Hollywood Accounting Rears Its Ugly Head Again: Fox's 'False Testimony' And 'Aversion For The Truth' Leads To $179M Fine

from the this-is-endemic dept

For years, we've talked about bullshit Hollywood Accounting, in which the big studios make boatloads of money on films and TV shows while declaring publicly that those works never made a dime in profit. As we've discussed, in its simplest terms, the studios set up a separate "corporation" for the film or TV project, which then it charges massive fees -- and the sole purpose of those fees seem to be to send all the money to the studio, while claiming that the film or TV project is "losing money" and thus they don't have to pay out any profits to the actual creative people.

Remember this the next time the MPAA goes around talking about how its mission is to "protect creators."

Over at the Hollywood Reporter, Eriq Gardner has the latest bombshell example of Hollywood Accounting, which has resulted in Fox being told by an arbitrator to pay $179 million for repeated and obviously intentional dishonesty in reporting on the profits of the TV show Bones:

In coming to a decision, Lichtman describes how some of Fox’s top executives, including 21st Century Fox president Peter Rice and Fox TV CEO Dana Walden (soon to be top executives at Disney) plus Fox TV chairman Gary Newman (leaving Fox) “appear to have given false testimony in an attempt to conceal their wrongful acts.” According to the ruling, Fox has taken a “cavalier attitude toward its wrongdoing" and exhibits a "company-wide culture and an accepted climate that enveloped an aversion for the truth."

What is clear in reading through the details is that this scam works because everyone at the studio is on it. This is not some scam that came out of nowhere. This is the standard operating procedure used by the big Hollywood studios to screw over the people who were actually behind the creative aspects of the show, who were promised a cut of the profits that never arrive.

In this version of the scam, Fox also roped in Hulu, the online streaming platform it owns 30% of. In this case, it used Hulu to suppress the money coming in for the show, so it could show lower income for the sake of hiding profits.

In arbitration, Fox attempted to justify the low license fees that Fox Broadcasting, Hulu and Fox’s foreign affiliates were paying its studio division for rights to air the series.

“Bones was a middling show with middling ratings,” wrote Fox’s lawyers in an opening brief, adding that a higher fee from the $2 million per episode paid would have led to the show’s cancellation.

As Lichtman discovered in the course of the arbitration, though, Fox’s studio executives were never really interested in finding out the series’ fair market value.

“We were not allowed to get that information from the network,” testified Walden, who at the time ran the Fox studio but not Fox Broadcasting, when asked about the possibility of finding out what the network paid for similar shows in their middle seasons.

Given that the profit participants had self-dealing protection in their contracts that “deals must be as good as marketplace deals,” the arbitrator found Walden's lack of knowledge to be “either shocking if true, or disingenuous if false,” adding, “Interestingly, both Ms. Walden and Mr. Newman testified that they engaged in tough negotiations and fought for the [Profit] Participants. However, the evidence belies these assertions. How could they fight if they were not properly armed with the requisite information? What negotiations were there if the information mandated by the contract was not examined, called for or even investigated?”

It also comes out that Fox threatened to cancel the show unless those who contractually were supposed to get a cut of the profits signed a special agreement promising not to challenge the self-dealing licensing fees that Fox negotiated. As the story notes, other Fox actions at the time -- including signing on the showrunner of Bones at an expensive new contract to continue the show -- made it clear that this was a total bluff by Fox just to get the profit participants forced into a position where they couldn't challenge the sham licensing deals. The arbitrator calls this out directly:

The answer is self-evident: The show was not going to be canceled and there never was an intent to do so. The intent was to continue with the show and at the same time bar any chance for a lawsuit to be brought.

Also, there appears to be significant evidence to suggest that Fox tried to buy off a former executive who had organized a plan to avoid paying out profit sharing, by offering him insanely lucrative "deal" right before he was set to testify about the Bones situation:

And all of this activity was coming as Fox Entertainment’s then-chairman Peter Liguori sent a memo in 2009 to Fox Broadcasting’s then-chairman Peter Chernin outlining a “legal action plan” to avoid paying license fees covering the full cost of show production.

Shortly after sending this plan, Liguori would leave Fox and would later become CEO of Tribune Media, stepping down in 2017. The ruling reveals something new and startling: After his stint at Tribune and in the heat of this arbitration, Liguori signed a "First Look Agreement" with FX, which provided him contingent compensation far exceeding that of top executive producers in Hollywood. According to IMDb, Liguori's sole credit is a 1996 film, Big Night. Nevertheless, and with absolutely no public fanfare whatsoever that he now has a deal with FX, he is apparently getting profit points surpassing the industry's top showrunners.

"Why and how did this come about?" asks the arbitrator. "FX apparently issued no press release reporting its deal with Liguori. When viewed in light of these circumstances, the Liguori 'legal action plan' is far from innocuous. If one juxtaposes the First Look Agreement with Mr. Liguori's testimony at the hearing (where he downplays the significance of the plan itself), it seems coincidental that Mr. Liguori disappears for nine years (from Fox's radar) and then magically reappears with a First Look Agreement seven months before he is to testify in these proceedings with a deal in hand that most producers in Hollywood have strived to have their entire entertainment career."

