Two of these films are Tim Burton. Poor Tim...

Yeah, and CPA's pay too much money for the degrees that allow them to be so good at being bad with the math and the books...

Now, if the accountants for the films were only paid on a percentage of net profits, how different the figures might look. :D -kh

Why do people even agree to take a percentage in a contract when they know this is going to happen?

And that kids is why copyright is amoral. It was meant to stimulate creativity, not get the mega rich to betray society by avoiding taxes.

My sister worked for Jim Henson back in the 80s and early 90s. She told me that the Muppet people threw a big party when they received word from their accountants that "Dark Crystal" had finally hit the break even point. This was more than a decade after the movie's release!

It is said that figures don't lie, but liars do figure.

i think Hollywood and Washington must use the same accountants.except in Washington it's the reverse.

I think the last line under the Harry Potter entry sums it up nicely: "So why keep making them if no one's earning money?"

i am sop sick of hollywood and the mafiaa.screw them !!!

i don't even buy any new films anymore i just try and find them used.that whole industry is a pile of greed and i do not need greed in my life.

Read "The Keys to the Kingdom". It reveals the name of the guy who discovered this little trick because Katzenberg and Eisner used it on there productions(Star Trek:The Motion Picture) to make names for themselves at Paramount.

It's quite an amusing system they have, unless you're on the "bend over" end of it. As I understand it, they effectively "bill" all the losses from completely unrelated projects to the successful project, so while the studio makes money, the project, somehow, does not.

gorehound696,

"i do not need greed in my life."

Maybe not, but you do need grammar, spelling, and typing lessons in your life!!!!

When you leave a post like you did, readers think you are an idiot (which you probably are) and won't believe anything you say.

NEVER accept 'net' profits, always go for the 'gross' profits. The "net" means that not only the cost of the movie is included, but also the cost of Promotions and other 'expenses'.

Hollywood has been doing this for decades, long before any of these films were made.

After seeing what Enron, Worldcom, etc. did is it really all that surprising that Hollywood's big corporations also use fake accounting in their profit scams?

@watcher

You just come across as a complete tool for attacking someones grammar on a posting board. I assume you have some kind of issues.

As to the article, Hollywood and the music business have been engaged in these shenanigans since the fifties. No surprises here.

WARNER BROTHERS is one of the worst offenders (New Line is theirs as well).

They don't call "a percentage of the profits" "monkey points" for nothin'. Only a monkey would be dumb enough to take the points, because Hollywood knows how to screw them over.

It actually comes down to bribing judges (or the judges are corrupt without being paid...either way.) We had a whole lesson on Batman in my writing class and how Warner claimed they didn't make the money on the film because they made a bunch of crap that didn't make money so they had to pay for those losses out of Batman and that's how Batman didn't make money. Of course, if any other business were run this way they would be shut down for fraud, but not the movie industry.

According to various sources the last movie to make a NET PROFIT was Gone With The Wind. Obviously they had bad accountants who couldn't make the movie loose money. This is why you never sign a Net Profit Deal, as there never is a Net Profit. The Studios always bill the production company for the Gross Profit, thus ensuring no profits.

How can the U.S. Government/Internal Revenue Service let them get away with this? They go after us little people and let Hollywierd and other DemoniCorps get away with murder. It is not moral or right (I won't say 'not fair' because that's in the eye of the beholder and whether ones ow ox is being gored!).

That's why the smart move is get as much up front as possible then a cut of the gross, which they can't hide.

As funny as it sounds, this is actually not fuzzy math. This article doesn't mention WHY this happens. It's because the article is not taking P&A (prints and advertising) into account. Comparing a movie's raw budget to its theatrical profits is always going to make it LOOK like the film made money... BUT, when you take into account how much the studio spent on advertising -- usually several times the budget of the film, especially internationally -- then you realize that, in fact, these films did NOT make a profit.

So why release films if you know they'll lose money at the box office? Because a theatrical release is the best possible advertisement for DVD sales and (especially) TV licensing. It's in DVD sales and TV licensing where these films actually turn huge profits. The writers and directors mentioned in this article are foolish -- if they'd have known what they were doing, they SHOULD have negotiated for a percentage of DVD SALES & TV LICENSING RIGHTS, rather than a % of theatrical box office (which is always a loss-leader).

