Another tactic I've heard of is raising salaries. The movie never becomes profitable because the executive producer's salary is "3 billion." great video
I see no fraud as long as the IRS gets its share… actors just need to read the contract and deny the businesses the ability to do this, their fault for signing a bad contract at least to some extent.
@@ottof9808 Have you ever read the terms of service for any major service? They’re full of jargon and vague language, making them difficult to read and even harder to fully understand. While many actors might have lawyers to review their contracts, those who don’t are at a significant disadvantage and are more likely to get taken advantage of. On top of that, Hollywood is super competitive. Even if an actor recognizes and rejects a bad contract, someone else might take it out of desperation, perpetuating the cycle. We don’t blame victims of scams for losing their money-so why should we blame actors for being exploited by unfair contracts? The responsibility to ensure fair pay lies with the industry and its practices, not solely on the individual actors.
Ed Solomon, the writer for Men Black says he has yet to be paid, because the movie "didn't make money". My favorite then he said was "It didn't make money, that's why they made 3 sequels and a tv show." But he also noted that the way they have a movie continue to lose money for years, regardless of dvd sales or streaming, is because they are constantly writing off random things towards the movie. For instance, the producers will go to a restaurant for lunch, right now in 2024, and claim it was a business meeting for Men in Black - writing off thousands of dollars throughout the year.
Yup. I interviewed Rob Zombie back when House of 1,000 Corpses came out, and he talked about Universal calling him into a lunch meeting to talk about how he was going over budget for the movie, and then charged the lunch to the production.
People claimed that Black Adam bombed at the box office and that is the reason we are not getting a sequel yet as you pointed out Men in Black lost money, yet we got 3 sequels and a TV show. Does that make cents to you??
It's not just Hollywood, either. Here's a little story for you: In 1980 I spoke with UK film producer Walter Shenson about a couple of films he had helmed in the mid-60s, and he told me that at the time he had been given a choice of taking a very small payday up front or signing a deal in which he would outright own the movies -- lock, film stock and barrel -- after fifteen years had passed. Shenson was proud of his work and went with the latter option. The studio was delighted with his choice. Here's the thing. The two films had no big name actors attached; they were vehicles for cashing in on a new fad that was expected to burn out within a year or two and the stars were young kids with no track record -- and the youth demographic the flicks were aimed at would be adults in fifteen years. When word of the deal got out, Shenson was a complete laughing stock. When I spoke with him, fifteen years later, he was in the process of getting very expensive restoration jobs done on the films, financed entirely out of his own pocket -- and to top things off he had just discovered that the original negatives had *not* been handled with care. In creating trailers to promote the movies in overseas markets, someone had decided to simply cut chunks out of the master celluloid and didn't bother to return the pieces afterwards. However, people weren't laughing as loudly as they had before -- because Walter turned out to be smarter than they thought; his newly acquired rights to A Hard Day's Night and HELP!, both starring The Beatles, went on to make a great deal of money as theatrical re-releases, international television favorites and home video purchases. And he got every penny!
I am an accountant this a couple things I’d like to point out for those interested. This is not something that’s only seen in Hollywood. The practice in the accounting world is called “Transfer Pricing”, it’s taught in CPA programs. If you want a good example of this, look into how much tax Starbucks pays in Europe and how they did it. Some companies accountants are so good at getting these numbers into loses for the years that the company pays taxes to the local government as a gesture of goodwill. They didn’t have to pay them legally but they chose to, because they’re such good corporations. TP accountants do very well for themselves
Accountant: "Okay, keep your eye on these profits. I'll put them under this here cup. Don't lose track." Government: "Got it. The middle cup. That's where the profits are." Accountant: "And here they go shwing shwang shamallaballabong." Government: "The cup on the right." Accountant: "Are you sure? Ahh, too bad, no profits under this one." Government: "Dang it!" Accountant: "One more? Same subsidy as always." Government: "Okay, here you go. But this time, I want to get some taxes out of this. Come on, daddy needs a new [education, health care and infrastructure]."
I have a friend who works for a multi-national company whose head office is based in a beneficial tax location, this is considered the brains of the organisation, as such the TP can be adjusted per country to ensure that the amount of tax paid in the operating market is reduced to a minimum. All legal but is sneaky.
@@dlb550 ...But that's the whole point though. The higher-ups don't want honest business. Sometimes overpaying a shady professional such as an accountant can make/save you soooooo much money. In some cases you even get to blame them after.
Corporate America picked up on this years ago. It's called Financial Engineering, where you show Profits to the Shareholders and Losses to the Taxman. ( see Enron, Worldcom, Tyco etc)
Which is why Ireland is so popular. "Oh yeah! We totally operate our multi billion dollar empire out of a closet in Dublin.Oh no! Looks like our tiny branch in the US lost money. Oh well."
Yeah you mention Enron, WorldCom and Tyco and they're all dead now. This thing has been going on in Hollywood for decades though by the same companies with no recourse. Wonder why...
@@rogerhalt3991 For sure. My head is full of little anecdotes. Another good one was when working on Slither with James Gunn. Editor Chris had a note on the door that said: "Give me what I want! Not what I asked for!"
You may be able to answer my question then. The only thing I was thinking this entire time is how do people fall into this trap? If it's so common why do actors not know about it. Maybe you get burnt once on it as a young actor, but why would you ever accept a role again without either a flat fee or gross pay?
