varnachitram

A Blog on Cinema

Hollywood Accounting

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In Malayalam Cinema, we don’t know how much money a movie makes. We have to scavenge for numbers from unreliable reports. Often you have to take the producer’s word for it and only he would know the actual truth. But when it comes to Hollywood, there is proper accounting, except that it has been designed for fraud. A movie can take in millions and still be at a loss.

TechDirt has a great post, explaining this with examples.

The really, really, really simplified version is that Hollywood sets up a separate corporation for each movie with the intent that this corporation will take on losses. The studio then charges the “film corporation” a huge fee (which creates a large part of the “expense” that leads to the loss). The end result is that the studio still rakes in the cash, but for accounting purposes the film is a money “loser” — which matters quite a bit for anyone who is supposed to get a cut of any profits.

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