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
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