To the outside world, this is known as 'Hollywood Accounting', but when I was in LA in 2001 it was called FuckYou Accounting by independent producers. I'm guessing it still is :
According to the (Warner Bros. accounting) statement, the film shows a loss of $167+ million. Even with one of the top 10 worldwide grosses of all time, the film’s distribution, advertising, and print costs—which are listed as being the film’s greatest expenses—are apparently enough to negate every dollar of that achievement.This means that cast, producers, writers and crew members who signed on for a chunk of the net profits, that is all the money left over from what the movie's made at cinemas, on cable and DVD after all the costs have been deducted, perhaps instead of higher upfront fees, now get sweet fuck all. The movie didn't make money, it lost more than $167 million. FuckYou accounting.
The WB statement :
That is a one page history of FuckYou/Hollywood acconting. Anything and everything gets charged to the movie's total "costs", until there is nothing left but a loss, which means nothing to share with "net profit" participants.
FuckYou Acounting has been part of the Hollywood system for all of its history. FuckYou accounting is Hollywood.
Warner Bros. can also lose money on mega-successful TV shows like Babylon 5, created, written and produced by J. Michael Straczynski :
Straczynski, who wrote 90% of the episodes in addition to producing the show, would receive a generous cut of profits if not for Hollywood accounting.Here's a good story on how Hollywood tried to fuck over Winston Groom, the author of the novel Forrest Gump, which became one of the biggest grossing movies of all time. Groom was in for a cut of the "net profits". Of course there were none to share with him.
The series, which was profitable in each of its five seasons from 1993–1998, has garnered more than US$1 billion for Warner Bros., most recently US$500 million in DVD sales alone. But in the last profit statement given to Straczynski, Warner Bros. claimed the property was $80 million in debt.
"Basically", says Straczynski, "by the terms of my contract, if a set on a WB movie burns down in Botswana, they can charge it against B5's profits."
The smart people, like Tom Cruise, Tom Hanks, James Cameron, and the young casts of Harry Potter and the Twilight series, go for a cut of the box office gross, or First Dollar Gross, but even that can get very, very complicated.
Another good story here, with producer Don Murphy, takes you through some examples of Hollywood Accounting, but also shows the other side, an industry where the upfront costs can be huge and the money slow to trickle back in.