There is a lot more in Gardner's article, which makes it incredibly clear that this was all standard operating procedure at Fox. Basically, the company appears to do anything possible to avoid an official "profit" on its works, to avoid paying out to the creatives involved in the show who signed on to participate in any profit. From this story alone, the company clearly had a detailed plan to avoid such payouts, and then bolstered it with sham deals, bogus threats, forced contracts, multiple levels of lying, and even potentially buying off a key witness.

Yeah, and Hollywood wants to paint the internet companies as bad?

Perhaps it shouldn't be shocking that the very same people who rush to the press and politicians to whine about some kids getting a free copy of their tv show or movie online would be in the midst of a massive multi-million dollar scam to defraud actual creators -- but it does seem like maybe (just maybe) we shouldn't be so quick to take those folks at their word when they complain about the internet and "piracy."

Filed Under: bones, fees, hollywood, hollywood accounting, lies, profits, scams, self-dealing
Companies: disney, fox, hulu

Facebook Is Flagging/Banning Accounts For Posting An Admittedly Strange Children's Book Illustration

from the no-leg-to-stand-on dept

I'll admit that very few things in this existence we all share give me as much pleasure at poking at the prudish censorship employed by Facebook. The overly broad puritanical guidelines, theoretically designed to save our sensitive eyes from anything as horrible as a breast or a penis, often instead results in the censorship of parody, renowned artwork, and bronze statues. That sincere but misguided attempt to keep things PG on its site is inherently funny, but nearly as inherently funny as is the fact that the following image was (rather innocently) included in one of a collection of children's books in France, entitled Images of Ponies and Horses.

Right about now you're thinking that you just witnessed a French how-to manual on having a horse be all that it can be inside of you. But it isn't! Honest! What this actually is is an attempt by the illustrator to show how similar the bone structure of human beings and horses are by aligning their respective physiology in this way. A rep from the publisher told BuzzFeed:

"Obviously, we never wanted to shock our readers with that drawing," a Fleurus spokesperson told BuzzFeed. "We publish educational books and make realistic or explanatory illustrations. In that case, our goal was to make the child visually comprehend that the bone structure of the horse and the human being are similar," they said. "Putting them in the same position makes the likening more understandable and concrete."

So, we have an unfortunately designed illustration that was supposed to be educational now going viral entirely because of the context our own dirty minds adds to the image. BuzzFeed wrote a post on the image, only to find that -- you guessed it -- Facebook had begun flagging the article as it was being shared on the site.

Well, things got even weirder with this horse thing. Facebook seems to be flagging this article — the one you're reading right now — as pornography. And then, after Facebook removes this article from your feed, it makes you go through your photos and verify that none of them are pornographic. In fact, Facebook's moderators seem to find this horse picture so inappropriate, a member of BuzzFeed's social media team received a 24-hour ban from posting on BuzzFeed's Facebook page.

And this is why Facebook should get out of the morality business to every last degree possible. An article about a hilarious, but innocent, educational illustration is being flagged, users are being hassled about their other photos on the site, and some folks are even getting banned. Because? Well, because it appears that Facebook moderators have the same perverse baseline psyche as the rest of us, resulting in an image of a man and a horse being compared physiologically becoming suspected horse-man-porn. And the article pointing out what it actually is is the one that got flagged. That's as much of a failure of this sort of thing as we could hope for.

Filed Under: bones, errors, flagging, horse, social media
Companies: facebook

DailyDirt: No Bones About It

from the urls-we-dig-up dept

Some folks want to suck out all the marrow of life, but apparently when it comes to fast food, it's much more expedient to just suck all the meat off the bones, grind it up with some other stuff, and fry it until it's a delicious golden brown. Chicken nuggets are popular with kids meals, and there are apparently various patented processes for cutting up chicken meat into innovative products. Here are just a few good nuggets on some fast food chicken items.

• What is a chicken nugget made of? An anecdotal analysis finds that some chicken nuggets (not McNuggets) are mostly fat (~56-58%), about 40-50% muscle meat, along with some bone fragments and breading and other bits. (And don't forget the BBQ sauce.) [url]
• McDonald's Canada took a film crew to document the process of making chicken nuggets. Did you ever notice that there are four distinct nugget shapes: the bell, the ball, the bow tie and the boot? If you want to see how the sausage nugget is made, check out the video. [url]
• KFC got on the boneless chicken wagon in 2013 to go after the 6 in 10 customers that say they prefer chicken meat without bones. Customers have to pay a little more to eat chicken without bones, so the convenience comes with a price. [url]

If you'd like to read more awesome and interesting stuff, check out this unrelated (but not entirely random!) Techdirt post via StumbleUpon.

Filed Under: boneless, bones, chicken, fast food, food, mcnugget, meat, nuggets
Companies: kfc, mcdonalds