Real accountant here. I don’t do the shady stuff as I find it morally reprehensible. But I know about it. When big business wants to dodge paying taxes in a high taxing country, here are a few ways of increasing costs to get that “profit” line to 0: 1. “management fees” of the high tax subsidiary always magically seem to roughly match the exact profit that subsidiary would have made. 2. If the parent company supplies the inventory of the subsidiary, they jack up the price of their inventory to make the business unprofitable. 3. Increasing royalties on sales to make the business unprofitable.
I am an accountant too and I find these accounting practices to be not shady or tricky at all as they are commonly applied to other industries as well. If these LLCs are audited, nothing highly irregular or illegal would be found. What I find suspicious are the fair value measurements under US GAAP compared to IFRS.
Mel Brooks wrote a musical called "The Producers", where the protagonists' goal was to create the biggest Broadway flop. It's hilarious how a musical film from the 60s is still true to this day.
If enough people do that, they'll just stop making so many movies. I like movies. There aren't enough good ones. I want them to make as many as possible, within reason. I'm happy to spend some money to help out.
I can’t believe we’re calling this a “loophole”. I can’t even begin to imagine this holding up in court. A company makes money after expenses and says they didn’t. How could this possibly not be fraud.
Because they're wealthy, powerful, connected, and influential. You can't comprehend it because you lack all of those things (as do the majority of other folks on the planet). Rich gotta rich. 💪😎✌️
@@jamad-y7m Trump tapped into people's justified anger but will mostly just cut taxes for the rich. The only people who talk about the problems of finance capital are Marxists, socialists, communists, and anyone using classical (Adam Smith) economics who understands what economic "rents" are and that "free markets" means markets *free from* financial manipulation and economic rent seeking. The US Supreme Court would have to be completely replaced with honest judges who would break up the big monopolies. Then we need public banking for low interest loans, and to cut the legs out from under these scoundrels and their financial misdeeds.
I worked in a Hollywood adjacent business for many years and counted many of the studios, production companies, writers, directors, producers, etc as customers and friends. Got my own crash course in Hollywood accounting. You have to go back many years to understand why the industry is the way that it is today. And understand how it’s changing back towards the more vertically-integrated businesses that were broken up after the US v Paramount 1948 case. One thing this video didn’t touch on was the accounting around production companies. Production companies essentially only exist for one film. At the end of the production, that company ceases to exist. It folds up and there are no assets. A production company owns nothing except the thing that it produced and it sells all rights to that product to the distributor (the “studios”). That sole product is the only asset. Production companies don’t buy anything. Telephones - rentals. Computers - rented. Props, costumes, sets - rentals. Complex lease and rental agreements get setup and used so that at the end of the production, everyone gets paid off and closes shop. Any leftover debt gets transferred to the distributor. And a movie always ends up costing more than the producers get paid.
Not necessarily. It drives down the net profits of the main organization (and yes, they wouldn't pay taxes). But the money still ends up as profits for subsidiaries or contracting companies, and presumably they must pay taxes on that. But, of course, there's lots of further ways to shift profits (maybe oversees), or simply consolidate, dilute or spread them over time to reduce the taxes too. But at that point, it's just a garden variety tax evasion scheme, nothing special about Hollywood there.
There’s 174,000 producers in the US workforce. The average pay is $70,000. Thanks to this video you now know that is how much they get paid on a line item on the films budget as their profession. However all the companies they own that leased & sold items & loans at ridiculous costs means they’re other “businesses” give them access to buy alot of those crazy 25+ million dollar homes & exotic cars under their “paper cup” company. Just a note there’s still plenty of good honest producers that make no money too.
Very glad to hear both extremes doing well. Both dishonest practices netting obscene amounts of wealth *AND* plenty of honest folk not getting thier due props. (pun intended) if only there wasn't a perverse insensitive both of those extremes share.
One of my fav anecdotes is when Seth Rogan was in an interview and said they were going to make Sausage Party. And the host said, 'don't those animated movies cost a fortune to make' and he laughed in that way he does and said 'yeah, I think we can make it a lot cheaper'.
@@BryanAgapitoAnd slavery wasn't wrong either because it was legal, right? /s We all know the point the poster is trying to make, don't be that guy. "Legal" doesn't mean right or wrong, it's still wrong, anyone can see it. "Legal" just means you convinced people to let you cheat.
@@dh2032 I loved "banana stuck on wall with ducktape". It evoked such deep emotions in me. Definitely worth millions. I'd pay those millions to buy it but I probably first need to figure out how to afford air for my balding car tires so they don't go flat on my way to get food discards at the local free food dispensary. I'm starving right now and seeing "banana stuck on wall with ducktape" helps me get through the day and gives me hope for a better tomorrow. Lol
@@MrXlee1967easy, he was the first. When the MCU started no one thought it would be so successful, he mananged to get backends that they weren’t willing to provide to the actors once the films were hits
@marvelprince 👎 nepotism is the correct answer. I'm sure with his new contract to Dr Doom it will entitled him to special entitlements😉. Goyim (mankind) won't be getting. He's getting big bucks to keep it in the family. Look at all there unfunny comedians, non-stop getting movies made. It's called keeping it in the family. Even if the blood test proves there not chosen 🤫🤥
That explains why Hollywood is so corrupt and they feel like they can make any move they want and destroy as many movies as they want. This practice should have been illegal and I feel bad for the writers who write these amazing stories and don't profit from them. Thank you for shedding light on this problem I will never sell any of my books or writing ideas to Hollywood. I'll just make my own company and do it myself
Tbh this does not at all explain lackluster filmmaking. At the end of the day, Hollywood still wants more movies to succeed at the box office than not. The lesson here isn't that they profit regardless. The lesson is that even if a movie makes a huge profit, they still fudge the numbers indefinitely to be able to claim such profit never happened... Yes there's a such thing as writing off legitimate losses stemming from box office flops, but studio execs definitely lose their jobs in those scenarios. If anything, the high pressure to produce a successful film is precisely why they're in such a habit of cranking out formulaic products over being creative - that soullessness is what leads to lackluster films. They definitely care about profit, they're just wreckless with how they go about it (hint: they're business people, not artists...whereas the writers and directors they bring on board are just hired hands to execute their presumed formulas).
