How does “Hollywood accounting” work?


How does “Hollywood accounting” work?

In: Economics

Lets say big movie studio like Warner Bros wanted to make Forrest Gump 2. They would make an ‘on paper’ company (to make the movie) called ‘Forrest Gump 2 Movie Company’ then charge anything they wanted to the Forrest Gump company. Basically huge fees and although the film is a smash hit, they (Warner Bros) can make it look like it has not made a cent in profit because Forrest Gump 2 company still owes them money.

That’s how actors etc can be in a profit share contract of a huge movie but not see a penny from their profit share cut

The actors in Bones sued over this recently. They are entitled to a percentage of money for reruns of the show. Fox owns the show and a channel that wanted to show reruns of it. So Fox licensed the reruns to the channel for free. So the actors got a share of nothing. But Fox gets the revenue from the channel so they make the money from the reruns.