Hollywood Accounting Strikes Again: Investors In 29 Paramount Films That Earned $7 Billion Dollars Get No Return
from the those-accountants-are-really-expensive dept
Ah, Hollywood copyright math. In the past, we've discussed a few instances of how massively profitable films use funny accounting tricks in order to avoid ever having to show an official profit, even as the studios themselves make out nicely. The key trick: the studios set up special subsidiaries just for each film, and then charge those subsidiaries huge sums of money for effectively doing very little. Thus, the studio gets all the money, but the actual "film" is shown as remaining in the red.The latest example of this in action involves a group of investors who gave $375 million to Paramount Pictures expecting to see some return on blockbusters like Mission: Impossible III, Blades of Glory and the Transformers series. All in all, those $375 million dollars found their way into 29 movies, many of which were massively successful. In total, the collection of films brought in $7 billion dollars worldwide. And... Paramount didn't pay a single dime out to those investors, until they were finally taken to court.
Perhaps hoping to keep the mysteries of Hollywood accounting secret, Paramount has now worked out a "settlement" with the investors, just as hearings were about to begin. It seems likely that Paramount coughed up some money to keep the investors happy... and to keep from having to provide to the court information on how the money flowed, where all of us would have seen some more details of the infamous Hollywood accounting practices.The financiers charged Paramount with understating gross receipts, delaying payments, overstating production and distribution costs and hindering audit rights to verify revenue and costs with the films that Melrose II had funded. The plaintiff also had a bone to pick with how revenue from Melrose II-funded films was being received through Paramount parent Viacom, not Paramount, and how money was flowing. For instance, Paramount allegedly paid sister company MTV as a third-party participant for Nacho Libre and Charlotte's Web.
In reaction to the claims, Paramount initially described the lawsuit as "filled with hyperbole" and claimed that it "ignores the true facts."
Later, Paramount characterized the investors as being impatient. "Based on the performance of the films in which it invested, Melrose II is expected to make a double-digit return on its investment," the studio alleged.
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Filed Under: accounting, movies
Companies: paramount
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And they want us to respect copyright. I can safely and happily say I infringe copyright whenever I can just for the heck of it. And while I'm at it I try to make sure my money is gonna land directly into the pockets of the artists/producers/developers who are the ones that really matter.
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Of course would the DOJ actually go after Hollywood.
I love how a bunch of sleazy cheating pilfering companies expect their customers to be pure as the wind driven snow when it comes to buying their stuff....
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Either way, the DOJ isn't really going to bite the hand that feeds them. If all this ever reaches the light of day, the worse that could happen for them is that a few heads will resign and a few underlings will be given up as sacrificial lambs with favorable plea bargains, no one will claim any culpability, and the people who replace them will publicly claim that justice will be served while selling out before the seats they fill go cold. In the end, the publishers offer a settlement and everything will go on business as usual.
In reality, however, the big publishers have deep ties with the all major news outlets, not to mention congressmen and various heads in the executive branch. With the careers of so many of the current establishment on the line, they will individually ensure that nothing of the sort will ever happen. They would rather cover their own ass-ets than protect the American public.
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Taxes?
Now, I don't know jack squat about California taxlaw, and perhaps there are no taxes to be paid, but if there is - why aren't the IRS on their asses?
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Re: Taxes?
It might even cause Hollywood to pay more taxes than normal.
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Not to mention that they got a 1 billion dollar tax break this year. -_-
So, Hollywood, get your goddammed act together and just drop dead already!
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Under the Pall
Whoever has to be made destitute, whoever's reputation has to be destroyed - nothing is too over-the-top for these filthy, greedy pigs. And the artists just keep swarming to them - supporting their causes and participating in their mammoth flesh-eathing machine.
No pity. I have no sympathy for artists so long as they continue to support this sort of filthiness.
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Re: Under the Pall
If you ever want your movie into the mainstreams theatres you're still pretty much stuck. Times are changing though, with more and more being successful outside, less and less new artists will go the old route. Unfortunately it's a slow process, probably going to need at least another generation, if not two before things truly shift to where the machine is not the norm
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Re: Re: Under the Pall
What do you think will happen the first time an independent movie goes straight to, let's just say Google Play or iTunes and becomes massively popular, and maybe more than modestly profitable.
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If you can get a bank to finance you, you get fresh new money - a chance to get ahead of the curve, to carve out market share in a way private investment simply cannot do for you. What do banks want? They want sure things.
http://www.hollywoodreporter.com/news/wall-street-love-affair-movies-375945
How do you get sure things? It's not technically possible, but it is very helpful if you make competition illegal.
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Re: Re: Under the Pall
Artists have always had to work under the patronage of others. Broadly speaking, you don't eat, wear, or live in art. The richer your patron, the more you can make. And guess what sort of art rich patrons are interested in.
