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Hollywood Accounting — How Harry Potter Loses Money

Soulskill posted more than 4 years ago | from the hypocrisy-in-action dept.

Businesses 447

An anonymous reader writes "Techdirt has the details on how it was possible for the last Harry Potter movie to lose $167 million while taking in nearly $1 billion in revenue. If you ever wanted to see 'Hollywood Accounting' in action, take a look. The article also notes two recent court decisions that may raise questions about Hollywood's ability to continue with these kinds of tricks. For example, the producers of 'Who Wants To Be A Millionaire' now have to pay $270 million for its attempt to get around paying a partner through similar tricks."

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Peter Jackson (5, Informative)

jjohnson (62583) | more than 4 years ago | (#32851962)

Peter Jackson had to sue New Line Cinema to get paid for LotR. New Line claimed they lost money on the trilogy.

Re:Peter Jackson (5, Insightful)

Monkeedude1212 (1560403) | more than 4 years ago | (#32852000)

They very well could have - but thats not a director's fault.

I expect to be paid for writing an application or website if I'm contracted to do it, regardless if its used or not.

Re:Peter Jackson (5, Funny)

Anonymous Coward | more than 4 years ago | (#32852120)

Jackson's contract is for a cut. What's crazy is, in hollywood everyone knows to ask for a cut of the *gross*, not net. I can buy the idea of magic rings, elves, dwarves, hobbits, dragons, ents, wizards, and so forth, but a net reported profit on a Hollywood movie? That's just fantasy.

Re:Peter Jackson (5, Insightful)

nedlohs (1335013) | more than 4 years ago | (#32852168)

That's because you contract doesn't say "will be paid X% of gross income", whereas Peter Jackson's did.

And of course he did get paid, he just got paid less than he should have because New Line sold the rights to sister companies for below market value.

Re:Peter Jackson (0)

Anonymous Coward | more than 4 years ago | (#32852284)

That's because you contract doesn't say "will be paid X% of gross income", whereas Peter Jackson's did.

And of course he did get paid, he just got paid less than he should have because New Line sold the rights to sister companies for below market value.

Not only that, but New Line had related companies charge themselves much more than market value for services rendered.

Re:Peter Jackson (1)

nedlohs (1335013) | more than 4 years ago | (#32852384)

That wouldn't matter, since that just lowers the net, and he had a cut of gross. Though I'm sure other people had a cut of net, and maybe he had a cut of net as well in the mix.

Re:Peter Jackson (5, Interesting)

eldavojohn (898314) | more than 4 years ago | (#32852042)

Peter Jackson had to sue New Line Cinema to get paid for LotR. New Line claimed they lost money on the trilogy.

Indeed [nytimes.com] , on top of that I recall the Tolkein Trust [slashdot.org] suing New Line for hundreds of millions after New Line only paid them $62,000 for the rights to the movies. New Line apparently claimed that was 7.5 percent of the gross of the films. Isn't that the standard these days? (as the article notes)

Re:Peter Jackson (5, Interesting)

MightyMartian (840721) | more than 4 years ago | (#32852298)

It's been the standard for years, and it's been one of the things that really pisses me off, that while the MPAA is going after movie pirates claiming theft, their members have been stealing money from investors and the tax man for decades. Even where the contract stipulates a percentage of gross, dirty tricks have been used to screw over directors, actors and other investors. The only reason most of Hollywood's accountants and producers aren't rotting in jail for embezzlement is because the movie industry has been this walled garden for many decades, seen as to valuable to peel back the layers to discover the crooks running the show.

In the past, what stopped folks from getting too uppety was buy offs. Most folks are pretty pragmatic, and will take 25% or 50% of what they're owed rather than going through the long, arduous and expensive process of actually moving a lawsuit all the way to the courtroom. I don't know whether the studios don't have as much money to buy off the people they've screwed, or whether some people, like Don Johnson, who just won $20 million bucks that he had been scammed out of over a similar deal for the Nash Bridges TV series are just saying "enough is enough", but if this becomes the rule, the MPAA's members are going to have bigger things to worry about than the Pirate Bay.

Re:Peter Jackson (4, Interesting)

OnePumpChump (1560417) | more than 4 years ago | (#32852454)

"In the past, what stopped folks from getting too uppety was buy offs. Most folks are pretty pragmatic, and will take 25% or 50% of what they're owed rather than going through the long, arduous and expensive process of actually moving a lawsuit all the way to the courtroom. "

Yeah, they've just delved too greedily and too deep. Someone might settle for half of what they're owed if the amount is tens or hundreds of thousands of dollars, but for tens or hundreds of millions of dollars, that years-long court battle might be worth it.

