When the Established Film Industry’s Money Math Doesn’t Add Up

What would you think of a company that took in a lot more money than it spent but reported only losses? With most kinds of companies, it would seem scandalous. In the case of Hollywood production companies, though, it wouldn’t be unusual at all.

It’s commonly assumed that big names in Hollywood mean big salaries. And if you’ve ever stuck around through the credits at the end of a movie, you know there are a lot of people to pay when it comes to studio expenses.

However, what you might not know is how established film industry money math can bloat expenses to make gains look like losses. It doesn’t always happen with a production, but it happens enough to make “Hollywood accounting” an actual term for an unreal financial practice with a not-so-praiseworthy purpose.

How and Why Some Studios Let Blockbusters Bomb, Budgetwise

Whatever the intention one may pin on the execs and number crunchers involved, it’s no secret that some obviously profitable movies have ended up looking like flops because their returns were dubiously reported as losses:

Blockbuster Film	Box Office Earnings	Budget	Reported Loss
Star Wars: Return of the Jedi	475	32	“Never made a profit”
Forrest Gump	683	55	-62
Harry Potter and the Order of the Phoenix	942	150	-170
Men in Black	589	90	“Never made a profit”
Coming to America	288	36	“No profit”
Bohemian Rhapsody	911	55	-51

(Numbers in millions, USD)

How “Hollywood Accounting” Is Done

Essentially, a film’s production is set up as a corporation, more specifically a shell corporation, which takes the money a movie makes and hands it to the studios. From there, film industry money madness can take off, with the studios paying themselves whatever they want for virtually any kind of production-adjacent expense, inflating costs to make it look like there’s no profit.

This flexibility—as exercised in a culture that’s widely secretive about the finances of productions as it is—is what allows Hollywood accountants to claim a loss despite good earnings. Producers have even been known to assign expenses to the currently highest-grossing movie to affect ultimate financial results.

So why would a studio undercut the true economic value of a movie, making profits look like losses, when other kinds of companies do their best, legitimately or not, to make themselves look as profitable as possible?

As we’ll see shortly, many of those who create and appear in film productions have already made up their minds about the answer to that question, claiming it’s a way to keep them from receiving a share of the profit they’re due. After all, if a production looks like a loss on paper, there’s no profit to share in.

Who’s Hurt By Fuzzy Film Financing, and Some Who’ve Fought It

A notable example of one such claimant, among many, is the actor playing Darth Vader, David Prowse, who’s received no share of profits from Return of the Jedi as contracted for. Although this will likely seem ridiculous if you know about the success of Star Wars movies at all, the table previously shown reveals the actual numbers that prove it.

In fact, many performers and creators in similar situations have sued over the falsely reported value of a movie project they’ve contributed to. Examples include actors such as Kevin Costner, whole teams of actors and creators such as those behind This is Spinal Tap, screenwriters such as Anthony McCarten (for Bohemian Rhapsody) and directors such as Michael Moore.

With so many examples across different kinds of productions and roles, “Hollywood accounting” has become commonly known and tolerated despite being highly unacceptable. However, such cockamamie calculations don’t have to be the status quo.

That’s because new paradigms of film production financing, such as Film.io’s blockchain-based movie crowdfunding platform, offer established film industry alternatives that ensure all stakeholders are treated fairly.

Essentially, Filmio is for those who simply want to make great movies with other creatives and fans but also get paid what they’re really worth, from what their work can really earn.

Finally Seeing Behind the Screen as Well as What’s on It

With Film.io’s movie crowdfunding platform, it’s virtually impossible for creators to be edged out of profitable movies by fabricated figures, for many reasons.

First of all, the way Film.io’s platform is blockchain-based ensures a production’s transparency because blockchain technology is immutable.

Not only does Film.io’s transparency set it apart from the established film industry’s opaqueness, but many of the groundbreaking platform’s other qualities also set it apart, and refreshingly so.

With Film.io, fans aren’t set up to just passively accept the kinds of movies they happen to be able to access or share their insights through relatively ineffective, traditional evaluation methods such as screenings.

Instead, among many other functions such as communicating directly with creators, fans can vote to greenlight which movies are produced, through Film.io’s special utility movie token, the FAN Token.

Indeed, a movie’s financing is based on definitive metrics at every step through Film.io’s innovative ‘Go Score’, which is substantially based on fan input and largely determines how a film is funded, produced and distributed.

In this way, Film.io’s system is as efficient as it is transparent, as films on its platform aren’t financed until they have enough potential to succeed. In the process, Film.io is setting a new standard of accountability and accuracy in film financing.

Ultimately, with Film.io, fans see the movies they want to see and creators’ rights are treated with respect through contracts whose transparency is technologically guaranteed. What’s more, producers are held to a higher standard and investors are provided with more accurate, fan-driven metrics about more carefully and consistently developed projects.

Not only that, for all of you movie makers out there who just want your voice heard and project greenlit, Film.io’s platform levels the playing field, enabling audience building and fan interaction to anyone who has access to the internet.

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Last modified on August 3rd, 2023 at 5:09 pm