Another Day, Another Studio Sued Over Accounting

by Paul William Tenny

I'm sure that most people don't follow labor issues much, if at all, especially not in Hollywood. To quickly explain, studios play with their accounting books adding in every possible cost they can imagine, discounting certain profits, shifting and adding debt (they are true masters that would make Enron proud) until every movie they produce shows a loss on paper. They do this because a lot of people see huge blockbusters making hundreds of millions of dollars and they figure since they helped make the picture, they ought to get a piece of the profit based on a percentage.

The studios never want to give out money they don't have to, so they promise most people a percentage of the profit after the film has recouped its costs. That deal works fine when the person keeping the books is honest, but the studios are notorious liars and cheats and they couldn't care less that everybody knows. They've been sued a few times over the past couple of decades over dishonest accounting practices and virtually every single case as been settled, presumably because they know if they are forced by the courts to open their books to the talent, they'll be able to prove it's a shell game.
One such studio, I think it was New Line was recently fined by a court for failing to open its books to Peter Jackson in his lawsuit over profits he says he's owed from the Lord of the Rings trilogy, even after the judge ordered them to. If they keep playing games, I imagine New Line won't be making movies very much longer and it's not like with all the money those films made that New Line couldn't afford to pay Jackson his due.

This doesn't only happen in movies though, it happens with television shows as well. There are two important things happening right now because of this problem, one is the labor negotiations between the Writers Guild of America and the studios, and yet another lawsuit over profit participation against 20th Century Fox.

According to the Hollywood Reporter, "'Dharma & Greg's' co-creator, writer, executive producer and lead actress have filed suited ... claiming that they are owed $15 million in profit-participation payments." Just because they sued Fox and just because studios are well known frauds when it comes to accounting practices, doesn't mean that Fox is guilty in this case. However, to give you an idea of just how prevalent this problem is, I'm not aware of any show that has made a profit on paper in the history of television.

The Simpsons for instance - and this is used as an example by writers why "payment after profit" deals are nothing but pyramid schemes - has not made a profit after being on the air for 18 straight years and having a feature film made in 2007.

At least on paper.
in Labor, Television


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