Re:Peter Jackson (0)

sconeu (64226) | more than 4 years ago | (#32852338)

$62,000 was 7.5 of the Gross????

That means the trilogy only took in $826,000?

Remember, Gross means box office intake, before expenses.

No it doesn't (4, Insightful)

geekoid (135745) | more than 4 years ago | (#32852442)

In the movie industry, gross profits is customarily defined as the profits remaining after production and distribution expenses are subtracted from revenues.

The more you know.

Re:Peter Jackson (5, Funny)

God'sDuck (837829) | more than 4 years ago | (#32852054)

Wait...if they claim they are losing money on every copy they sell, aren't the pirates saving them money?

Re:Peter Jackson (2, Insightful)

blair1q (305137) | more than 4 years ago | (#32852104)

Saving, no. Making, yes.

Re:Peter Jackson (5, Funny)

mysidia (191772) | more than 4 years ago | (#32852280)

That's why piracy has GOT to be stopped immediately. It foils the movie makers' tax dodge (and revenue sharing dodge)

Let's see them bring THAT justification to congress, on why it is imperative for the economy to make tougher anti-pirate laws

Not a new trick (3, Informative)

Drakkenmensch (1255800) | more than 4 years ago | (#32851966)

The producers of Forrest Gump used the same math to claim a loss on that one too.

Re:Not a new trick (4, Funny)

Yvan256 (722131) | more than 4 years ago | (#32852070)

Shrimps are expensive.

Re:Not a new trick (5, Funny)

blair1q (305137) | more than 4 years ago | (#32852146)

Life is like a box of chocolates...where someone has eaten the middle out of every one.

Re:Not a new trick (5, Insightful)

copponex (13876) | more than 4 years ago | (#32852228)

Bubba knew all there was to know about the movie business...

"There's dumb fucks, stupid fucks, lying fucks, stealing fucks, lawyer fucks, producer fucks, and they're all trying to fuck you out of your ideas and passion. And that's... that's about it."

Re:Not a new trick (2, Informative)

Midnight's Shadow (1517137) | more than 4 years ago | (#32852188)

And Star Wars (4-6) - the guy who was actually in Darth Vader's suite never got paid for the role.

Re:Not a new trick (1, Troll)

91degrees (207121) | more than 4 years ago | (#32852230)

He probably got paid. The contract would have been for basic rate + royalties. He just didn't get royalties.

Re:Not a new trick (1, Troll)

schon (31600) | more than 4 years ago | (#32852268)

the guy who was actually in Darth Vader's suite never got paid

I thought movies used trailers, not hotel rooms.

and wouldn't Darth Vader be in Darth Vader's suite? Or are you talking about his bodyguard or something? (I would think it would be the actor's responsibility to pay his staff.)

And if you're talking about the actor (or maybe the guy in the suit), instead of his entourage, why would you talk about where he stayed? Why not mention him specifically?

Re:Not a new trick (1)

nizo (81281) | more than 4 years ago | (#32852388)

I thought movies used trailers, not hotel rooms.

Yes, because watching a hotel room for three minutes doesn't bring in moviegoers.

Re:Not a new trick (2, Informative)

Midnight's Shadow (1517137) | more than 4 years ago | (#32852420)

Yes that was a bad typo. So lets try this again to appease all the idiots who can't figure it out.

David Prowse the person who was the on screen presence of Darth Vader in A new Hope, The Empire Strikes Back and Return of the Jedi never got his full compensation for his part in the movies due to the same accounting tricks mentioned here.

Better?

Re:Not a new trick (1)

MalHavoc (590724) | more than 4 years ago | (#32852412)

and actually, yes, he did. He was paid $12,000 for his role in the first movie of the original trilogy. It was the latter two movies [timesonline.co.uk] that he was screwed over on. Still, your point is made.

Re:Not a new trick (0)

Anonymous Coward | more than 4 years ago | (#32852548)

And Star Wars (4-6) - the guy who was actually in Darth Vader's suite never got paid for the role.

You mean Darth Vader's SUIT.

Re:Not a new trick (5, Funny)

damnfuct (861910) | more than 4 years ago | (#32852630)

And Star Wars (4-6) - the guy who was actually in Darth Vader's suite never got paid for the role.

I mean, why should he? That freeloading bas**rd was just hanging around Vader's suite? Being such a key figure in the Empire, he's probably got his suite outfitted with all sorts of luxuries.
note: suite and not suit

Re:Not a new trick (4, Insightful)

zoocey (1285472) | more than 4 years ago | (#32852438)

and it bit them in the ass. They successfully screwed over the author of the book the movie was based on. Rumor has it that they wanted to film a sequel, but said author refused to allow it. As clearly there is no point in filming a sequel to an unprofitable film.

