4 ms·

Read the article. He mentions that "someone suggested to them to audit and they found 'Millions and millions of dollars of error not in our favor.'" Shady acc

by danko 12y ago

Read the article. He mentions that "someone suggested to them to audit and they found 'Millions and millions of dollars of error not in our favor.'" Shady accounting practices were used to intentionally mask earnings that would've contributed to a real royalty payout. This is a common practice in Hollywood as well. It's the reason why royalties as a percentage of net profits are called 'monkey points'. It's because you'd have to be a monkey to believe that the studio's accountants would ever allow that film to turn a profit in its official books.

munificent 12y ago
http://en.wikipedia.org/wiki/Hollywood_accounting http://en.wikipedia.org/wiki/Hollywood_accounting
- Tloewald 12y ago
  Indeed the publisher model for games was copied straight from Hollywood's playbook, so this link is right on the money. In general, the accounting system works great if the distributor is also the developer (because tax) but really badly if the developer is external (because "net" is a fiction). This is also why powerful people negotiate for a percentage of gross vs. net. It's also how record labels do their accounting (and why most musicians make more money from touring than LP/CD/... sales). Based on my experience (I was involved in several contract negotiations with major game publishers), of the $40 that the publisher is paid by the retailer for a $60 AAA title before it starts getting discounted, at most $14* goes to the developer (and that assumes you deliver boxed media with instructions, etc.) -- if not the publisher will be happy to deduct those costs from your $14. This is assuming the developer created the entire product on their own dime. If the publisher does QA and packaging, that's coming out of your $14. * Probably more if you're a Brand Name. I imagine that if you've got brand recognition then, like Alec Guinness in Star Wars, you can negotiate a percentage of gross, and it's a whole different ballgame.
  - lotsofmangos 12y ago
    David Prowse has apparently been told that Return of The Jedi has still not made a profit, so he has yet to see any residual payments from it. “I get these occasional letters from Lucasfilm saying that we regret to inform you that as Return of the Jedi has never gone into profit, we’ve got nothing to send you. Now here we’re talking about one of the biggest releases of all time,” said Prowse. “I don’t want to look like I’m bitching about it,” he said, “but on the other hand, if there’s a pot of gold somewhere that I ought to be having a share of, I would like to see it.” http://www.slashfilm.com/lucasfilm-tells-darth-vader-that-return-of-the-jedi-hasnt-made-a-profit/ http://www.slashfilm.com/lucasfilm-tells-darth-vader-that-re...
    - Tloewald 12y ago
      This is pretty horrific given that we're talking about a guaranteed money-making threequel. I imagine that, as someone whose face is never visible, Prowse was in an unusually poor negotiating positionand that the more recognizable leads got better deals. Alec Guinness (who got 2% of the gross of the first movie, claimed to have argued in favor of killing off his character to avoid speaking any more terrible lines, and only agreed to do the sequels if he didn't have to promote them) reportedly bought his own island with part of the proceeds (probably in an effort to avoid Star Wars fans).
      - ropz 12y ago
        Naw, Alec Guinness lived quite close to me, near Petersfield in Hampshire http://en.wikipedia.org/wiki/Petersfield,_Hampshire http://en.wikipedia.org/wiki/Petersfield,_Hampshire. Never met him, but I think he's on record as describing those roles as ... <Googles> ... "Fairytale rubbish".
- runevault 12y ago
  Glad I'm not the only one who thought of Hollywood accounting when I read this.
reboog711 12y ago
Perhaps I am misreading this, but doesn't: "Millions and millions of dollars of error not in our favor." mean they owed more than they thought? If an audit is 'in my favor' that means you made a mistake and owe me more. If the audit is 'not in my favor' then you made a mistake and I owe you more. I'll add that this "Hollywood" accounting is also used in the music industry.
- eric_h 12y ago
  The audit discovered errors on the part of the publisher that were not in their favor (and occurred prior to the audit).
- seanflyon 12y ago
  If an audit is in your favor that means that it found an error that was not in your favor.
- gms7777 12y ago
  It was the error that wasn't in their favor, not the audit. It means they either already overpaid, (or themselves were underpaid).
stonemetal 12y ago
I did read the article. It didn't mention if they were owed 20 bucks or 2 million. It said EA gave them their company back but there hasn't been a major use of their IP since they went under so obviously EA doesn't think it is worth much. Giving back the company but no cash could be EA saying "yawn we didn't really want it anyway thanks for taking out the trash" or "OMG! we just avoided a serious day in court". I am curious which it is.

