Re: [dvd-discuss] Re: Hollywood accounting practices

["Michael A Rolenz" <Michael.A.Rolenz(at)aero.org>]

And don't forget those creative accountancy  practices where the producers 
can party everywhere and call it promotional expenses. Where the profits 
from one movie or television series appear in the balance sheet of another 
nonprofitable one so they don't have to pay the percentage to the 
stars(e.g.,  The Rockford Files, Daniel Boone). Or where the stars buy a 
lavish trailer and then lease it back to the studios for THEIR use at a 
handsome profit. Not only are Jack Valenti's claims bogus but if one of us 
tried these tricks on your income tax statement the IRS would have you in 
jail but not so for Hollywierd.




Michael Sims <jellicle@inch.com>
Sent by: owner-dvd-discuss@eon.law.harvard.edu
06/06/2002 07:04 AM
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mickey wrote:

> I said that wrong, didn't I? The claim is that only 2 of 10 recover
> costs.. .

There are any number of factors.  First you "recover costs in theatrical 
exhibition" doesn't mean much.  Many films are made for video release - 
some never even hit the theaters.  The breakdown might be something like 
this:

For every ten films:

1 of 10 films bombs and only makes back a fraction of its costs, say 50% 
or 75%.  Note that even a "bomb" is still a loss of maybe 25% of the 
principal over a period of three years or so: better than most US stocks 
have done recently.

2 of 10 films are made for video: don't recover costs in theaters, do 
recover costs in video.

5 of 10 films hit the theaters, don't make back costs.  For instance, the 
movie may have cost $100 million to make, and only made back $99.99 
million in the theaters.  These films become profitable as soon as they 
hit video.

2 of 10 films hit the theaters, make back costs in the theaters and then 
become super-profitable in video.

Valenti's statement that "8 of 10 don't make back costs in the theaters" 
is neglecting that video is now the major part of their business - 
theatrical releases are secondary.  Films are produced based on the 
overall calculation that they will be profitable over the next five years 
counting revenue from all sources: theaters, pay-per-view, rentals, video 
purchases, cable television, broadcast television, product promotional 
tie-ins, etc.  And the vast majority of them are.


-- 
Michael Sims