Re:Not a new trick (1)

notommy (1793412) | more than 4 years ago | (#32852612)

I would like to point out that this sort of accounting is not a new trick anywhere, not just in hollywood. This happens all the time, where a company would pay its sub fees above the fair market value of the service provided in order to create losses. The problem here is not the fact that they paid themselves, but paid too much.

Ideally, The terms for these types of related party transactions should be set out in the contract. Not bickered over after in courts. Especially since this has been going on for ages and ages.

The Terrible Economy Threatens Even the WB (5, Funny)

SeriouslyNoClue (1842116) | more than 4 years ago | (#32851982)

It's the people below the poverty line who don't work and aren't productive enough that are to blame for Hollywood's plight. Not the rich accountants and brilliant producers that carefully select only the most qualifying of movies. It is obviously getting to the point where our culturual heritage -- the heritage of Americans -- in film needs to be conserved by the government. Which is why movies like Harry Potter should be able to apply for and be granted a government bailout when they finish in the red. It's obvious that the economy has hit them hard and they need a little help. With the file sharers and ripoff dupes in the world taking away their copyright, this is the only way we can help them out until a solid and sane prosecution framework like ACTA is approved for the whole world.

My thoughts and prayers are with Hollywood and the families of everyone involved with such quality original films.

Re:The Terrible Economy Threatens Even the WB (0, Flamebait)

hackerman (1649305) | more than 4 years ago | (#32852162)

I see what you did there

Read Roger Corman's book. (4, Insightful)

Animats (122034) | more than 4 years ago | (#32851998)

Roger Corman had some problems like that with studios back in the 1970s, and he won, too. Read his "How I Made A Hundred Movies in Hollywood and Never Lost a Dime".

Not Hollywood alone (2, Insightful)

rjejr (921275) | more than 4 years ago | (#32852008)

Don't most major league sports teams do this as well? And major corporations in a bid to avoid taxes? And most (US) individuals in a bid to pay less in taxes? I'm not saying it's right or wrong only that it just is and is practically universal.

Re:Not Hollywood alone (5, Informative)

phantomfive (622387) | more than 4 years ago | (#32852196)

No, this trick won't work for tax purposes. The IRS isn't that dumb (and when they are dumb it is never in your favor). The reason they are able to get away with it from a tax perspective is they actually do pay taxes on it.

What they are doing is setting up a separate corporation for each movie. The corporation is the one that makes contracts with the actors/directors/whoever. Then the studio charges the corporation a (bankrupting, in this case) amount for distributing the movie. Much more than actually distributing the movie cost, but of course the corporation pays it, and ends up making no profit on the movie. The studio still has to pay taxes.

Now, as an average person, you can try to do that, and set up your own personal corporation so you can deduct 'business expenses,' but the IRS will still make you pay a full amount. The studios also still have to pay the full amount in taxes, just not to other people (unless other people sue).

Studios will still continue to do this kind of thing, because while on highly profitable movies, juries might not favor them, on less profitable movies it will be easier to get away with. Obviously it is fraud, but I don't know if it is close enough to the legal definition to press legal charges.

Re:Not Hollywood alone (4, Insightful)

pavera (320634) | more than 4 years ago | (#32852262)

Hollywood is the only party (and the music industry) that screws over the people actually producing stuff by pulling this trick. Sure corps do it all the time, but they pay employees first, and generally employee pay is not tied to "net profits" of the company. Same goes for sports teams. Lebron James paycheck is not dependent on the team he plays for making money, its dependent on how well he and his agent negotiate his contract.

In hollywood and the music industry, not only do they get to dodge taxes with this trick, they also get to dodge paying their employees cause most of the contracts in LA are of a "% of net profits" mold... Thus, not only are they screwing over the government (why again do they have so much sway in DC??!!??) but they screw over regular working people and of course, high paid actors and musicians as well...

Hollywood is different (5, Interesting)

swb (14022) | more than 4 years ago | (#32852400)

Tax avoidance through expense maximization and income minimization is one thing; there are rules and if you break them you get penalized, up to an including prison.

In this case, though, the rules (GAAP) are much more flexible and in some cases they can write their own rules (contract language, business procedures) and the punishment at worst might be a fraud conviction but generally the punishment is getting sued and that has a high barrier to success, let alone initiation.

It also helps that the "product" of much of Hollywood doesn't have the kind of supply-and-product chain that manufacturing or other industry has. It has a lot of soft costs and a lot of human costs that can silently and flexibly siphon money from successful projects (consulting fees, personal services (AKA "hookers and blow"), promotional costs, legal fees).