Another example is Ghostbusters. It's a wildly successful franchise, and yet the franchise was stolen from Filmation. Faced with a massive lawsuit they settled out of court and offered a share of the net profits, and then used their accounting shell game to claim that the movie made no money so that they never had to pay the rights to use the very name they stole.
With cases that involves movie studios writing off their profitable movies as financial losses, I want to know what type of legal loopholes they used that allowed that practice. Are their loopholes that allow movie studios to account their profitable movies as financial losses if the revenue generated does not recuperate their other movies that financially flopped? If there is, then that would make so much sense when it comes to Disney. They only need at least one financially successful movie to make up 2 or 3 box office bombs in a year!
Orson Welles, when asked on the state of the film industry in the 1960’s, replied “Can we really call it an industry? If General Motors made automobiles the way Hollywood makes movies, 9 out 10 would fall apart before they even left the factory floor. It just show business. Always has been.” In a way, entertainment has always been based on a bit of an absurd principle. It’s about convincing people to pay to use their own imaginations.
it’s supposed to be that you’re paying for imaginative people to put in an effort and they’ll give you something that stimulates your imagination, not necessarily that you use your own to get the entertainment. that would be closer to buying ttrpg rulebooks and accessories
"some days these accounting loop hole will be closed" it should have been closed long ago. financial statements are required to disclose transactions between related parties also, if you publish a consolidated profit and loss of the studio and it's subsidiary, you should see the actual profit or loss on the studio and all it's subsidiaries as a group for one production
I first learned about this from Freakazoid, where he taught an alien to always ask for a percentage of the gross, not the net. "The net is non-existent."
This was eye=opening! You also have the rare, modern example of the actor that gets a big payday from the gross box office for a particular project. A big example I've seen of this was Cameron Diaz in Bad Teacher.
And when they shelve an already completed movie by simply deciding not to release it, like the Batgirl movie, it's used as a tax write off so they still recoup money they never made.
@@arandombard1197 I'm not sure business owners know how tax write offs work. Companies trash so much sellable product if they would just discount it as slightly used/damaged. So they must think the expenses of shrinkage is a tax credit instead of only a deduction from their taxable profits. I mean trash is basically selling for $0. Surely selling for any amount is more profitable than that. But good luck telling those fraud committers.
I believe it's that they can scrap it and write offs basically pay for the movie for free in exchange for never releasing it so they don't pay the taxes. But, essentially they made their money and a free product. At least my understanding.
@zetok45 they don't lay taxes yeah. But they still spend the money. If you pay even 50% taxes for example. You spend 2 million. You scrap and use it for tax write offs. You will only be saving 1 mill in taxes. So you still lost money. They scrap movies not to get tax writes offs, it's to save the money on distribution and adds for it, if they think the movie wont make enough to even recoup those
@@jasonmullinder But you understand that the next obvious question to ask is why did they sign the contract. In other words (as you understannd), when I asked why are actors making movies, that included within it the question why are actors signing contracts to make movies.
@@krisrhodes5180 people acting won't be a requirement much longer, see; 1. Disney "stuntman" robot for mocap-CG overlay 2. Many big studios putting "We have an eternal, transferrable, unrevokable right to your face, voice, and acting style in return for you appearing as an *extra* in this production" in their extras clauses This means you could scan someone for one production and have an "actor" for all eternity to insert in any production via "big screen" (The Mandalorian), mocap-CG, or straight up full CG
Actors do get paid for the roles they are doing. They don't get paid extra amount that comes with movie's success. For example, lwts say Tom Hanks got paid $10 million for Forrest Gump and he also has clause that gives him 5% of the profits. In this case, Hanks does get $10 mil upfront but studio will do everything to not give him 5% of movie's profits by saying Forrest Gump didn't make money
This makes me think of the producers by Mel brooks. Mel brooks first made the producers as a movie in 1967 basically with the idea that a shady producer and an accountant who discover that can make more if it flops, later he produces a broadway version of the show with new cast. And they adapted that into a movie in 2005 which ironically flopped.
Conflict of interest isn't typically allowed in government agencies and nonprofit organizations. Seems like the private sector need this policy. Until then, hopefully no one else falls for the profit sharing model and instead focus on upfront fees with percentages regardless of profitability.
One place, I am aware of, that a % profit agreement worked out, was with Jack Nicholson playing the Joker in Batman. I don't quite 100% remember the context, but he ended up profiting off of either every Batman movie, and/or the merchandising.
2:21 "Studios hate sharing their success more than a box office flop" Thats just sad. Every passing day, i believe capitalism and greed is getting horrible
I see why studios wouldn't want to do this, but couldn't actors insist on contracts that grant them a share when revenue of a movie surpasses $X (where X is the "real cost" of making the movie)? Then, inventing costs wouldn't help.
@@AarmOZ84 It wasn't intended to be a hit. It was intended to be a flop and make an actual real loss. They oversold to investors so any profit would require them to pay out more than a dolalr for every dollar invested. If the play is a disaster that closes on opening night with the books firmly in the red, there is no profit to seek a percentage of. So it's not like the producers at all because they're not hiding their profit and benefitting from it.
