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December 31 at 8:15am

You Will Never Make Any REAL Money With Hollywood

By Ted Hope

how do you expect to get your money from Hollywood?

how do you expect to get your money from Hollywood?

Why did Mike DeLuca leave an incredibly successful producing career to return to the executive suite at Sony? After leaving the reigns of New Line, he produced Moneyball, The Social Network, and Captain Phillips among others.  It’s hard to match his track record.  Yet he too has given up producing.  Why?

One can only assume the autonomy of producing is more pleasurable than the pressures of running a studio.  One can also assume the confines of Sony are a hell of a lot more secure.  Rarely does one gets paid their value for producing a film, and if it is a project you love and is even a wee bit challenging you are going to watch that diminished fee take another cut or five. If you want financial security or wealth, don’t be a producer.

But there’s always the back end, right? Yeah, and there are suckers spawned every second. Well, once again we are being reminded that the only thing that Hollywood thinks the back end is for: a place to get fucked.  Hollywood accounting is an incredible art, evidently more refined than the other cinematic arts, but accounting clearly only has one story it can tell: exploit the creators and those that support them.  Don’t you think it would make sense for the studios to put out some stories about how artists made a fortune through profit sharing?  It would lower their upfront costs. But instead we get story after story of a film or series being a tremendous hit, and the participants having to sue to get theirs. But they never tell that story any more these days, do they.  Instead, the latest installment of the profit participation saga is fittingly around the industry’s metaphoric equivalent, The Walking Dead.

As of Sept 2012, two years after its premiere, AMC claims Walking Dead‘s deficit is $49M.  C’mon! And even if it was, since they also know that

the zombie apocalypse drama now averages a staggering 13 million viewers — 8.4 million of them adults 18-49. The haul in the pivotal advertising demographic solidifies its status as the highest-rated scripted series across television, and on several Sundays this fall it even outperformed NBC’s Sunday Night Football.

they know they have a truckload of money coming in down the road, and they can reward those that helped get them there.  But do they?  Of course not!

The HRptr article goes on to explain:

“Darabont’s lawsuit is the latest in a long line of so-called “vertical integration” cases in Hollywood that arise when the producer of a TV show also distributes it via an affiliated entity that pays a license fee to be shared with talent. License fees are supposed to be negotiated between producers and distributors to reflect the fair market value of a given series. But litigation brought by producers of hit series including Home ImprovementThe X-FilesWill & Grace and Smallville have alleged artificial manipulation of license fees between “vertically integrated” companies to minimize or eliminate payments owed to talent. “This practice, known as ‘self-dealing,’ is at the heart of this dispute,” the Darabont lawsuit alleges.”

But it is also just the latest in a long line of hit films showing that Hollywood does not want to reward those that got them there.  We need  a sustainable creator class.  We need  a sustainable investor class.  We need a total systems reboot of the film industry so that the creators and their supporters can be the direct financial beneficiaries of the work they generate. We need to make indie film work for investors.  

The list of how filmmakers, their collaborators and their backers have been taken advantage of continues to grow:

  • In addition to the recent Walking Dead case and the other 4 cited above, we have:
  • Wouldn’t you be embarrassed if you released a film on DVD and it generated $139 Million Dollars (on DVD alone) and you only shared 12.88% of that tremendous wealth with the people who created the movie? That is what happened with Napoleon Dynamite. They got away with applying an old world model (and math) to one that had already changed. Read the shocking story here.  
  • Although Harry Potter and The Order of the Phoenix grossed $938.2 million worldwide, the accounting statement conveyed that the film is still over $167 million in the red.
  •  A jury found the Who Wants To Be A Millionaire  accounting unfair and awarded the producer $270 million in damages, after the jury believed that Disney used “vertical integration” and other inappropriate methods to avoid having to pay out their legal obligation.
  • “In 2010, Rysher Productions was ordered to pay Don Johnson $23 million in profits for the Nash Bridges show and interest. Rysher was also ordered to pay an additional $28.5 million in interest.” In the end, Johnson settled for $19 million.

It seems if you want to play in the big leagues, you have got to lawyer up from the beginning.  Even Harvey Weinstein has to sue to get his part of the profit pie. I know of a case where a producer sued a distributor/financier and won significant damages. In it it was revealed that the distributor made it a business practice not to pay out what it owed as it was cheaper than paying damages.  They evidently owed over 50 other producers money that they were not planning on paying out unless they were sued.  Or so I heard.  

You get the picture of what we are dealing with.  The books are cooked and you need to spend money and time if you want to get your fair share.  This cracks people’s spirit.  Doing really want to play such games?  Can’t we build a better system? YES WE CAN!  

It is time for a total systems reboot of the film infrastructure.


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