Re:Not Hollywood alone (1)

Hatta (162192) | more than 4 years ago | (#32852512)

And all of this is nothing compared to Washington accounting.

Forest Gump (5, Interesting)

Bill_the_Engineer (772575) | more than 4 years ago | (#32852010)

This is a very old trick, and I can't understand why people still fall for it.

Winston Groom had to learn the hard way when his deal involved a percentage of the net profits from Forrest Gump. Unfortunately for Winston, Hollywood accounting always makes sure there isn't any net profits.

This is why the big actors and producers always ask for a percentage of the gross revenue.

Re:Forest Gump (1)

Shimbo (100005) | more than 4 years ago | (#32852108)

This is why the big actors and producers always ask for a percentage of the gross revenue.

Hence the saying, "If Yoda is so wise, why didn't he hold out for a percentage of the gross like Obi-Wan?"

Re:Forest Gump (3, Informative)

nedlohs (1335013) | more than 4 years ago | (#32852182)

Gross doesn't cut it always either, see Peter Jackson and Lord of the Rings.

Re:Forest Gump (3, Informative)

sconeu (64226) | more than 4 years ago | (#32852372)

Predates Forrest Gump. See Buchwald v. Paramount [wikipedia.org] , regarding "Coming to America".

To Hollywood (0)

Anonymous Coward | more than 4 years ago | (#32852026)

Stop wasting millions in special effects, stop wasting millions for known actors. Get good actors, a good script and non-crappy decors and you can make money.

Get out of your California bubble once in a while. See how the rest of the world lives. You are disconnected from reality. Take a vacation from your little fairytale world. Travel outside of the USA and change your mind once in a while.

Re:To Hollywood (1)

Jeng (926980) | more than 4 years ago | (#32852134)

Hey, I want them to continue to make special effect heavy movies, and if I wanted reality I would watch documentaries.

They are making money hand over fist, they just claim to not make any profits when they are so that they won't have to pay people what they are owed.

Re:To Hollywood (1)

eugene ts wong (231154) | more than 4 years ago | (#32852244)

That's exactly what every corporation does. The execs get paid first, and then whatever is left can be used to pay the little employees. The government will gladly tax its own people to ensure that the system stays that way.

Re:To Hollywood (0)

Anonymous Coward | more than 4 years ago | (#32852476)

You don't need special effects movies to get away from documentaries. Gattaca is a very good example. It's not low-budget but they didn't spend millions for special effects either. Movies are supposed to be stories about people or events, not "woah did you see that thing blew up" lowest-denominator crap.

"It's okay for us to be dishonest..... (5, Insightful)

commodore64_love (1445365) | more than 4 years ago | (#32852030)

".....and not pay our actors, writers, staff their share of the profit-sharing contract, but if you are dishonest and download a DVD, then you'll get the equivalent of a life sentence in fines! Seems perfectly fair to us." - Motion Picture Association of America (MPAA) aka megacorp tyrants

Re:"It's okay for us to be dishonest..... (1, Interesting)

commodore64_love (1445365) | more than 4 years ago | (#32852084)

I call this the "pull it out of your ass" expense. We have no idea where this number came from, and it's just large enough to wipe-out the profit. How convenient.

INVESTMENT
Negative Costs and Advance - $315 billion

And why is the "interest" placed under expense? I've always thought of interest as income... very very odd accounting these Hollywood types have. "Arrogance and stupidity in the same package - how efficient of you."

Re:"It's okay for us to be dishonest..... (1)

M8e (1008767) | more than 4 years ago | (#32852370)

And why is the "interest" placed under expense? I've always thought of interest as income...

Ones mans income is another ones... outcome. You get interest on your saved money but you pay interest on your mortgage loan.

Re:"It's okay for us to be dishonest..... (0)

Anonymous Coward | more than 4 years ago | (#32852392)

and generally hollywood studios have to borrow money to make a movie, not lend it out....

Re:"It's okay for us to be dishonest..... (1)

Anne_Nonymous (313852) | more than 4 years ago | (#32852376)

Under FASB 666, you're allowed to amortize profits over the expected life of the universe under an account called Not Paying Investors and Actors Carryforwards.

Re:"It's okay for us to be dishonest..... (1)

zehaeva (1136559) | more than 4 years ago | (#32852472)

Off topic but I love the B5 quote. ~Z

Re:"It's okay for us to be dishonest..... (1)

iluvcapra (782887) | more than 4 years ago | (#32852508)

And why is the "interest" placed under expense?