The Producers scams the investors, this trick scams the workers that share the profit. Another trick, is to scam the debtors, those the company owes money too. You just use a new startup, and drive them bankrupt with expenses.
I suppose after Alec Guinness made off with a percentage of a new hope, the accounting stasi were brought in for Jedi. Great video, I am now aware that Hollywood studios are absolutely corrupt 😳
I appreciate this video in a profound way. Having grown up watching the movies, now knowing my favorite actors were getting reamed by Hollywood Accounting, I no longer feel bad for not going to movie theater releases.
I miss the days when the shadiest thing movie producers did was making the movie poster first to find what would sell and then making a movie around that concept.
A director sold his film to Crown International Pictures. The head of Crown was a relatively honest producer, so after the deal was done, the head of Crown said: "Ha! You know what you just did? You sold me a movie for $10,000 that'll make $100,000." The director learned his lesson. The next time, he asked for a portion of the profits. The head of Crown was a relatively honest producer, so after the deal was done, the head of Crown said: "Ha! Do you know what you just did?" He then explained Hollywood accounting, & told the director to ask for "Gross! Gross! Gross!" The director learned his lesson. For his next film, he asked for & got Gross. And they all lived happily ever after, at till the 70's ended & the exploitation market collapsed. True story, tho my quotes may not be exact.
Was it Ben Stein who said "every movie in Hollywood has either made money or lost money and sometimes both at the same time'. I had an uncle in the business and the entire thing is quite the baffling, money-laundering, magic taxes, weirdly somehow involved diamonds and modern art and none of it makes sense to us normies. But this video helped a lot! good stuff.
Great video. I remember Arnold Schwarzenegger used to be paid a % of "first gross," which meant if a movie earned $100m in revenue, he'd get $20m or 20% (but I'm assuming the theater gets paid 1/2 so maybe that would be $10m). Either way, actors can't really get those deals anymore. But I'd heard that Matt Damon was offered 10% of the gross for the original Avatar but he turned it down. He's told that story a hundred times in interviews. So, maybe those deals still happen from time to time.
Dude youre unironically saving me hours of research and a lifetime of regret.. i already uploaded a third of my 1st film to YT.. i knew i need protection..LLC? Tyvm my man. 😎
This becomes a huge equity issue for independent filmmakers, who don’t have the resources to spin the numbers in a favourable way. Essentially, this means low budget indie films have to play by the rules, whereas the big studios can get away with having their cake and eating it too when it comes to profitability. This is why we rarely see lower budget films succeed in the current filmmaking landscape.
Studios are greedy I work for a movie theater and studios take almost 90% of the total ticket sales on top of making you rent in advance the film. One reason why concessions is expensive because it’s the only way the theater makes money.
I thought studios take 50% off ticket sales not 90% not one cinema would be able to survive if they had to work to shell 90% of what they earn it's unsustainable
As a kid growing up in Socal, I heard an adult once say "the middle class all works in hollywood". There hasn't been a middle class for a few decades now. The "stay in your lane" mentality has only got more expected as no one likes to get stepped on or caught doing the same thing. As times got more deseperate for jobs, "you have to know someone" to get your foot in the door. As frusterating as this has been to see Socal crumble, at least there's a name to the tactic. Here's hoping it gets better because I want to afford to live back home
I went to business school and absolutely hated accounting. It was very obvious to me that it was ripe for abuse. Fast forward to more recent times, and I'm constantly having know-nothings tell me how I'm wrong, don't understand how accounting works, and that you can't fake numbers. You don't need to fake numbers. You just need to add a few numbers from different places and make it a few layers deep. Film/Tv Production LLCs are literally built to lose money so that the profits can be funneled to the main studio. The LLC will eventually close down, taking a bunch of "debt" with them (but also helping to send some tax write offs to the main studio along the way).
this i kinda old news. Famous actors nowadays negotiate big upfront fees. Often times about 20 Million dollars. The accounting tricks are still apllied. Like in the past to save on paying taxes
It's definitely this. This "one simple trick" to not pay headline actors isn't a secret. They all know. This is about taxes only at this point, but this clickbait stuff makes ordinary people think they've got the inside scoop. Hey maybe they should be a Hollywood agent now! You've just got to know this one secret trick!
This kinda goes to explain why so many movies have these outrageous budgets, like Red One with over $200 million or Indiana Jones close to $250 mill. They can legitimately report them as losses. But...I don't get how this makes sense from an industry standpoint. Surely big successful movies wouldn't get sequels then? Why aren't they clamoring to make another Flash or Indiana Jones then? I guess because then it's too transparent?
Some movies are legitimate flops, not just on-paper flops. People like Dwayne Johnson and Chris Evans can demand high pay and wouldn’t always take lower upfront pay for points, especially on a wannabe blockbuster. CGI is expensive.
The point is that movies aren't supposed to make money, studios are. The purpose of Hollywood accounting is to syphon profits out of the movies and into the studios.
The most important thing that should be on everyone mind currently should be to invest in different sources of income that doesn't depend on the government. Especially with the current economic crisis
Thank goodness you brought this up! Truly, investing has changed my perspective on how one can succeed in life; working multiple jobs isn't the optimal way to attain financial freedom and unfortunately, we discover this later in life. Currently earn as much as 10 grand weekly and this has improved my financial life. Great piece!
@@stevenaustin3853 Wow, congratulations on your impressive investment success! Your discipline and focus on delayed gratification is truly inspiring. I'm curious, what are some of the key factors that you consider when making investment decisions? Do you have any tips for those of us who are just starting to dip our toes into the world of investing? Thanks for sharing your story!
