Tuesday, December 18, 2007

Hollywood Studio Creative Accounting: a Solution

Still no progress in the strike talks, with both sides slinging mud and acting like unwanted children. And these are supposed professionals we're talking about.

While I have no proposed to solution to this deadlock, I do believe I have a solution to one of the problems that has haunted Hollywood's talent for decades: the studios' propensity for "creative accounting."

What do I mean by "creative accounting," you might ask? Well, I'll tell you.

In Hollywood, several actors, directors, writers, and the like often sign deals for a percentage of a film's gross, or a percentage of a film's net. As a percentage of a film's gross is a rather unfair deal to the studios, some of the talent in Hollywood agreed to work for a percentage of the film's net, thereby allowing the hand that feeds them to make a nice profit, before handing the talent any extra income. However, the studios began to employ "creative accounting," in that they would fudge figures, budgets, revenues, and all sorts of numbers to show that a particular film, despite its box office take, never netted a penny.

As you can well see, taking a percentage of the net, a set up designed to be fair to both the studios and the talent, began a system entirely unfair to the talent. So, the talent went back to "percentage of gross" deals, and the studios went back to fuming.

This problem, unlike the current strike, is easily solved. Simply set a specific box office revenue target, then grant the talent a percentage of the gross beyond that target dollar amount.

Example: Film A costs $60 million to make. Writer B (or Actor B, or Director B) agrees to the "gross beyond specific box office revenue target," which is set at the film's budget amount of $60 million.

The film is released and goes on to gross $260 million at the box office. Since the set level was agreed at $60 million (the budget), the studio recoups its production costs, and Writer B makes 5% of the $200 million earned above that level.

As box office figures are compiled independent of the studios themselves, there are no figures to fudge.

And hence, no more "creative accounting."

Vote Eastwood, who is likely to support my idea.

2 comments:

  1. It's not rocking the boat; the boat's already been rocked. This is stabilizing it.

    The studios win (by not having to give full gross percentages), the talent wins (by not having to accept net percentages). Seriously, who would rightfully disagree with such a proposal?

    Posted by JeffScape on December 19, 2007 - Wednesday - 2:41 AM

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  2. Dude you keep talking like that and you will get yourself buried next to Jimmy Hoffa :-)

    Ummmmm.....You would be creative at accounting too if you could line your pockets.

    I don't think you want to rock the boat on this Gravy Train broham.

    Posted by Johnny O™ on December 19, 2007 - Wednesday - 12:19 AM

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