Warner Bros. nominally borrowed money to pay for the production of the film, thus they pay interest on the notes they took out to fund the production, and those interest payments are counted against the total negative cost of the production. The borrowed the money at a high rate of interest, probably from an organization that isn't at arms'-length, like her parent, AOL Time Warner. That's how they keep the film unprofitable for tax purposes, but profits still can move to the parent under a more favorable tax regime. People should use the most favorable tax regime possible for their work, yes?

Re:"It's okay for us to be dishonest..... (4, Informative)

iluvcapra (782887) | more than 4 years ago | (#32852416)

Without debating the merits of pirating copyright material, I'd point out that the people who sign on the dotted line for "net" deals know exactly what they're getting, which is nothing -- writers, actors, directors and "staff" (of which I guess I'm one) sign their contracts with the advice of a lawyer and a manager, and all of these people know exactly what "defined net" is, and how it's defined is completely clear in the contract. We should respect contracts, right? I can assure you whoever is complaining about their deal in TFA isn't J.K. Rowling, she's getting gross points.

The only revenue sharing deals that ever pay off are "first-dollar gross" or "dollar breakeven" deals, where the money directly from the box office is split. Net deals have always been a fantasy -- it was true when Art Buckwald sued Paramount [wikipedia.org] over to Coming to America in 1990 and it's still true now. In this particular case of Harry Potter, what WB appears to have done is borrowed the money to make Order of the Phoenix at a high rate of interest, and is paying off its note so slowly that the negative cost [wikipedia.org] of the film keeps going up relative to the revenue. What isn't mentioned is that Warner Bros. probably borrowed the money from AOL Time-Warner, it's parent, in the first place. :)

Re:"It's okay for us to be dishonest..... (1)

bunratty (545641) | more than 4 years ago | (#32852436)

Yeah, I buy that argument. I installed a splitter to watch my neighbor's cable TV, 'cause their friends bully my kid. Seems perfectly fair to me!

Re:"It's okay for us to be dishonest..... (2)

ground.zero.612 (1563557) | more than 4 years ago | (#32852578)

Hey Mr. Commodore, I agree with your sarcasm 100%. As I also appreciate your point of view; I am wondering what your answer to the following questions would be:

At which point is it socially acceptable to take up arms and execute said tyrants? Or perhaps even just to take up arms and mobilize citizens with the intent to do so?

I'm desperately trying to find a legitimate, reasonable, logical answer to this question. Mainly because I see no reason to defend the right to bear arms unless we actually exercise it when we need to.

I own many firearms. I feel my leaders are tyrants. I want desperately to remove them from power, and to simultaneously put the fear of death into the hearts of other would be tyrants. Honestly, I'm just scared to be the only person with the testicular fortitude to actually bear arms against these people I personally consider tyrants.

Re:"It's okay for us to be dishonest..... (1)

DaveV1.0 (203135) | more than 4 years ago | (#32852604)

In reality, no it is not correct. But, just because they do something wrong, you are not granted a license to do something wrong to them. Two wrongs do not make a right.

Feh. (5, Insightful)

Pojut (1027544) | more than 4 years ago | (#32852036)

I absolutely adore the world of film, but holy fuck do I hate Hollywood.

MPAA's Piracy Statistics (5, Funny)

Darkness404 (1287218) | more than 4 years ago | (#32852066)

You know, if they can make such a wildly successful film as Harry Potter appear to lose money, then suddenly all of the MPAA's statistics about piracy make sense!

Re:MPAA's Piracy Statistics (1)

blair1q (305137) | more than 4 years ago | (#32852114)

As does their logic about images of people making love being bad for kids and images of violence being good for them.

Re:MPAA's Piracy Statistics (4, Insightful)

nizo (81281) | more than 4 years ago | (#32852448)

Actually it would be awesome if it was legal to download copies of movies that didn't make money anyway; maybe that would solve this problem?

That's gross! (1)

Itninja (937614) | more than 4 years ago | (#32852076)

This magical accounting is why more and more bankable stars are demanding x% of the gross instead if just wanting part of the profits.

Babylon 5 (4, Informative)

Y-Crate (540566) | more than 4 years ago | (#32852078)

JMS Posted: [google.com]

The show, all in, cost about $110 million to make. Each year of its original run, we know it showed a profit because they TOLD us so. And in one case, they actually showed us the figures. It's now been on the air worldwide for ten years. There's been merchandise, syndication, cable, books, you name it. The DVDs grossed roughly half a BILLION dollars (and that was just after they put out S5, without all of the S5 sales in). So what does my last profit statement say? We're $80 million in the red. Basically, by the terms of my contract, if a set on a WB movie burns down in Botswana, they can charge it against B5's profits.

