a wonderful concept known colloquially as “Hollywood Accounting”, or more accurately “How to Lose Friends and Screw People”. For this reason, the smart actors in Hollywood will insist on getting a percentage of “gross points” in their contract, i.e. the money directly made before the studio profits are calculated. Groom was pretty outspoken about how Paramount was trying to weasel out of paying him–and eventually Paramount settled with him behind closed doors.
Movie Accounting – How Hollywood Accounting Can Make a Box Office Hit Unprofitable
In spite of the $790 million in profits, Warner Bros. claimed that amount was actually minus $167 million. Any percentage of a negative number is a negative number (even if Time Warner’s own cut was not so negative). Thus the film that earned $940 million at the international box office was actually a financial loss for the company of a whopping $167 million. That was one question that arose when an official Warner Bros. receipt for the film was leaked online showing how the costs were allocated. According to independent analysts, the whopping $212 million that Warner Bros. spent on “Distribution Fees” was actually paid back to itself (or, at least, one of the divisions of the same company) in order to help tip the scales and make the movie “lose” money… at least on paper. This means, if the studio is to be believed, they’d have been better off throwing the film in the trash after spending the $5 million for filming and producing the film, rather than earn their cut of that $370 million in ticket sales and all the revenue streams that came after.
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A good way to keep a movie out of profit is to keep going back and paying different departments for work ‘owed’, and delivering bonus’ upon bonus’. If you’ve worked on the film, and are ‘in on it’ (and willing to co-operate), if the film is successful there’s a good chance you’ll receive some kind of surprise ‘bonus’ (who’s real purpose is to stop the film having to commence net-point payouts). Studio Celador had to sue Disney over millions in claimed lost revenue over the TV series Who Wants to Be a Millionaire. Amazingly, the British firm won that suit against the House of Mouse. Don Johnson sued the Cox Media’s Rysher Entertainment for lost income over Nash Bridges and he won that one, too.
The main reason for this is how expenses and revenues are accounted for. In Hollywood, much of a film’s revenue is often reallocated to cover various expenses, like distribution fees, marketing costs, and overhead charges. These expenses can what is hollywood accounting be so high that they significantly reduce the reported profit of a movie, sometimes to the point of showing a loss. The costs are then charged out to, for example, CGI companies, script companies, companies owned by actors and directors.
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- Fox, for its part, pointed back to its financial reports that indicated that Alien was, at best, a low earner and at worst, a money loser and thus, did not warrant a sequel.
- Both fans and critics critically applauded the film, and it established Tom Hanks’ reputation.
- Alien opened on 91 screens and pulled in $3.5 million on its opening weekend.
- That’s where large box office revenues tend to cancel out the expenses.
Sure, printing and shipping movies does not constitute the only release cost of a film, but this example shows how quickly a film can pay for itself. Thus we are still looking at huge profits around 30 percent of which Brandywine was entitled to. Unlike as we have with Order of the Phoenix, we don’t have any ledger explaining just how Fox (allegedly) buried the profits from Alien but the question of “Why?
As a result of this, Tom Hanks’ most beloved film, Forrest Gump, was labeled a “successful failure.” Forrest Gump is one of the few films with a big box office success. Both fans and critics critically applauded the film, and it established Tom Hanks’ reputation. With a $55 million budget, the film had a phenomenal first week of release. As a result, the film grossed approximately $24 million in the United States.
According to the Marvel’s lawyers the gargantuan success somehow managed not to net any profits whatsoever, so Stan (The Man) and his company, Stan Lee Media were out of luck. Thus, Lee sued but found little luck in the courts thanks to Hollywood Creative Accounting. Since then, Stan Lee Media has sued Marvel more than once to attempt to obtain ownership of the many characters he co-created.