film industry Why does “Hollywood Accounting” still work? Movies & TV Stack Exchange
That $58 billion statistic comes from a 2007 report written by Stephen Siwek of the Institute for Policy Innovation. In case you’ve never heard of him or the Institute, it’s a think tank backed by Dick Armey. The former right-wing Texas congressman who was a longtime liberal bogeyman and big-business advocate — hardly the best source of objectivity.
- Why the gap between the MPAA’s $6.1 billion and Siwek’s $20.5 billion?
- After spending a few years learning the ins and outs of the luxury clothing world, the young entrepreneur soon started his own business.
- Over the years, while the allure of profit-sharing increased, the actual profit shared decreased.
In a blistering intro, TSG’s attorney John Berlinski opened with discussing “Hollywood Accounting” and arguing that it’s now a common practice employed by studios to “cheat” profit participants out of money. There are numerous examples of blockbuster films that, according to Hollywood accounting, are still unprofitable. Films like “The Lord of the Rings” trilogy, the original “Batman,” and “My Big Fat Greek Wedding” are all said to be in the red despite their massive box office success. Studios craft tales of non-existent costs, ensuring all profits are funneled back to them. Despite challenges to this system, most net profit participants never see any profits. How can a film like “Return of the Jedi,” which ranks among the top 20 biggest blockbusters of all time, earning over $500 million on a $32 million budget, be deemed unprofitable?
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He was promised 3% of the net profits (on top of a flat $350k) of the biggest film of that year–Forrest Gump. Since Forrest Gump “somehow” (you now know how) made “no money,” Groom didn’t see a penny of that 3%. Now anyone with a brain, including Groom, could see that he was getting the short end of the stick; Forrest Gump’s $700 million at the box office in 1995 would be over $1.25 billion today. A production accountant could eventually go to work at a studio as a finance executive, who is responsible for several projects in production simultaneously.
The executives oversee the key production accountants, making sure they are managing the finances of their shows properly. This is a leadership position that oversees the first-, second- and third-assistant accountants. Over the years, the money TSG received from its investments “decreased dramatically” and the company launched an independent audit to investigate the financial records. Last year, the website Techdirt revealed a balance sheet from “Harry Potter and the Order of the Phoenix”, which, under Hollywood accounting, ended up with a $167 million “loss” even though it’s one of the top grossing films of the last decade. Warner Bros. charged about $350 million in distribution, advertising, and interest fees to this external corporation.
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And then how does that compare to the business that we’re leaving behind that we’re transitioning away from — linear, because there is a long-running transition that’s taking place from linear to https://accounting-services.net/bookkeeping-hollywood/ streaming. Why the gap between the MPAA’s $6.1 billion and Siwek’s $20.5 billion? Because the latter also factors in estimated losses from revenue that fails to circulate through the economy.
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John Harrison, media-entertainment chief at accounting firm EY, also shares his outlook on cord-cutting and his expectations for studios’ next moves as they target streaming profitability. Distribution fees (think the marketing for a film) can send upwards 30% of what a film makes back to the studio by reporting outrageous marketing costs. Few studios ever give an accurate account of the negative cost of their films — that is, how much they cost to make, before prints and advertising are added to the mix. On the rare occasions they do, they stay mum about their marketing outlay.
Why does “Hollywood Accounting” still work?
In the early 1980s, Buchwald, a humorist and Pulitzer Prize-winning columnist, wrote a two-and-a-half-page movie treatment about an African prince who travels to the U.S. He took the project, It’s a Crude, Crude World, to producer Alain Bernheim, who in turn sold it to Jeffrey Katzenberg, then an executive with Paramount. All this is called “Hollywood accounting,” and it’s barely more transparent now than it was when the industry was founded.
The course aims to prepare entry-level workers from underserved communities for careers in production. Often these roles are filled by those fresh out of high school or college who have a love for the entertainment industry, the professionals said. “I get a call every day [asking] ‘Can you help me find a production accountant? TSG on Tuesday sued 20th Century Studios for breach of contract and Disney for inducing that breach. The financier says it has invested more than $3.3 billion into well over 100 films, which also include Bohemian Rhapsody, Deadpool, Dawn of the Planet of the Apes, The Martian, The Grand Budapest Hotel and The Banshees of Inisherin. Not everyone in Hollywood supports the local accounting practices, however.
Hollywood Accounting
Soon after, Paramount began to develop its own, similarly themed film, with Eddie Murphy attached to star. When Coming to America was released in 1988, five years after Buchwald sold his treatment, his name was nowhere near it. Instead, a “story by” credit went to Murphy, who received the grand sum of $400,000 for his idea — one of those murky numbers that is never mentioned when you hear what a star is getting paid. Anousha Sakoui is a former entertainment industry writer for the Los Angeles Times who covered topics such as labor and litigation in Hollywood. She has been a journalist for over 20 years, having joined The Times in 2019 and reported for the Financial Times, Wall Street Journal and Dow Jones Newswires, Bloomberg News and Businessweek Magazine.
2023-07-03
