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principles of finance a la shmoop- Hollywood accounting. ever read missives

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about the Hollywood accounting? well the vibe is undoubtedly bad. like who thinks [accounting explained on a whiteboard]

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a Hollywood accountant is generally like good anyway? other than the power player

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who hired her of course outright lying about expenses is too easy a method of

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cheating. instead in bad accounting costs get overstated a producer has to rent a

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ranch to shoot a horse chasing an alien scene. it's lo alien. but that ranch just

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happens to belong to the producer. is it accounting leak kosher to have the

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producer actually rented from herself? well technically it is in fact kosher

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but the optics are bad too much room for corruption to take place, and you know

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the producer really wanted that West field plowed for personal reasons ,but

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maybe you suggested that the film needed the West field plowed right? so the movie [black and white of horse pulling a plough]

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pays for that plowing and/or the house and or anything else. that fair not fair?

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well not fair. optics matter. when you're the financial manager that cliche holds.

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you build a reputation over decades and you can destroy it in five minutes .and

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yes your personal life enters into your professional life these days whether or

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not you think that's fair. even in Hollywood. but here's a hard thing to

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think about only one in 20 movies make a profit. like a real profit .so that one

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movie has to pay for the losses of the other 19. well when you've greenlit a

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slate of 20 movies which will rent a soundstage for two years for two million

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dollars how do you account for the cost of that two million dollars? well if you

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allocate by revenues then you'd quote burden unquote the big hit monster movie

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starring Brad Pitt aful which was 90% of the revenues of the 20 movies and with [revenues listed]

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90% of the cost. the whole slate of movies generated a billion dollars of

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revenues and while shmoop wars with Brad pitiful was 900 million of that. the

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other 19 movies totaled only a hundred million of revenues. you know in the one

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starring Amanda Bynes that only was 14 bucks. even though she mop wars took only

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one twentieth of the time of the rental of that soundstage is it fair to burden

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it 90% of the costs? hmm so is it fair well

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we're thinking. and then how do the profit participants feel about that

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allocation ?meaning that Justin Boober or Brad pitiful stars of the movie, [profit participant defined]

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well Brad anyway was to keep 10% of the profits of the film the film was clearly

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very profitable. have you charged one twentieth of the two million dollars for

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that soundstage rental well then it's rental expense in the film would have

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been a hundred grand but instead you charged one point eight million in

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studio costs so you just essentially well you took away one point seven

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million dollars in profits from Brad pitiful profit pool and that would have

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netted him a hundred and seventy grand Brad's agent will be none too happy

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about this arrangement. legal yes. fair? well maybe why maybe well because when [equations]

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the movie was funded nobody knew it would be a big hit had the movie done

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horribly would the studio have asked Brad pitiful for his salary back? no the

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studio will argue that it's totally fair because this big hit movie just made

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Brad pitiful even more valuable and on his next contract he can secure even

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better terms. and in fact in real Hollywood definitions of profit are a

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big part of the contract negotiations for big stars accountants as deal [people frown sitting at a table discussing terms]

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quarterbacks. yeah who knew?

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