It seems that movie companies are just like any corporation in America that use the business as their personal piggy-banks and everyone else be damned.......

Jack Nicholson took a percentage of merchandising and no other payment on Burton's crappy Batman flick, and he walked away with a fortune!

Tom Black, That 'Crappy Batman flick' as you call it changed the face of Batman from the silly camp it was back in the sixties into something dark and gritty. Every other incarnation of Batman evolved out of what was made in 1988 / 1989. Classics become classics for a reason.

@divephotog - While there are unethical CPAs (as there are unethical members of every profession), the vast majority of them work very hard at presenting the books in a fair and accurate manner. Accounting is not as black-and-white as you imply. If it were, the profession would not have such a stringent certification process.

Profitability is about much more than Revenue - Production Costs. There are operating costs that outsiders have limited visibility to, especially if it is not a publicly traded company.

While I don't doubt that some game playing may occur to minimize payouts, it is probably not as nefarious as this piece suggests.

srb1971, NX01: Yes, there are some things that are legit, but not nearly what is being claimed by these companies.

They claim they are losing money for the movie because they put the movie profits into the company, not just that one movie. They claim other movies are losing money so they have to use money from this movie to make up for it. Batman was a classic example where the writers weren't paid what they were owed because the studio cheated them and the judge allowed it. It was accounting that wouldn't be allowed in any other business, but Hollywood gets away with it.

If they were being honest, they wouldn't be losing lawsuits (nevermind the one's where they win and cheat people). Sometimes they get away with it, sometimes they back down so they can can keep the rights to something or have someone work for them again.

Trust me. I've been selling scripts and working with others doing the same, so I speak from experience.

If you want some great insight into Hollywood's corruption, I recommend listening to Orson Scott Card sometime. He'll tell you about the money, and he'll tell you about how they want to turn Ender's Game into some bizarre story about a kid coming of age sexually, nowhere near the original source material...

Your points only scrach the surface of the corruption and don't get to the heart of it. The theatrical release makes more than the dvds and tv rights combined with all the above mentioned movies.

srb1971, NX01: DO THE MATH. 300 million to make Lord of the Rings. Let's give them a billion for advertising and everything else. A billion dollars! And it made almost 3 billion dollars.

1, 700,000,000 is still missing by your reasoning. It's outright fraud and you're trying to excuse it without knowledge or thinking it through.

They lost money on other projects so they took from this one to make it up.

That's illegal. That's why they have separate companies, so that if something goes wrong they don't lose everything. But some judges are allowing them to spread that money around.

I don't know how to make it more simple than that, but if any other business were to work like this it would be called illegal (and has been when companies fail and fall apart.)

There are other words for it, but it is fraud, without a doubt. Again, the Batman one was a perfect example where the money was there, but given to someone else instead of those who earned it.

48 million budget. 411 million earned. In the 80's do you really want to justify them spending 8 times the cost of the full movie on advertising and the such? LOL!

Sorry, you're thinking is a good try but not quite there, when you actually take the time to think it through.

What did they do, buy a fleet of jets and write it off as expenses for the movie?

I can't believe there are people dumb enough to try to explain the loss of hundreds of millions, if not billions, of dollars as advertising, production costs and expenses! If it was that expensive, none of the smaller movies would ever be made because there's no way for them to earn it back.

A movie isn't advertising for dvd, especially the above mentioned movies. You really think that even with multiple releases of Lord of the Rings they will come close to the almost 3 billion they made in theaters?

Try again, ya weak-minded simpletons.

Corporations, especially those in the entertainment industry use what I like to think of as "imaginary numbers" a la Calvin and Hobbes.

I think I read somewhere that J. Michael Straczynski said the reason Babylon 5 "lost money" according to the studio was that studios don't look at each film or project as unique items. That whole profit-loss thing has nothing to do with what actually occured with individual projects, They lump ALL projects together when calculating profit loss. So, if Babylon 5 was amazingly profitable, as was Lord of the Rings, the profit loss reflects the fantastic losses suffered by the studios when other projects fail utterly. So according to studio imaginary numbers successful projects reflect the over all losses of the studios. We are talking about an industry that produces products which suspend reality. Perhaps the studio suits have convinced themselves to take that idea into the world of financial reports.