Re:Babylon 5 (2, Interesting)

AnonymousClown (1788472) | more than 4 years ago | (#32852260)

Even if they didn't tell them so, the fact that they kept the show in production is enough reason to believe they're making money on it.

The other thing is, if they're losing money and reporting profits to shareholders, then how in the World are their books matching? Wouldn't that be considered fraud or at least a violation of SEC rules? What about GAAP and FASB rules? Or are there exceptions for Hollywood and Government?

Re:Babylon 5 (4, Informative)

kidgenius (704962) | more than 4 years ago | (#32852382)

See, the head company makes money, but your contract is with the smaller company that was created. So in this case, you work for Babylon 5 Incorporated. Babylon 5 Inc lost money, tons of it, but they aren't publicly traded or owned. This smaller company is wholly owned by Warner, Fox, etc., who charge the Babylon 5 LLC tons of money for the show. Things like loans, distribution fees, advertising, etc. Warner then gets that money and reports that on their books to their shareholders, which are open, and everything works out quite nicely.

Re:Babylon 5 (2, Informative)

Anonymous Coward | more than 4 years ago | (#32852444)

The books do match.

Imagine Media Co starts 3 projects: A, B and C. All are given 100 million and complete on budget. Project A has contractors which are compensated according to net revenue. Project B has contractors which are compensated according to gross revenue. Project C has entirely fixed costs.

In order to avoid any payment on project A, the company can simply assign losses from Project C to Project A until Project A shows a loss. GAAP cannot prevent this.

In order to avoid any payment on project B, more elaborate measures must be taken but it can be done(directing revenues to Project D or giving Project B to a different entity).

Re:Babylon 5 (2, Insightful)

commodore64_love (1445365) | more than 4 years ago | (#32852320)

I'm surprised the people like JMS, Ronald Moore, Ira Behr, and others don't rally together and sue these companies. Or maybe complain to the IRS, and let the IRS open an audit.

Re:Babylon 5 (2, Insightful)

Austerity Empowers (669817) | more than 4 years ago | (#32852424)

You have to be careful about biting the hand that feeds you, even if it repeatedly punches you in the face while doing so.

Re:Babylon 5 (0)

Anonymous Coward | more than 4 years ago | (#32852616)

But then again, I knew that was the situation going in...I saw the writing on the wall (and the contract) from the git-go. I didn't do this to build an empire, I wanted to tell this story...and that's worth more than anything else.

Doesn't mean I can't tweak 'em about it, though.

Re:Babylon 5 (4, Insightful)

cliffiecee (136220) | more than 4 years ago | (#32852470)

I like his last sentence best:

But then again, I knew that was the situation going in...I saw the
writing on the wall (and the contract) from the git-go. I didn't do
this to build an empire, I wanted to tell this story...and that's worth
more than anything else.

And this is why there's so much dreck in the movies/TV. Who the hell wants to give away their best creative ideas to a bunch of corporate executives, and never recieve anything in return except for the chance to "tell a story"?

Kudos to JMS for doing so; I feel I should mail him some money directly, rather than buy the DVDs, however.

Re:Babylon 5 (5, Insightful)

noc007 (633443) | more than 4 years ago | (#32852600)

That post from JMS really bummed me out when I first read it since I bought all five seasons and all of the "made for TV movies" on DVD. Not a penny of my purchases went to anyone that poured their heart and soul into B5. Hollywood Accounting is one of the big reasons I don't have much sympathy for the studios crying that they're loosing trillions of dollars to piracy. If they can fudge the numbers so no one can get any residuals, they can fudge the numbers just as much to claim that rampant piracy is going to force them to close up shop and justify their lobbying for more ridiculous laws in their favor.

I wonder if these loses are (1)

future assassin (639396) | more than 4 years ago | (#32852090)

also part of the lost sales they claim from movie pirating making them look exaggerated. Oh look me lost millions because of pirates.

Piracy cuts the losses, right? (0, Redundant)

Above (100351) | more than 4 years ago | (#32852100)

Seems like if they loose money distributing these films the normal way, then piracy saves them money on distribution costs, and might actually make the films profitable!

Paging Washington (5, Funny)

cdrudge (68377) | more than 4 years ago | (#32852110)

Obviously Hollywood needs a government bail out. First the pirates were cutting into sales, and with all these extremely successful movies that have lost millions, Congress must do something fast!

Wow! (0)

Anonymous Coward | more than 4 years ago | (#32852140)

It's like the Boston strangler became an accountant.

Kudos if you know why that's relevant.

So this means (-1, Redundant)

Dyinobal (1427207) | more than 4 years ago | (#32852154)

So this means I should pirate more movies, since my pirating isn't hurting their wallet as much as they claimed it was yes?