Ever heard of a Triumphal Arch?
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Ummmmm
But... but .. but... if you donate to Kickstarter projects, you might not see a return on your investment.
So how is Paramount any different than Kickstarter?
Other than the fact that a film maker on Kickstarter may not know all the crafty accounting practices of Hollywood.
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Redundant
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$1000 from shell company 1.
$1000 from shell company 2.
etc. etc
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The easiest way
I have mentioned this to a quite a few people and the look in their eyes is shock. It grabs attention. More people need to know about these slimy bastards thieving practices as they cry wolf time and time again about piracy while their pockets overflow with money.
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* allegedly, at least
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Acturally, it's "If you're paying YOURSELF millions of dollars, there's nothing left to call "profits".
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I was making a Star Wars reference.
Darth Vader: When we last left, I was but the learner, now I am the master.
Obi-Wan: Only a master of evil, Darth.
See?
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I worked for a startup that had a profit-sharing incentive for employees who got in early. After 5 years, I saw $0, and the owner sold the company for a tidy profit.
Now I know why we had such glorious end-of-year holiday parties - to eat up every last bit of profit so there was nothing to pay taxes on, and nothing to hand out to the employees.
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The only way the company would be worse off with turning a profit, is if the taxes and profit sharing add up to more than 100%, in which case you have that "Springtime for Hitler" scenario.
And if you had profit sharing, no profits were reported, the owner sold for a profit, and you got $0... you may want to talk to a lawyer, if you know what I mean.
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The profit sharing, well probably something like 100% shared or he just didn't want to expand the business! If you are a small startup with a few interesting immaterial rights in your pocket (copyrights, patents or trademarks), you are more likely to get bought than if you are a large or medium sized fish.
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And the owner's salary is an expense.
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Petition the white house!
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Why the fuck do people keep investing with them?
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Lawyer question
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On a side-topic, Matt Stone and Trey Parker started their own production studios called "Important Studios" because they too hate Hollywood and its practices.
http://www.guardian.co.uk/film/2013/jan/15/trey-parker-matt-stone-important-studios
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Highly unlikely.
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Also this little gem:
" I don't care about piracy for our stuff. I find it a fascinating thing to talk about, how the world is changing and all. But we're not like Lars over here. Its going to be interesting to see what happens over the next few years though."
http://treyparker.info/archives_transcripts_spstudios_05apr05.htm
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I'm not confident that you'll stop being a jackass and accuse me of doing it anyway, though.
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It really shows how single-minded and alienated from reality you people really are.
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it's even got it's own plug in for plex so i can watch easily from my tv's.
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EXCELLENT riff on Hollywood accounting
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Bad link.
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Invest 375MM get back
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US govt = hollywood
its soo broken ....
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Why isn't this fraud?
Why doesn't this apply here?
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If everyone's corrupt...
Then no one is.
Is that it?
And, yes, I'm paraphrasing movie quotes today.
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Perhaps the Gov't should hire Hollywood to keep the books
"See this $17 trillion deficit?? Its actually not a liability... its an asset that you can charge to...
-- Blink --
-- Blink --
oh wait...
:-)
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Re: Perhaps the Gov't should hire Hollywood to keep the books
"See this $17 trillion deficit?? Its actually not a liability... its an asset that you can charge to... a Collateralized Debt Object (CDO)... which you can then roll up into a Combination of Collateralized Objects (CCO) and then you can sell indexed securities that are tied to the CCO's payoff (and we know when that will happen...)
This is how Wall Street can turn the deficit into something that they can sell to dumb schmucks (aka common investors) with misleading and incomprehensible diagrams showing how all the funds flow in a circle and eventually 'fill up' the CCO (when pigs fly....) thus returning the investors funds with a double digit return."
No I didn't just take the Financial Bubble and turn it into s Deficit bubble, there is real 'equity' there that will be available as soon as the deficit is covered (or the US is repossessed by China, in which case all CCO's are null and void...)
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Absolutely needs to be reformed
Hollywood accounting absolutely needs to be reformed. But then again, as pointed out above, our entire system of banking, trading and financing needs to be reformed even more urgently.
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Re: Absolutely needs to be reformed
Doesn't surprise me. From what I understand, a new shell company is created on a per-film basis and then closed once production is finished, so that there's no paper trail left to be audited.
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Hollywood Accounting
RULE: Don't EVER do a back-end deal with a studio. It's a sucker bet. You'd think folks would have learned by now.
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Point of no return
Hollywood should register as a charity to avoid scamming (er, misleading) people with both money and optimism, otherwise at some point (why not already?!) they'll be prosecuted for confidence trickery (i.e. fraud).
Not only can the Nigerian 419 scammers learn something from Hollywood, but there could be a movie in this! :-)
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And your source for this information?
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