"Why do people even agree to take a percentage in a contract when they know this is going to happen?"

Because, even though it's meaningless, it's a step upward on paper. So you get offered more on your /next/ contract. Maybe it's funny money, too, but eventually, if you make enough funny money, you may become powerful enough to demand real money.

Or, in other words, it's Chinatown, Jake.

There is absolutely no way that each episode of "Smallville" costs $4.5 million per episode. That would make it one of the most expensive shows on all of broadcast TV, and for a show that averages between two and three million US viewers per episode on a last-placed network, there is absolutely no way that the show would stay solvent at that cost.

Is the earnings figure quoted the gross retail value of tickets purchased at the cinema door or the studios' share of that revenue?

Babylon 5 made a BILLION dollars?

...don't get me wronged - I loved the show. But a billion?

Only in Hollywood. Greedy, prick bastard, no taste, spineless set of ingrates!!

Where there is life, there is hopeMBT Shoes .Love is blind.

"Only in Hollywood"? Anyone paying any attention to pro basketball free agency lately?

@Jesse,

Thanks for mentioning that. I just think it's amusing that back in 2009 when nuParamount was using the same funny numbers to try to paint 2009's STAR TREK as a bigger "Success" than it actually was, the supporters of the film were more than willing to use the K&E numbers to claim that TMP never made a profit but only willing to declare as crazy everyone who pointed out that the K&E formula when applied to their pet movie also says it never made a profit.

The best thing about this article is that it firmly reveals that the studios play games with their numbers so it's never really clear what the numbers that the studios themselves tabulate and release mean: pro or con.

A while back a director (I cna't remember which one) said that if you take the cost of a movie and multiply it by 2.5 that is the amount of money you need to make to break even. Anything after that was profit. I assumed he was talking about advertising and incidental costs taking up the rest. Most of the movies and shows mentioned meet or exceed this figure so I would love to know the studios can even say they are lossing money with a straight face. Isn't part of the cost of a movie how much you have to pay everyone involved in making the film? Shouldn't an agreement for percentage payments include an initial figure on when a movie has started making profits? Maybe I'm just crazy for using logic.

In the accounting debat, what the article fails to talk about is the cost of promotion :

When you have a movie that cost 100 M$, the rule is that you need to spend as much in promo : poster, bilboard, tv ads, junkets, etc... And that in ever country in the world.

So if HP cost 350M, it must have cost over 200M in promo, and made "only" 500M in the US, so yes, they lost money in the US... You must look at cost of promotion in each country and how much the movie made in each countrey...

Plus in certain countries, a movie is not always distributed by the compagny that made it. IRON MAN was sold be local independant distributer, so they get of course a cut out of what the movie made.

And further more, if you said that a movie made 500M$ at the box office, it doesn't mean the studio made 500M$, because the theater that shows the movie don't belong to the studio, and they keep part of that money (at least 1/3 of it)...

Then you have taxes... lol

So just to say that we are not looking at the full picture here. Looking at the budget of the movie and world wide Box Offices doesn't mean anything!

I hope we are allowed to link to external new sites, but this is related directly : http://news.bbc.co.uk/2/hi/entertainment_and_arts/10549972.stm

Don Johnson has successfully sued for tv-syndication millions owed by NBC & Co. for Nash Bridges

more i like the Iron man

If you are directing a film (or even involved in anyway with royalties) you are crazy if you don't get points on gross or ticket sales. Hollywood accounting is well know by now and if you are settling for a percentage of net profits, be prepared to be screwed while others laugh all the way to the bank.

NX01: Give me a break. You must work for one of these Hollywood clowns. If none of the movies made make money, why would they be making the movies anymore? *ALL* of the studios would be out of business long long ago.