Re:So this means (2, Funny)

falzer (224563) | more than 4 years ago | (#32852316)

So this means I should pirate more movies, since my pirating isn't hurting their wallet as much as they claimed it was yes?

When pirating, you never took into consideration whether or not it would hurt anyone's wallet except your own, so continue pirating at your regular rate. If you ever get caught (unlikely) you can tell them falzer on Slashdot said it was OK.

Re:So this means (0)

Anonymous Coward | more than 4 years ago | (#32852538)

When pirating, you never took into consideration whether or not it would hurt anyone's wallet except your own

when I pirate, I do consider other peoples wallets. Since it in no way impacts them,I'll continue to do so for the reasons I do.

Re:So this means (0, Troll)

DaveV1.0 (203135) | more than 4 years ago | (#32852530)

No, unless you have no ethics or morals.

In other words, it is still wrong and if you do it you are exactly like those weasels you claim to hate and whom you steal from.

Can you sue fornegligence? (1)

91degrees (207121) | more than 4 years ago | (#32852170)

Seems that Hollywood has a property that should be hugely successful. They are using the investments that other people made to make it so.

It seems that the producers are deliberately trying to not make money from these investments. I'm pretty certain that if any other business executive decided to run a business in such a way as to minimise shareholder value, they would be in serious legal trouble.

Re:Can you sue fornegligence? (1)

compro01 (777531) | more than 4 years ago | (#32852300)

No, they're making plenty of money, they're just doing a good job of hiding it via accounting tricks so they don't have to pay actors, directors, etc. who are often paid a percentage of profits.

Re:Can you sue fornegligence? (1)

Deadstick (535032) | more than 4 years ago | (#32852558)

It seems that the producers are deliberately trying to not make money from these investments.

No. They aren't trying to not make money: they're trying to "not make money". BIG difference.

rj

So... (0)

Anonymous Coward | more than 4 years ago | (#32852176)

Maybe the pirates aren't the real enemy there...

Let's not jump to conclusions (3, Informative)

TheSync (5291) | more than 4 years ago | (#32852222)

The document shown probably concerns net calculations for a deal with a writer. A Deadline comment said:

These are VERY high loads, but they are TYPICAL loads for writers, who very rarely receive "cash break" or "studio breakeven" type deals. To repeat, nothing has changed under the sun: the "net" deal articulated above is fairly standard for writers. Typically writers are compensated up-front with a kicker if a film is absurdly profitable. Writers rarely, if ever, get gross or "studio breakeven" or "cash breakeven" -- i.e., a share of the revenue from the first dollar of revenue, or a share of the profits from the first dollar of profits. When the studio cut the deal above with the writer, I can't imagine they told the writer: "Once we breakeven, you get paid! We all win!" They probably said to his agent/lawyer: "We'll give you the standard "net" kicker", which is exactly what he got.

I.e. the writer got paid on a fixed basis regardless of movie performance, with the "net kicker" that no one really expects to see (except maybe on "Avatar").

Note the document has nothing to do with taxes. That is a very different story.

Not 'the producers of'... (0)

Anonymous Coward | more than 4 years ago | (#32852256)

Disney are just the current rights holder of Who Wants To Be A Millionaire?, which was not invented in America. Celador originally owned the rights to it (and it ran first on British television).

So it's not a mere 'partner' who is being bilked. The deal to buy the production company included a revenue split for Celador, and Disney has been caught trying to pretend it doesn't have to pay.

Four-oh-four... Oooo baby... (2, Informative)

ebbomega (410207) | more than 4 years ago | (#32852272)

Canna get to your urrrrrrrrl [showclix.com]

So, um, someone wanna post a mirror/text?

Re:Four-oh-four... Oooo baby... (1)

devjoe (88696) | more than 4 years ago | (#32852380)

Actually, it now appears the whole site http://www.techdirt.com/ [techdirt.com] is slashdotted.

like the 1970s (0, Redundant)

cinnamon colbert (732724) | more than 4 years ago | (#32852294)

The probably forgotten, but at the time well known comedian art buchwald had to sue hollywood for his royalties,wich were not % of gross, but % of net, and as i remember it, it was the same story - accounting that turned huge profits into losss

Re:like the 1970s (0)

Anonymous Coward | more than 4 years ago | (#32852404)

And why hasn't it been fixed in 50 fucking years? This is fraud on a large scale.

