4 ms·

> Hollywood doesn't really do small movies, be it hand drawn or not. The article mentions that Nobody is done at a $10 million budget, I don't think that's real

> Hollywood doesn't really do small movies, be it hand drawn or not. The article mentions that Nobody is done at a $10 million budget, I don't think that's really interesting for corporate Hollywood. Sure if it becomes massively successful, it's great, if not it was a lot of work for very little or no profit. That's fine for smaller studios, but if you expect all your movies to gross $1 billion, then trying to do it with a $10 million budget seems unrealistic. There’s also the issue of Hollywood accounting. The people and studios funding the movies don’t see an all or nothing P&L because they own the companies actually producing the film (that’s how the zero net profit accounting is legally implemented in the industry). An EP like Spielberg putting down $10 million might see $8 million of that back before the film even releases because the project will use their studio for VFX or to shoot part of the movie. That leaves the costs that are spent outside the industry like advertising and marketing. If you have to spend $100 million on marketing anyway, it just doesn’t make sense to worry about production losses on a $10 million vs $100 million movie.

lotsofpulp 1y ago
Hollywood accounting refers to businesses screwing each other out of compensation with loosely defined terms in business contracts. For the purposes of reporting financial figures to the SEC or calculating tax liabilities, the businesses still have to follow GAAP and other property methods of accounting. If a business like Disney or Sony contracts with Spielberg, they aren't going to be fooled by him contracting out to his other businesses, they are going to know that is part of the terms. And surely, by this point, all the actors and other contractors are sophisticated enough to know the game also. Even the wikipedia page for Hollywood accounting cites actors telling everyone to only settle for percentage of gross. https://en.wikipedia.org/wiki/Hollywood_accounting https://en.wikipedia.org/wiki/Hollywood_accounting
- throwup238 1y ago
  Second sentence of that Wikipedia page: > Expenditures can be inflated to reduce or eliminate the reported profit of the project, thereby reducing the amount which the corporation must pay in _taxes_ and royalties or other profit-sharing agreements, as these are based on net profit. First and foremost it’s a tax dodge because nobody falls for points net anymore unless they’re brand new to the industry and people dropping millions to finance a movie are rarely that uninformed. But that’s the why. I’m describing the how: Hollywood accounting is GAAP accounting where the financiers direct a significant fraction of the capital towards businesses they have an ownership stake in. They have both control over the client and how much the vendor charges, driving profit in the topline organization to zero and sending it downstream. The people/studios financing the films are okay with it because they own the downstream vendors. Neither the studios nor Spielberg are under any illusions about how this works - they structure it that way on purpose. They can’t just zero out their profit and say too bad to the taxman and all the contracts on net profit. No judge would let that slide if it came to a lawsuit (and it frequently does). None of this is a mystery to anyone who has worked on the financial side of the industry but because of how that money moves around within a production, it creates economic incentives that favor expensive productions rather than smaller budget ones, at least within Hollywood.
  - lotsofpulp 1y ago
    How is the tax dodged? If business A doesn't show a profit because it pays business B, then business B has a profit on which to pay tax. The point is the revenue and expenses for an individual film can be altered, for the purposes of screwing someone who agreed to a share of the profit, but the revenue and expenses for all of the businesses put together cannot. If a business made money, it has to show up somewhere, in someone's account.
    - deleted 1y ago
      [deleted]
    - throwup238 1y ago
      Yes the money has to show up in someone's account but where and when it is taxed is very important. The profit is shifted to entities with tax credits or industry specific tax incentives, timed net operating losses, lower rates altogether, or different state/foreign rules so the total cash taxes fall in absolute number. If you want more info on how this all works look into single-purpose production LLCs (aka SPVs, which is where the accounting happens) and federal consolidated groups for how its taxed. That this all allows screwing over anyone ignorant enough to accept points net in their contract is just a bonus that happens to have cemented itself in Hollywood pop-history.

lotsofpulp 1y ago

Hollywood accounting refers to businesses screwing each other out of compensation with loosely defined terms in business contracts. For the purposes of reporting financial figures to the SEC or calculating tax liabilities, the businesses still have to follow GAAP and other property methods of accounting. If a business like Disney or Sony contracts with Spielberg, they aren't going to be fooled by him contracting out to his other businesses, they are going to know that is part of the terms. And surely, by this point, all the actors and other contractors are sophisticated enough to know the game also. Even the wikipedia page for Hollywood accounting cites actors telling everyone to only settle for percentage of gross. https://en.wikipedia.org/wiki/Hollywood_accounting https://en.wikipedia.org/wiki/Hollywood_accounting

throwup238 1y ago
Second sentence of that Wikipedia page: > Expenditures can be inflated to reduce or eliminate the reported profit of the project, thereby reducing the amount which the corporation must pay in _taxes_ and royalties or other profit-sharing agreements, as these are based on net profit. First and foremost it’s a tax dodge because nobody falls for points net anymore unless they’re brand new to the industry and people dropping millions to finance a movie are rarely that uninformed. But that’s the why. I’m describing the how: Hollywood accounting is GAAP accounting where the financiers direct a significant fraction of the capital towards businesses they have an ownership stake in. They have both control over the client and how much the vendor charges, driving profit in the topline organization to zero and sending it downstream. The people/studios financing the films are okay with it because they own the downstream vendors. Neither the studios nor Spielberg are under any illusions about how this works - they structure it that way on purpose. They can’t just zero out their profit and say too bad to the taxman and all the contracts on net profit. No judge would let that slide if it came to a lawsuit (and it frequently does). None of this is a mystery to anyone who has worked on the financial side of the industry but because of how that money moves around within a production, it creates economic incentives that favor expensive productions rather than smaller budget ones, at least within Hollywood.
- lotsofpulp 1y ago
  How is the tax dodged? If business A doesn't show a profit because it pays business B, then business B has a profit on which to pay tax. The point is the revenue and expenses for an individual film can be altered, for the purposes of screwing someone who agreed to a share of the profit, but the revenue and expenses for all of the businesses put together cannot. If a business made money, it has to show up somewhere, in someone's account.
  - deleted 1y ago
    [deleted]
  - throwup238 1y ago
    Yes the money has to show up in someone's account but where and when it is taxed is very important. The profit is shifted to entities with tax credits or industry specific tax incentives, timed net operating losses, lower rates altogether, or different state/foreign rules so the total cash taxes fall in absolute number. If you want more info on how this all works look into single-purpose production LLCs (aka SPVs, which is where the accounting happens) and federal consolidated groups for how its taxed. That this all allows screwing over anyone ignorant enough to accept points net in their contract is just a bonus that happens to have cemented itself in Hollywood pop-history.