You can't use a flat 2.5 or 3 times a movies production budget to cover advertising and prints (as I myself used to think.) Say one movie has big stars and a budget of 200 million. A second movie has big stars and a budget of 100 million. Both movies open on 3500 screens during the peak summer season. The advertising costs, all things except the budget being equal, would be about the same, but those costs are a different percentage of each films budget.

As for Hollywood using fuzzy math, it's not much different than say Microsoft. Windows 7 has sold briskly, but Microsoft is undergoing another round of layoffs. Microsoft sells many products, and while Windows 7 may be doing well, others are not. In the end, however, all those profits and losses come together to reflect the companies overall profit/loss statement. And if that falls below a certain point, then the axe falls. Film studios do the same thing, but applied to each individual project as if it were the whole company. That's the fuzzy part.

Not SciFi but Hollywood related - they've been doing this for years. 60 minutes did a report on this back in the early 80s, showcasing two highly successful TV series; 'Daniel Boone' and 'The Rockford Files'. Both series stars (Fess Parker and James Garner, respectively) had bothe agreed to a smaller up-front paycheck in exchange for a percentage of the show's Net. According to the studios' accounting methods, both shows ran at a loss during their entire runs...

Wow, this makes sense dude.

Lou

www.web-anonymity.au.tc

wonder how they managed to fool people so far! everyone can tell black from white! it's obvious! ugh! my mac is a slooooooow snail! how to make your mac faster

Often, the studios (and other big, high-profile businesses) do their accounting this way: "We expected to make a profit of $100,000,000, but we only made a profit of $75,000,000. Ergo, we lost $25,000,000."

Money to stars, directors, crews, etc. is money out the door, so studios look for ways to keep the money in, all the while making it look like there are no profits.

One way to do this is with development. There is no costed formula or well-established set of steps for development, and more or less this is intentionally so. Studios will announce a much lengthier slate of upcoming productions than they will ever actually produce, because the costs associated with open-ended productions are effectively in limbo and can be written off as losses, even though the money is never actually leaving the studio. So you can be holding a billion dollars and claim you don't have a billion dollars because that billion dollars is tied up in effective escrow to yourself through various sham companies that have been created for each production, most of which will never see the light of day.

For example, say you write a screenplay; let's call it "The Rubber Chicken Movie". You're not a professional screenwriter, you don't even live in L.A., but you had the good luck to send your script to a studio at the right moment when the studio needs to squirrel away a few million because the latest crap flick based on a tou from the 80s inexplicably turned a real profit.

So you get a call: They just love your work! They are really excited to be in "The Rubber Chicken Movie" business! Come on down to L.A. so we can hammer out terms.

You get a free trip to L.A. to meet with studio execs and feel like a player -- huzzah! You take a few meetings, hear a few war stories about the BIZ, and finally land a deal. Now, as a first-time writer, you won't of course be getting millions, but we believe in you: here's a hundred grand for the exclusive rights to make your picture.

Will you say no? Of course not. So for about a hundred thousand dollars, you get some pretty serious bragging rights, and the studio has a way to hide millions. "The Rubber Chicken Movie" is announced as being in 'development'. What is 'development'? It's any expenses they can add to "The Rubber Chicken Movie" production company's spreadsheet. This way, the studio appears to be leaking money. They're pouring it into "The Rubber Chicken Movie" which is in actuality the studio itself, but in the bizarre parallel universe of accounting, perceived of as a separate costed entity.

The studio has will never shoot a single minute of "The Rubber Chicken Movie"; they never had any intention to to begin with. In fact, they thought it was a pretty dumb idea, but they are excited by the Ben Stiller-Owen WIlson project, "The Weebles" ("They wobble. They don't fall down. Next summer, action doesn't have a new name. It was two. The Weebles."). And if that actually makes any money, expect another call from the studio:

"We're sorry things didn't work out with The Rubber Chicken Movie. But we're still excited by your work. Do you have anything else...?"

(Based on a true story.)

Soooooo...in reality NONE of these movies/shows lost money. The real title of this article should be "How Hollywood rips off artists."

These Hollywood crooks should be burned at the stake...PUBLICLY. Every last damned one of them. They keep giving us pap and/or sewage and yet for quality films that really succeed beyond their wildest dreams, they screw those who deserve to share out of their cut of the profits.