You are right. The best approach I feel is to diversify investments- by spreading investments across different asset classes like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown.
@@thehousecat93 It's a global competition, and when another country (Ireland, Australia etc.) undercuts with better tax credits, the industry and all its jobs move there instead. This is especially true of the less location-dependent VFX and animation, where the work is constantly flitting between the UK, Canada, Singapore, New Zealand, and increasingly India and Malaysia.
Sorry, but it's Justin who's ripping off Canada. The "cultural industry" of English-speaking Canada has always been closely tied to the Liberal party, but it really took off in the late 1960's through the mid-1980's when his father was prime minister. Subsidies and tax breaks not only to production companies, but also to those financing them, have expanded under JT. He's going to do everything he can to keep them not only voting the right way, but also to keep the woke messaging flowing, and if the Canadian tax-payer is left holding the bag, what does he care?
I wonder if anyone else has thought of creating an LLC to sell products to themselves at a huge markup... I think I heard of a NY real-estate magnate who did this and put his kids in charge of the company to transfer his wealth to them
The government goes after individuals for stuff like this because we're not 'connected' and we're not an industry that is too big to fail. There's probably also a certain demographic doing it, which is why they're protected, but that's a whole other topic.
This is only done for tax purposes and ease of managing large estates when an individual does it. If the entity is managed in such a way tht profits are derived that are not incremental to the sale then they are taxed at the company tax rate which is higher than capital gains tax.
Having been in the industry for quite a few years I can confirm that this is exactly what is happening lol. Another common tactic I've seen is using joint venture contracts to split the "costs/debts" of a production with the talent. As they usually don't have cash on-hand they will end up in debt with the majority production company - thus essentially having to make more projects for them at a lower rate.
Same thing happened to the comic book writers and artists who originally created the characters for marvel comics who later appeared in the Marvel cinematic universe. They weren't paid the percentage they were due by either Marvel Studios or the Walt Disney Company
Avi Arad (/ˈɑːvi ˈɑːrɑːd/; Hebrew: אבי ארד; born August 1, 1948[1][2]) is an Israeli-American studio executive and producer of film, television and animation. He became the CEO of Toy Biz in the 1990s, was the chief creative officer of Marvel Entertainment and is the founder, former chairman and former CEO of the latter's successor, Marvel Studios Robert Alan Iger (/ˈaɪɡər/; born February 10, 1951)[3] is an American media executive who is chief executive officer (CEO) of The Walt Disney Company. Robert Alan Iger was born to a Jewish family in New York City.
Afaik they were not “due” any percentages. Marvel artists and writers were usually under work for hire contracts that meant they saw no profits, didn’t own their creations, and had no control over it Don’t get me wrong, that’s extremely messed up, but it’s an entirely different scenario, not “the same thing”
The movie crocodile dundee 3 explains this exact same thing. After releasing it Paul hogan was banned from Hollywood and put under a tax audit. True story.
You did a Masteclass in demonstration, really the example you tookn was so well done and explained! absolute shaddy tactics used by the studios. Thanks for putting this in the public eye!
We lost so much money on this video.
tax write-offs are a thing.
Obviously people pirating the video is the main cause.
lol
yo are you related to the its almost friday guy i swear you are his brother or cousin yall look so similar
@@adam346 Jewish people not giving people what they are owed is a thing.
Another tactic I've heard of is raising salaries. The movie never becomes profitable because the executive producer's salary is "3 billion." great video
IRS wouldn't care, they are taxing $3B of salary.
@@j.c.4192 no because the executive producer has donated 99% of his salary to a nontaxable foundation go figure
@@charmedprince Don't forget to mention that the executive producer set up the nontaxable foundation himself, and is the foundation's president.
@@SergeantExtreme yep lolx
@@SergeantExtreme and the charity is called "Save the Producers"
Soooo, fraud, they are committing fraud
nononono it’s _“creative accounting”_
I see no fraud as long as the IRS gets its share… actors just need to read the contract and deny the businesses the ability to do this, their fault for signing a bad contract at least to some extent.
@@ottof9808 Have you ever read the terms of service for any major service? They’re full of jargon and vague language, making them difficult to read and even harder to fully understand. While many actors might have lawyers to review their contracts, those who don’t are at a significant disadvantage and are more likely to get taken advantage of.
On top of that, Hollywood is super competitive. Even if an actor recognizes and rejects a bad contract, someone else might take it out of desperation, perpetuating the cycle. We don’t blame victims of scams for losing their money-so why should we blame actors for being exploited by unfair contracts? The responsibility to ensure fair pay lies with the industry and its practices, not solely on the individual actors.
@@ottof9808The IRS only taxes net profits, not revenue. So it sounds like they're scamming the govt too.
Well no, but actually yes
Ed Solomon, the writer for Men Black says he has yet to be paid, because the movie "didn't make money". My favorite then he said was "It didn't make money, that's why they made 3 sequels and a tv show." But he also noted that the way they have a movie continue to lose money for years, regardless of dvd sales or streaming, is because they are constantly writing off random things towards the movie. For instance, the producers will go to a restaurant for lunch, right now in 2024, and claim it was a business meeting for Men in Black - writing off thousands of dollars throughout the year.
Yup. I interviewed Rob Zombie back when House of 1,000 Corpses came out, and he talked about Universal calling him into a lunch meeting to talk about how he was going over budget for the movie, and then charged the lunch to the production.
