Hollywood Accounting | How Movies Make Nothing

Hollywood Accounting is the interesting (shady) practice, where a movie will purposely lose money, on paper, to avoid paying royalities. Famous examples of Hollywood Accounting include The Return of the Jedi and Forrest Gump. So What is Hollywood Accounting? In this practice, when a studio is producing a movie creative accountants working will set up the movie as it's own company. The company then charges everything back to the studio (which is making the movie, just not on paper) Then at the end when the credits roll and the ticket revenue rolls in, it doesn't cover what was charged internally, and so makes nada! But in reality the movie made millions. Hollywood Accounting, or rather, how movies purposely make nothing at all.

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[christopher_martin]

remember this everytime you see that thing before movies saying pirating is not a victimless crime, its not ok for you to steal, just for them too....lol

[rogerferris]

And don’t forget, if they don’t make any profits, one would assume they wouldn’t be eligible to pay the IRS anything on it. Sounds like an excellent way to avoid your taxes.

[g-maof]

This is why, say, a novelist will sell the rights to his book outright to a producer or studio. The movie may only barely resemble his novel, but he gets paid upfront and is done with it; doesn't have to worry about so-much-percent of nothing.

[Padoinky]

As a recovering CPA and iBanker, this creative accounting approach is common place in so many business models - mining, oil/gas, agriculture, hell even Solar panel mfg and NYC taxi medallions lol. There is always a “gotcha”... if you must be involved, at least ensure you are on the “right” side of the deal

[ricosuave]

Literally the most educational thing I encountered today. Well done, thank you.

[oevilone]

This is mind boggling nuts! And the IRS lets them get away with this?? Unbelievable! It's a shame it's not more publicly known how blockbuster movies are considered not profitable by studios.

ETA: I really like, and appreciate, you put sources in your video description!!

[heavyhanded]

Wow how is Forrest Gump still not that’s insane and should be illegal...

[baconsogood]

Yet another way in which Hollywood is corrupt AF. So glad I decided to go back and watch all of Mike's videos from the start. This channel is incredible!

[BabyBishRemy]

My husband works for the industry and union reps are constantly trying to get a piece of the streaming revenue. ATM union retirement plans and medical benefits are partially paid for by "Theatrical" money. Now that things are moving more and more to streaming none of the workers are getting their cut. Benefits are being slashed and fought over during contract negotiations.

[BSsex]

i dont understand how this is legal. Isn't this high corruption?

[jenniferlee]

Geez!! Is there anywhere in God's green earth honesty and integrity can be found!?

That's why i don't pay for any movie, i download them via torrent

[mervviscious]

same way they used to treat rock bands...

[JeffPittman]

This was fascinating! Didn't learn this in accounting class...

[Padoinky]

The Darth Vadar clip is actually that of actor Rick Moranis, portraying “Dark Helmet”, in Mel Brooks’s Star Wars parody film, Space Balls

[LAXx]

if you're involved in a movie, & your in a high enough position to warrant a percentage of a movie's take, negotiate for "gross points" (a percentage of movie's gross revenue), but don't be suckered into "net points" (a percentage of a movie's net income).
"there are two parts in show biz: the show and the biz ...and you better make sure you're good at both."

[dragonflybtchbauer]

I've heard the term "Hollywood Accounting" and always wondered what it meant. However, I wldnt be in position to do quick search and it wld slip my mind by the time I cldv looked it up.

Thank You so much for this video. It was precise. I'm always frustrated when a creator puts in a ton of useless info so they can get a video to a certain length. When a creator has done that twice then I'm out.

I completely understand wanting s certain video length BUT GD, ppl... the occasional short video aint gonna kill ya. Also you cld do 2 unrelated topics in 1 video and just provide a quick explanation why you put these 2 topics together.
Again THANK YOU! And Sorry, this comment is almost the same thing that I just complained about. Oh well, anyway.... Such is Life!

Blessed Journey &
Continued Success
May you & yours and all y'all out there have happiness, good health, lots of wisdom and whole hell of a lotta fun. While having fun remember: the trouble wit trouble is it's starts out as fun!

[B_Rich]

Subscriber here, just going back and watching all your videos from your very first video! Love your channel!

[lisahinton]

I had moved to Los Angeles at the age of 21. Lived there for 26 years. In that time, couldn't help but learn interesting little tidbits about "The Business" (the entertainment business, for the rest of the world, but simply "The Business" or even just "The Biz" to everyone in southern California), and had learned long ago about exactly this practice. Disgusting.

[rockstarofredondo]

Wow i always knew they were scumbags but this is low!