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Dumb question: how is Hollywood accounting not fraud? I know there have numerous civil court cases over differences of "opinion" over incentive compensation ca

Dumb question: how is Hollywood accounting not fraud? I know there have numerous civil court cases over differences of "opinion" over incentive compensation calculations, but has anyone actually gone to jail?

sircastor 5y ago
Part of the problem is that many of the people with a stake in the “higher profits” camp risk losing future opportunities. If you start to make a ruckus about contract profits you find yourself not employed by that studio, and you start to be looked over by other studios. It’s a shell game but everyone agrees to it so as to book another gig. The recent scuff-up between Scarlett Johannson and Disney was an example, and the rumors of Disney being unwilling and to work with her was the quod-pro-quo rearing it’s head.
chrisseaton 5y ago
What would you charge them with? They claim the costs for things like licensing and services are legitimate. How do you prove they aren't? What is the correct charge for a licence or service except for what two companies agree?
gamblor956 5y ago
Hollywood accounting doesn't change whether there are profits, it changes who records the profits. IP Holder the rights to a movie. Production Studio S to make the movie for a fee. Distributor D distributes the movie for a fee. Most people think that Production Studio S is the company that records the profits from the movie, but they generally don't see anything beyond their costs associated with actually making the film. In the old days, Production Studio S also got saddled with all the costs associated with the movie, including distribution costs paid to the distributor; now this is usually only the case for independently financed movies. Naive talent and investors, or independent film investors, make their profit sharing agreements with Production Studio S. IP Holder owns the rights to the movie, and generally is the one that records the profits to the movie. These days, this entity is rarely the same entity that made the movie, but for independent films, this entity is usually the same as the Production Studio S. If Distributor owns IP Holder, they will usually put expenses into this entity instead of Production Studio S because...sophisticated talent and investors make their profit sharing agreements with IP Holder (and Production Studio S won't see much income, so that's a moot point). Distributor can suck out the profits by increasing the fee charged to IP Holder for distribution services, which includes marketing. IP Holder sees a lot of expenses, and it may take years (or over a decade) to record a profit, so the highest-tier talent and investors make gross point profit sharing agreements, meaning that their profit share is based on the movie's pre-expense earnings rather than on net (post-expense) earnings (but only the highest tier talent and investors get to do this, see e.g., Sandra Bullock and Gravity). Note: when I was at a firm, my clients included both one of the big studios and a number of the smaller studios, so the above is a very simplified version of the accounting structuring.

sircastor 5y ago

Part of the problem is that many of the people with a stake in the “higher profits” camp risk losing future opportunities. If you start to make a ruckus about contract profits you find yourself not employed by that studio, and you start to be looked over by other studios. It’s a shell game but everyone agrees to it so as to book another gig. The recent scuff-up between Scarlett Johannson and Disney was an example, and the rumors of Disney being unwilling and to work with her was the quod-pro-quo rearing it’s head.

chrisseaton 5y ago

What would you charge them with? They claim the costs for things like licensing and services are legitimate. How do you prove they aren't? What is the correct charge for a licence or service except for what two companies agree?

gamblor956 5y ago

Hollywood accounting doesn't change whether there are profits, it changes who records the profits. IP Holder the rights to a movie. Production Studio S to make the movie for a fee. Distributor D distributes the movie for a fee. Most people think that Production Studio S is the company that records the profits from the movie, but they generally don't see anything beyond their costs associated with actually making the film. In the old days, Production Studio S also got saddled with all the costs associated with the movie, including distribution costs paid to the distributor; now this is usually only the case for independently financed movies. Naive talent and investors, or independent film investors, make their profit sharing agreements with Production Studio S. IP Holder owns the rights to the movie, and generally is the one that records the profits to the movie. These days, this entity is rarely the same entity that made the movie, but for independent films, this entity is usually the same as the Production Studio S. If Distributor owns IP Holder, they will usually put expenses into this entity instead of Production Studio S because...sophisticated talent and investors make their profit sharing agreements with IP Holder (and Production Studio S won't see much income, so that's a moot point). Distributor can suck out the profits by increasing the fee charged to IP Holder for distribution services, which includes marketing. IP Holder sees a lot of expenses, and it may take years (or over a decade) to record a profit, so the highest-tier talent and investors make gross point profit sharing agreements, meaning that their profit share is based on the movie's pre-expense earnings rather than on net (post-expense) earnings (but only the highest tier talent and investors get to do this, see e.g., Sandra Bullock and Gravity). Note: when I was at a firm, my clients included both one of the big studios and a number of the smaller studios, so the above is a very simplified version of the accounting structuring.