This Men In Black Secret Will Blow You Mind (For The Worst Reasons)

Hollywood Accounting - The Summer Blockbusters That Somehow Make No Money

Gone In 60 Seconds Nicolas Cage
Buena Vista Pictures

So, what does Hollywood Accounting actually entail? Speaking to NPR in 2010 on the Planet Money podcast, Edward J. Epstein, the author of The Hollywood Economist (which dives into the dark financial arts of the movie business), described the process of said practice and how films can generate millions against a smaller budget and still end up making a net loss.

Using the example of Gone in 60 Seconds - a Disney produced car-crime caper which starred Nicolas Cage and Angelina Jolie - Epstein described how, even though the film was considered a success by then CEO Michael Eisner, grossing $242 million against an $103 million budget, according to Disney's own profit statements, that gross was swallowed up by a number of different costs.

As Epstein explains, theatres reportedly kept $129.8 million, and remitted to Disney $101.6 million. $67.4 million went to advertising costs, which when combined with logistics costs and other expenses, apparently brought the total gross profit to $11 million. This apparently led to the movie being $90 million in the red - meaning it has now made a loss. Home media sales and TV residuals apparently do not make up for this either, leading to Gone in 60 Seconds somehow making a $212 million loss, despite a portion of those losses essentially being fabricated, as it's essentially just money the studio has charged to itself.

This is because each movie gets set up as its own company by the studio that is making. That company then pays fees to the company that is already producing the film to begin with. The biggest of these fees is the distribution fee, which tends to be "30-35%" of any sale on that film, be it physical media, streaming, TV showings, or merchandise.

This also creates illusory income - actors receive contracts that include an up-front payment but also payments contingent on net profit. As the hosts of Planet Money describe, an actor's contract may be worth $10 million, but most of that could be comprised of net profits that will never materialise. Epstein argues this is done to guard actor, director, and producer contracts and for agents to protect their value by hiding their up-front salary, but the other consequence is that creatives are denied money they had reason to believe would be theirs, but that the studio never had any intention of paying.

Advertisement
In this post: 
Men In Black
 
First Posted On: 
Content Producer/Presenter

WhatCulture's very own resident movie guy, Ewan has been working in the content creation biz for over 10 years now, having started as a freelance contributor to WhatCulture Gaming all the way back in 2015. After graduating with a First-Class Honours in History from Northumbria University in 2017 (where he won a prize for a totally killer dissertation on the Watergate years), Ewan took on the role of Comics Editor at WhatCulture and quickly developed WhatCulture Comics into one of the biggest superhero-focused channels on YouTube. He followed this with a brief hiatus at Screen Rant in 2021, where he worked across the Gaming and Film sections as a writer and editor, before returning to WhatCulture as a Senior Content Producer / Presenter in 2023. He started his own podcast, We Love Dad Movies, in 2022, and has contributed several written pieces to the Eisner-nominated comics website Shelfdust as well. In his current role, Ewan incorporates his love of cinema, comic books, and history into written pieces and video essays for WhatCulture's Film & TV channel, as well as WhatCulture Gaming and WhatCulture Horror, with a particular focus on nineties-era Dad Movies, old school Westerns, and Golden Age Hollywood Noir. John Carpenter is his fave, and he thinks Batman Beyond should never have been cancelled. If that's your vibe, you'll probably like his stuff.