That's outrageous 🤨
People claimed that Black Adam bombed at the box office and that is the reason we are not getting a sequel yet as you pointed out Men in Black lost money, yet we got 3 sequels and a TV show. Does that make cents to you??
@@JRMiraclemanDifference is one was successful and the other actually lost money.
Okay my question is if they can do it, then why cant i?
It's not just Hollywood, either. Here's a little story for you:
In 1980 I spoke with UK film producer Walter Shenson about a couple of films he had helmed in the mid-60s, and he told me that at the time he had been given a choice of taking a very small payday up front or signing a deal in which he would outright own the movies -- lock, film stock and barrel -- after fifteen years had passed. Shenson was proud of his work and went with the latter option. The studio was delighted with his choice.
Here's the thing. The two films had no big name actors attached; they were vehicles for cashing in on a new fad that was expected to burn out within a year or two and the stars were young kids with no track record -- and the youth demographic the flicks were aimed at would be adults in fifteen years. When word of the deal got out, Shenson was a complete laughing stock.
When I spoke with him, fifteen years later, he was in the process of getting very expensive restoration jobs done on the films, financed entirely out of his own pocket -- and to top things off he had just discovered that the original negatives had *not* been handled with care. In creating trailers to promote the movies in overseas markets, someone had decided to simply cut chunks out of the master celluloid and didn't bother to return the pieces afterwards.
However, people weren't laughing as loudly as they had before -- because Walter turned out to be smarter than they thought; his newly acquired rights to A Hard Day's Night and HELP!, both starring The Beatles, went on to make a great deal of money as theatrical re-releases, international television favorites and home video purchases. And he got every penny!
Love it!
That's a good story.
What if I told you there was a group of people involved in both cases that also control the UK and the US banking systems too.
Thank God
@@SteveSherman-jp1dz Those Brazilians man....
I am an accountant this a couple things I’d like to point out for those interested. This is not something that’s only seen in Hollywood. The practice in the accounting world is called “Transfer Pricing”, it’s taught in CPA programs. If you want a good example of this, look into how much tax Starbucks pays in Europe and how they did it. Some companies accountants are so good at getting these numbers into loses for the years that the company pays taxes to the local government as a gesture of goodwill. They didn’t have to pay them legally but they chose to, because they’re such good corporations. TP accountants do very well for themselves
Accountant: "Okay, keep your eye on these profits. I'll put them under this here cup. Don't lose track."
Government: "Got it. The middle cup. That's where the profits are."
Accountant: "And here they go shwing shwang shamallaballabong."
Government: "The cup on the right."
Accountant: "Are you sure? Ahh, too bad, no profits under this one."
Government: "Dang it!"
Accountant: "One more? Same subsidy as always."
Government: "Okay, here you go. But this time, I want to get some taxes out of this. Come on, daddy needs a new [education, health care and infrastructure]."
I have a friend who works for a multi-national company whose head office is based in a beneficial tax location, this is considered the brains of the organisation, as such the TP can be adjusted per country to ensure that the amount of tax paid in the operating market is reduced to a minimum. All legal but is sneaky.
If you're an accountant that's perfect reason not to trust you on money talk unless you directly work for me and are paid a static wage.
@@dlb550 ...But that's the whole point though. The higher-ups don't want honest business. Sometimes overpaying a shady professional such as an accountant can make/save you soooooo much money. In some cases you even get to blame them after.
🤔Soooo Money Laundering🤨
Corporate America picked up on this years ago. It's called Financial Engineering, where you show Profits to the Shareholders and Losses to the Taxman. ( see Enron, Worldcom, Tyco etc)
Which is why Ireland is so popular. "Oh yeah! We totally operate our multi billion dollar empire out of a closet in Dublin.Oh no! Looks like our tiny branch in the US lost money. Oh well."
Yeah you mention Enron, WorldCom and Tyco and they're all dead now. This thing has been going on in Hollywood for decades though by the same companies with no recourse. Wonder why...
Criminals
Or imagine that you, as a country, can just print your own fiat amd put the burden of inflation on your citizens...oh wait....
Grocery chains also always claim a 1% profit margin yet they're being remodeled every 5 years.
I worked for Hollywood for decades and we always had a saying: "The real movie magic takes place in accounting."
You must have lots of stories
@@rogerhalt3991 For sure. My head is full of little anecdotes. Another good one was when working on Slither with James Gunn. Editor Chris had a note on the door that said: "Give me what I want! Not what I asked for!"
@@enilenis lol. What was your favourite movie to work on? (And favourite person if you like) :)
but the IRS is at my house of 300 dollars. Great country we live in
You may be able to answer my question then. The only thing I was thinking this entire time is how do people fall into this trap? If it's so common why do actors not know about it. Maybe you get burnt once on it as a young actor, but why would you ever accept a role again without either a flat fee or gross pay?
Now I understand why actors and music artists start their own production studios or record labels...they're just tired of being cheated
That's how "United Artists" started
Boohoo think about the actors, with their well connected rich upbringing 😢
Yes some people actually care. Cry about it
So they become the cheater 🤔 I guess if you can't beat them join them
music labels pay artists by paying off debts to the producers, which is to say, themselves
Real accountant here. I don’t do the shady stuff as I find it morally reprehensible. But I know about it. When big business wants to dodge paying taxes in a high taxing country, here are a few ways of increasing costs to get that “profit” line to 0:
1. “management fees” of the high tax subsidiary always magically seem to roughly match the exact profit that subsidiary would have made.
2. If the parent company supplies the inventory of the subsidiary, they jack up the price of their inventory to make the business unprofitable.
