Article about Hollywood accounting:
http://priceonomics.com/why-do-all-hollywood-movies-lose-money/
Mike was one of the few art dealers who did his best to look after his artists. (a true story)
One day a painter, a shy woman named Sally, led him through his gallery to one of her own paintings on display with a price tag of $7,000.00. She plucked up the courage to ask him why she'd only got $700.00 for the painting.
Mike explained too Sally how he'd supplied the materials, the overheads, the framing, how the actual sale would more likely be about $5,900.00. Mike asked her, now that she had a better understanding, how much would she think would be a fair fee to her for the painting?
Sally, barely containing her outrage, blurted out that she wanted the full $7,000.00.
Still hoping to convince Sally, Mike took Sally to the third floor where he showed her a stack of canvases two-foot high. He flicked over a few until he found one of Sally's, then another and another. They were mostly works not commissioned by him; she'd presented them and, to keep her earning an income, he'd paid her varying amounts for her trouble. He explained how some of the earlier canvasses had been poorly prepared by someone. The colours were peeling off, the painting was unsellable but he'd paid her anyway. Other paintings were unfinished - just a few might one day become worth something if the artist's reputation were to grow.
Back on the ground floor, he explained that most of her better pieces that did get sold, ended up going in job-lots, at cost, to a travelling auctioneer who'd pass through from time to time with a keen eye and a cheque book. Mike told Sally that at $700.00 for a day's work she was really being paid a little more than the one third commission city galleries pay.
Sally was clearly disgusted. She wanted $7,000.00 for each one of those paintings in the heap.
The story has a happy ending: Sally was persuaded by another woman painter who'd seen and understood Mike's books that Mike had indeed been doing the right thing. Sally, while unconvinced and perplexed, agreed to forgive him.
Mike got out of the art business. He couldn't stand the stigma that went with the profession.
the house always wins.
Exactly. It's a big, big gamble. The house has to win or it has to get out of the business.
Movie making even has similarities to other forms of gambling, like horse racing. Small syndicates might buy a couple of horses out of love for the sport in the hope of a big win. Big stables find creative ways to spread their occasional wins over their more frequent losses - and those means are not always pretty.
Just like horse racing, boxing, live theatre or the fine art market, movie making attracts a strange mix of beautiful and unsavoury characters.
(It almost makes you want to do something independent, doesn't it?)
It's called the Dream Factory. Everyone working there has to keep dreaming, while in the front office, like Las Vegas, the house always wins. VFX artists have to worry about getting paid , let alone getting a piece of the Pi.
http://library.creativecow.net/kaufman_debra/VFX_Crossroads-1/1
Although creative accounting plays a big part in hiding profits in Hollywood, other industries lose money as well. Sony lost $9 billion in their electronics division, and makes up for it by selling insurance!
Ready for an answer? OK, then . . .
True, it's an unusual revenue-model. Not often found in any industry outside entertainment.
For example, to quote the New York Times:
While 70 percent of Broadway shows lose money, the percentage is universally believed to be even greater Off Broadway. Moreover, few if any Off Broadway shows will ever make one rich, unlike Broadway’s “Wicked” (which has earned $530 million there so far) or even “Rent” ($274 million).
The simple answer to How this can work, as hinted above, is that those shows [movies] that do make money, can make enough to cover all the losses. If somebody were clairvoyant enough to produce only the shows [films] that make money, We'd still have to find out what to do with the empty cinemas, theatres and TV time-slots in between the money-making shows [films].
(Sorry, just when the debate was getting nice and heated)..:-)
The question is unanswerable. It's the wrong question.
We could reasonably ask, "How do Movies ever get Made when 80% of Hollywood Movies Lose Money?"
-But then, I fear, we'd get an answer.
I think a lot of people would rather have a gripe instead of an answer. Which is quite OK. Everybody deserves to let off some steam.
Artists have always had a bad deal.
Very true. But to answer the thread's question in the simplest way...
The executives hold doors closed and charge you to open them. The unions throw wrenches into the machine and force you to hire 5 of their workers to pull it out.
It's just top and bottom corruption.
Hyperbole Hyper"bole, n. [L., fr. Gr?, prop., an overshooting, excess, fr. Gr. ? to throw over or beyond; ... a statement exaggerated fancifully, through excitement, or for effect. [1913 Webster]
Over 80% of Hollywood movies fail to turn a profit. (Alex Mayyasi, Priceonomics.com)
..mmm..
Yet the Article's title says:
Why Do All Hollywood Movies Lose Money?
Might you be from Marseille, Mr Mayyasi?
Before we drink another pastis, can you please tell us all: when did you stop beating your wife?
;-)
I check something what a friend told me; The Weinstein's are something like the Tony Montana from film industry.
Artists have always had a bad deal. Michelangelo never got his share of the box office at the Sistine Chapel either. Geffen promised his artists: You'll make a lot of money, but I'll make a lot more!!" Let's see if artists make any money on the interweb...
Down and Dirty Pictures is another great book, primarily about the Weinsteins.
http://www.amazon.com/Down-Dirty-Pictures-Sundance-Independent/dp/0684862581
...it also has very interesting info on Tarantino's early years, the breakup of his creative partnership, etc.
Basically, get your money up front or be happy with never getting it, unless it's royalties protected by a union agreement.
Even when they do make money, there's no guarantee you'll get paid. Adam Carolla, Kevin Smith, and Broken Lizard all had small movies that made money, but they didn't see a dime of their percentage deals. Basically the studio's just Say they didn't make any money and won't show you any of the books. And if you sue/audit to see the books, that could hurt your future work with them.
Carolla just said, "Fuck it, I'll never work with the Weinstein's again." Smith was prepared to just go along with it, but he wanted to make Clerks 3 and his co-star never got any profit points off Clerks 2 so he wouldn't sign off on the next one until the audit is done. That cost them a year. Broken Lizard wants to make Super Troopers 2, but their primary investor on Part One also sued so that movie isn't going to happen any time soon.
Even when you have a "proper deal" they'll still screw you.
Almost every city in North America is full of office buildings and condo developments that are pretty much empty just like the Cineplexes. Everyone, the land speculators, developers, architects & construction companies and Hollywood have all made their money before the show begins...
The-Hollywood-Economist-2-0 ... excellent book btw
** Every break was jam-packed with endless commercials telling me my penis is too soft and I need viagra, my gut is too big and I need a supplement, my kids are too dumb and they need scholastics, my wife is too ugly and needs a facial surgery or makeup, etc etc. It was a never-ending diarrhea-like stream of corporations telling me how to live, what to be afraid of, and what to buy to fix every problem in my life. **
Isn't this a line from that hacker kid in Die Hard 4.0? ;-)
@subco Mindboggingly true!
"After costs are recouped" is another fine line that can mean many things depending on ethics of company.
This sort of gymnastics is of course not limited to Hollywood. A subsidiary company forwarding the profits to mother-company is a typical way of not paying any taxes in the place it operates, since the daughter company is "not making any money". It is one example of how big capital can have an advantage in the "free market".
just never, ever accept a "net profit percentage" deal.
This one book is enough
http://www.amazon.com/The-Hollywood-Economist-2-0-Financial/dp/1612190502/
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