by danko 12y ago

munificent 12y ago

http://en.wikipedia.org/wiki/Hollywood_accounting http://en.wikipedia.org/wiki/Hollywood_accounting

Tloewald 12y ago
Indeed the publisher model for games was copied straight from Hollywood's playbook, so this link is right on the money. In general, the accounting system works great if the distributor is also the developer (because tax) but really badly if the developer is external (because "net" is a fiction). This is also why powerful people negotiate for a percentage of gross vs. net. It's also how record labels do their accounting (and why most musicians make more money from touring than LP/CD/... sales). Based on my experience (I was involved in several contract negotiations with major game publishers), of the $40 that the publisher is paid by the retailer for a $60 AAA title before it starts getting discounted, at most $14* goes to the developer (and that assumes you deliver boxed media with instructions, etc.) -- if not the publisher will be happy to deduct those costs from your $14. This is assuming the developer created the entire product on their own dime. If the publisher does QA and packaging, that's coming out of your $14. * Probably more if you're a Brand Name. I imagine that if you've got brand recognition then, like Alec Guinness in Star Wars, you can negotiate a percentage of gross, and it's a whole different ballgame.
- lotsofmangos 12y ago
  David Prowse has apparently been told that Return of The Jedi has still not made a profit, so he has yet to see any residual payments from it. “I get these occasional letters from Lucasfilm saying that we regret to inform you that as Return of the Jedi has never gone into profit, we’ve got nothing to send you. Now here we’re talking about one of the biggest releases of all time,” said Prowse. “I don’t want to look like I’m bitching about it,” he said, “but on the other hand, if there’s a pot of gold somewhere that I ought to be having a share of, I would like to see it.” http://www.slashfilm.com/lucasfilm-tells-darth-vader-that-return-of-the-jedi-hasnt-made-a-profit/ http://www.slashfilm.com/lucasfilm-tells-darth-vader-that-re...
  - Tloewald 12y ago
    This is pretty horrific given that we're talking about a guaranteed money-making threequel. I imagine that, as someone whose face is never visible, Prowse was in an unusually poor negotiating positionand that the more recognizable leads got better deals. Alec Guinness (who got 2% of the gross of the first movie, claimed to have argued in favor of killing off his character to avoid speaking any more terrible lines, and only agreed to do the sequels if he didn't have to promote them) reportedly bought his own island with part of the proceeds (probably in an effort to avoid Star Wars fans).
    - ropz 12y ago
      Naw, Alec Guinness lived quite close to me, near Petersfield in Hampshire http://en.wikipedia.org/wiki/Petersfield,_Hampshire http://en.wikipedia.org/wiki/Petersfield,_Hampshire. Never met him, but I think he's on record as describing those roles as ... <Googles> ... "Fairytale rubbish".
runevault 12y ago
Glad I'm not the only one who thought of Hollywood accounting when I read this.

reboog711 12y ago

Perhaps I am misreading this, but doesn't: "Millions and millions of dollars of error not in our favor." mean they owed more than they thought? If an audit is 'in my favor' that means you made a mistake and owe me more. If the audit is 'not in my favor' then you made a mistake and I owe you more. I'll add that this "Hollywood" accounting is also used in the music industry.

eric_h 12y ago
The audit discovered errors on the part of the publisher that were not in their favor (and occurred prior to the audit).
seanflyon 12y ago
If an audit is in your favor that means that it found an error that was not in your favor.
gms7777 12y ago
It was the error that wasn't in their favor, not the audit. It means they either already overpaid, (or themselves were underpaid).

stonemetal 12y ago

I did read the article. It didn't mention if they were owed 20 bucks or 2 million. It said EA gave them their company back but there hasn't been a major use of their IP since they went under so obviously EA doesn't think it is worth much. Giving back the company but no cash could be EA saying "yawn we didn't really want it anyway thanks for taking out the trash" or "OMG! we just avoided a serious day in court". I am curious which it is.