Is it possible for blockbusters such as “Star Wars” and “Lord of the Rings” show red in your finances? In this context, this issue has also been the subject of analysis and debate in an industry where raw ego and extravagance on the part of writers, producers, actors and directors.
Thus was made known the famous ” Accounting for Hollywood “, this according to an article developed by Dennis McDougal in 1989 for” Los Angeles Times “, refers to the bookkeeping services blacktown methods used by the industry of film, video and television for more profits based on inflated, reduce or eliminate the accounting result of the project, reducing the amount the company must pay to actors, directors and writers in royalties or other arrangements on profit sharing, because they are based in net profit.
This action can take several forms. One is that participants in the production are linked to an affiliate studio to perform an activity and the parent entity, ie, the film studio withdraw money from the subsidiary does not in terms of profits, but in the form of charges for certain “services” that are counted as expenses or losses.
In Hollywood about 5% of movies officially show a net profit, and the “losers” films include blockbusters such as “Rain Man,” “Forrest Gump,” “Who Framed Roger Rabbit” and “Batman” , films that had large amounts of monetary collection both in box office as rent and sell videos.
In another publication of “Los Angeles Times”, developed in 1990 by Dennis McDougal also called “Murphy Movie Made Millions But Stayed in Red, Studio Ledgers Say” says controversial statements by actor and comedian Eddie Murphy, who notes that only a fool would accept the net on his contract.
For experts like John D. MacDonald, the really creative in these industries people are accountants. A large study has more than half the profit, after setting breakeven around three times the cost, taking 25% of revenue and overhead costs, and 35% of revenue and distribution charge, plus rental rates.
In that sense there are three main factors in Hollywood accounting to reduce the result of a film, this lies everything that has to do with the production overhead amounting to 15%, the cost of production close to 30% of what receive from the cinema and advertising expenses amounting to 10%.
All this shows why so many big name actors insist on “gross points” a percentage of gross income instead of net profit participation. This practice reduces the likelihood that a project is not attractive for real creative industry.
Emblematic cases that have affected the industry
A case of writer Winston Groom is the right of his novel Forrest Gump, the contract included a share of the profits. However due to the “Accounting Hollywood,” the commercial success of the film becomes a net loss without the author has received profit as entered in the book “Clarifying Accountability: An Ethical Theory Framework,” Melvin Dubnick. Because of this controversy to the study, the author refused to sell the rights of the script for the sequel to the novel, which included a meeting with Tom Hanks Gump while filming the movie of your life.
According to an article developed in St. Louis University Law Journal, entitled, “The Origins of Accountability: Everything I Know About the Sovereign’s Immunity, I Learned from King Henry III”, Stan Lee, co-creator of Spider-Man character, introduced demand after the producers of the film Spider-Man (2002), was not given a share of the gross income. Another case is that of former Attorney Jim Garrison, who sued Warner Bros. for their share of profits from the movie “JFK,” which called his book was based on the book “On the trail of the murderers.”
Also, the writer Art Buchwald received compensation after suing Paramount. The court cataloged the immoral actions of the study, noting that it was impossible to believe that a movie starring Eddie Murphy in 1988, called “A lost Prince in New York”, USA only raise $ 350 million without the author perceived a benefit.
Other major productions have been under observation by the justice, the case of Peter Jackson, director of “The Lord of the Rings” and his studio Wingnut Films, who filed a lawsuit against New Line Cinema for discrepancies in earnings. Also, according to Lucasfilm, “Return of the Jedi”, despite having earned $ 475 million at the box office compared to a budget of $ 32.5 million, “has never generated profits.”