Re:like the 1970s (1)

sconeu (64226) | more than 4 years ago | (#32852408)

Buchwald v. Paramount [wikipedia.org]

Not Just Hollywood (4, Interesting)

Bryansix (761547) | more than 4 years ago | (#32852302)

The CEO of the company I worked for used this trick once. He was trying to get all the executives to take a temporary pay cut for one month. In order to do this he mentioned that he took no salary for the last 3 months. While this was technically true, the more overarching truth was more sinister. He had in fact shielded himself and his income from any downturn in the business by setting up a second corporation where he was the only owner, employee etc. This was a marketing company. Now the first company only got leads from Direct Mail. Guess what the second company did? Direct Mail Marketinig. So while he took no salary from the first company, he continued to get paid very well from the second company for something the first could not live without.

Slashdotted (0)

Anonymous Coward | more than 4 years ago | (#32852324)

http://www.guardian.co.uk/film/2010/jul/08/harry-potter-order-of-the-phoenix

I forget, why do I feel guilty about pirating? (5, Insightful)

jollyreaper (513215) | more than 4 years ago | (#32852346)

Oh, right. I'm taking money out of the hands of the starving artists. You know, the ones who aren't getting any money because their points were off the net and golly gee, the movie didn't make any money.

I love Disney strip-mining the world's fairy tales for ideas and then suing people for intellectual property infringements.

Fuck all the fucking fuckers.

Re:I forget, why do I feel guilty about pirating? (0, Troll)

DaveV1.0 (203135) | more than 4 years ago | (#32852428)

Because it is still immoral and illegal. Two wrongs do not make a right, remember?

My best guess is you have no morals or ethics and live a bit like Lindsay Lohan "If I don't get caught or punished, then it isn't wrong".You are no better than the weasels in Hollywood.

You think the IRS would be interested (0)

Anonymous Coward | more than 4 years ago | (#32852368)

You'd think that the IRS would be interested in loss of revenue from corporate profits, or at least the State of California. With all the stuff they go after these days, this seems ripe for "transparency"

ORIGINAL ARTICLE HERE (1, Informative)

Anonymous Coward | more than 4 years ago | (#32852410)

HAHAHA Techdirty is now being dirty, they REMOVED the news. Google follows by not offering the cached page, EVEN THO IT EXISTS!

Check the article HERE: http://webcache.googleusercontent.com/search?q=cache:8V1pgRKUcLsJ:www.techdirt.com/articles/20100708/02510310122.shtml

Re:ORIGINAL ARTICLE HERE (1)

Pinky's Brain (1158667) | more than 4 years ago | (#32852628)

It's still on the front page, the article itself just can't be reached.

All they're doing is investing (2, Informative)

guruevi (827432) | more than 4 years ago | (#32852466)

And it's pretty much standard too - just invest as much as you can in your future projects and you won't have to pay taxes or anything on it. I used to work at a company (.com startup) that did the same thing. Every year they invested a rough $2 million (net profit) in the development team (4 people) - eventually the development team became their own company so they just shifted funds back and forth (here you go 2 mil. to build this application, here you go 2 mil. for rent) - the developers kept the same desks, computers etc. I believe they off-shored a healthy profit as well.

Purpose of Accountants (2, Interesting)

fermion (181285) | more than 4 years ago | (#32852468)

Accountants are there to minimize profit that is shown externally. External profits are always bad. They require taxes and other payouts to external entities. Just as an example because they have the highest gross profits I know about, MS earned about 14 million the latest quarter, of which 11 million was gross profit. About two million of that was spent on research and 4 million on admin expenses and marketing. This is about 33% of gross profits on marketing and admin. As a percent of gross profit this is not excessive, but as percent of revenue it is highly excessive. Other companies might spend 10-20% of revenue. It is arguable that MS maximizes admin expenses to minimize profit. They put perks in minimize taxes and make them look less profitable. They do the same with research money that leads nowhere, i.e. the kin.

Star Trek interview (4, Funny)

KDN (3283) | more than 4 years ago | (#32852478)

Years ago I read an interview with one of the cast members of the original Star Trek. He said that the most creative writers were the finance guys who claimed that in 30 years of reruns that Star Trek has never made a profit. (I think the interview was in the early 90's) Unfortunately I do not recall who that was.

Cheating as a principle (1)

mseeger (40923) | more than 4 years ago | (#32852570)

To an external observer it seems, Hollywood has declared cheating the universal principle: actors cheat their wives, wives cheat gravity with upper body parts, businesspartners cheat each other and everyone cheats with his/her taxes....

I only noticed, nobody managed to cheat death yet, but think they will some day :-).

CU, Martin

revenue vs. profit (2, Insightful)

Lord Ender (156273) | more than 4 years ago | (#32852574)

Always ask for a percentage of revenue. It is much harder to lie about revenue than about profit.

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