3. Increasing royalties on sales to make the business unprofitable.
I am an accountant too and I find these accounting practices to be not shady or tricky at all as they are commonly applied to other industries as well. If these LLCs are audited, nothing highly irregular or illegal would be found. What I find suspicious are the fair value measurements under US GAAP compared to IFRS.
Patent box also, R&D etc.
Mel Brooks wrote a musical called "The Producers", where the protagonists' goal was to create the biggest Broadway flop. It's hilarious how a musical film from the 60s is still true to this day.
If they're unprofitable, I'm happy to continue pirating.
👍🏾
😂😂😂on point
If enough people do that, they'll just stop making so many movies.
I like movies. There aren't enough good ones. I want them to make as many as possible, within reason. I'm happy to spend some money to help out.
@@jamisojo Except they never stop making movies, they just continue to make mostly bad ones.
😂 yeah!
I can’t believe we’re calling this a “loophole”. I can’t even begin to imagine this holding up in court. A company makes money after expenses and says they didn’t. How could this possibly not be fraud.
Oy vey! It's not fraud when Jews do it- it's just business.
Because they're wealthy, powerful, connected, and influential. You can't comprehend it because you lack all of those things (as do the majority of other folks on the planet). Rich gotta rich. 💪😎✌️
Start making noise about it. If enough people care, we can make change happen. That’s why Trump won
This is why piracy is ethical.
@@jamad-y7m Trump tapped into people's justified anger but will mostly just cut taxes for the rich. The only people who talk about the problems of finance capital are Marxists, socialists, communists, and anyone using classical (Adam Smith) economics who understands what economic "rents" are and that "free markets" means markets *free from* financial manipulation and economic rent seeking. The US Supreme Court would have to be completely replaced with honest judges who would break up the big monopolies. Then we need public banking for low interest loans, and to cut the legs out from under these scoundrels and their financial misdeeds.
I worked in a Hollywood adjacent business for many years and counted many of the studios, production companies, writers, directors, producers, etc as customers and friends. Got my own crash course in Hollywood accounting. You have to go back many years to understand why the industry is the way that it is today. And understand how it’s changing back towards the more vertically-integrated businesses that were broken up after the US v Paramount 1948 case. One thing this video didn’t touch on was the accounting around production companies. Production companies essentially only exist for one film. At the end of the production, that company ceases to exist. It folds up and there are no assets. A production company owns nothing except the thing that it produced and it sells all rights to that product to the distributor (the “studios”). That sole product is the only asset. Production companies don’t buy anything. Telephones - rentals. Computers - rented. Props, costumes, sets - rentals. Complex lease and rental agreements get setup and used so that at the end of the production, everyone gets paid off and closes shop. Any leftover debt gets transferred to the distributor. And a movie always ends up costing more than the producers get paid.
Superb insight. Thanks
How many of their last names ended with "Stein" "ohen" and "burg"?
Which honestly there is nothing wrong with as the consolidated statements reflect the same information regardless.
This is why the Brad Pitt’s, Adam Sandler’s, 4:42 and Ben Affleck’s have their own production companies. They were tired of getting ripped off.
Christopher Nolan too.
Tom cruise, Dwayne Johnson.
Clint Eastwood
True. All smart people.
That explains why "Hollywood", bandwagon RUclipsrs, streamers and "REAL PEOPLE" ---> Hollywood bots often criticize those people like Adam or so.
Presumably it also means every media company is functionally not paying taxes on billions in real profits because of imaginary losses
so when Hollywood tells you how to vote, realize Hollywood is BS
Not necessarily. It drives down the net profits of the main organization (and yes, they wouldn't pay taxes). But the money still ends up as profits for subsidiaries or contracting companies, and presumably they must pay taxes on that. But, of course, there's lots of further ways to shift profits (maybe oversees), or simply consolidate, dilute or spread them over time to reduce the taxes too. But at that point, it's just a garden variety tax evasion scheme, nothing special about Hollywood there.
Yup. Rich gotta rich. 💪😎✌️ The powerful and prestigious can do whatever they wish. No exceptions. Be rich, else, BEGONE.
Yup, those 'paper-cup' shell companies they also own and bank the actual profits will be located in Ireland or the Caymens etc.
Bingo.
There’s 174,000 producers in the US workforce. The average pay is $70,000. Thanks to this video you now know that is how much they get paid on a line item on the films budget as their profession. However all the companies they own that leased & sold items & loans at ridiculous costs means they’re other “businesses” give them access to buy alot of those crazy 25+ million dollar homes & exotic cars under their “paper cup” company. Just a note there’s still plenty of good honest producers that make no money too.
Very glad to hear both extremes doing well. Both dishonest practices netting obscene amounts of wealth *AND* plenty of honest folk not getting thier due props. (pun intended) if only there wasn't a perverse insensitive both of those extremes share.
helps explain why so many films have dozen company names at the opening of the film...
@@truthteller50the worst are the ones where you think it’s the movie starting, just to turn into a logo for the production company lol
are you single
The fact that the Tolkien estate never got paid has tainted those movies for me
The Tolkien estate destroyed his legacy. F all of them!
Somehow I thought his descendants would be rolling in money.
Heck, even the guy who had the Rolling Stones catalog was able to get all the royalty money from that Verve song.
fell victim to the ring of transfer price accounting !
The fact that we live in a reality where rich people are allowed to run these kind of scams out in the open without any repercussions is wild.
That's cos they Jews and they will get away with it
Welcome to capitalism, baby! Where the almighty dollar is number 1 above all else, including basic human decency, kindness, and common sense
One of my fav anecdotes is when Seth Rogan was in an interview and said they were going to make Sausage Party. And the host said, 'don't those animated movies cost a fortune to make' and he laughed in that way he does and said 'yeah, I think we can make it a lot cheaper'.
Yeah, they did that by overworking and underpaying their animators
@@darkartsdabbler2407 Dude, animators are ALWAYS overworked and underpaid. Disney was doing that half a century ago.
“Hollywood Accounting.”
“So, _fraud_ ?”
“Yes, Hollywood Accounting. That’s what I said.”
I hope he makes one about gaming too.
It’s not fraud because it’s legal
Tax Evasion is fraudulent, regardless of how creative you are.
@@MosesMatsepaneit's called Tax Avoidance. Your welcome
@@BryanAgapitoAnd slavery wasn't wrong either because it was legal, right? /s
We all know the point the poster is trying to make, don't be that guy. "Legal" doesn't mean right or wrong, it's still wrong, anyone can see it. "Legal" just means you convinced people to let you cheat.
Like Modern Art and Real Estate, everything used to launder money gets destroyed in the process
did see "bannana" stuck on a wall with some "ducktape"? Just regular store banana fruit, and singel bit duck tape on a wall
@@dh2032 Completely illegible, yet somehow comprehensible
You shouldn’t use words you don’t understand.
@@dh2032 I loved "banana stuck on wall with ducktape". It evoked such deep emotions in me. Definitely worth millions. I'd pay those millions to buy it but I probably first need to figure out how to afford air for my balding car tires so they don't go flat on my way to get food discards at the local free food dispensary. I'm starving right now and seeing "banana stuck on wall with ducktape" helps me get through the day and gives me hope for a better tomorrow. Lol
Do you know what laundering money is ? Because what's described in video can be called many things but laundering money it is not.
AFAIK most actors negotiate an upfront fee nowadays because of these accounting tricks.
What big actors like Tom Cruise, RDJ, etc, are negotiating for "first dollar" deals. What this means is they get a percentage of the gross revenue
@@chill0843 Arnie did that for terminator 3. Made a boatload of money. You can look up the whole contract on google its insane.
@@chill0843 strange that only RDJ got the best deal out of all the cast, I wonder why that was.
@@MrXlee1967easy, he was the first. When the MCU started no one thought it would be so successful, he mananged to get backends that they weren’t willing to provide to the actors once the films were hits
@marvelprince 👎 nepotism is the correct answer. I'm sure with his new contract to Dr Doom it will entitled him to special entitlements😉. Goyim (mankind) won't be getting. He's getting big bucks to keep it in the family. Look at all there unfunny comedians, non-stop getting movies made. It's called keeping it in the family. Even if the blood test proves there not chosen 🤫🤥
That explains why Hollywood is so corrupt and they feel like they can make any move they want and destroy as many movies as they want. This practice should have been illegal and I feel bad for the writers who write these amazing stories and don't profit from them.
Thank you for shedding light on this problem I will never sell any of my books or writing ideas to Hollywood. I'll just make my own company and do it myself
Lol. When you get published come back and talk.
@jamespohl How that boot taste?
Tbh this does not at all explain lackluster filmmaking. At the end of the day, Hollywood still wants more movies to succeed at the box office than not.
The lesson here isn't that they profit regardless. The lesson is that even if a movie makes a huge profit, they still fudge the numbers indefinitely to be able to claim such profit never happened...
Yes there's a such thing as writing off legitimate losses stemming from box office flops, but studio execs definitely lose their jobs in those scenarios. If anything, the high pressure to produce a successful film is precisely why they're in such a habit of cranking out formulaic products over being creative - that soullessness is what leads to lackluster films. They definitely care about profit, they're just wreckless with how they go about it (hint: they're business people, not artists...whereas the writers and directors they bring on board are just hired hands to execute their presumed formulas).
Really goes to show there’s greed absolutely everywhere. Thank you so much for making this video. Here’s hoping something gets done about this soon.
Another example is Ghostbusters. It's a wildly successful franchise, and yet the franchise was stolen from Filmation. Faced with a massive lawsuit they settled out of court and offered a share of the net profits, and then used their accounting shell game to claim that the movie made no money so that they never had to pay the rights to use the very name they stole.
With cases that involves movie studios writing off their profitable movies as financial losses, I want to know what type of legal loopholes they used that allowed that practice. Are their loopholes that allow movie studios to account their profitable movies as financial losses if the revenue generated does not recuperate their other movies that financially flopped? If there is, then that would make so much sense when it comes to Disney. They only need at least one financially successful movie to make up 2 or 3 box office bombs in a year!
Not to mention, Spinal Tap.
Orson Welles, when asked on the state of the film industry in the 1960’s, replied “Can we really call it an industry? If General Motors made automobiles the way Hollywood makes movies, 9 out 10 would fall apart before they even left the factory floor. It just show business. Always has been.”
In a way, entertainment has always been based on a bit of an absurd principle. It’s about convincing people to pay to use their own imaginations.
Sophistry, theft, fraud, deception, and exploitation. Not surprised given who started, owns, and runs Hollywood 👃
You bring up a really interesting point,i wouldn't have thought that way.
it’s supposed to be that you’re paying for imaginative people to put in an effort and they’ll give you something that stimulates your imagination, not necessarily that you use your own to get the entertainment.
that would be closer to buying ttrpg rulebooks and accessories
The latter statement's an interesting one but I gotta go with logan on this one
At this point I’m convinced their accountants are just using a crystal ball to predict losses
Upside down ones
No need for a crystal ball when you're pulling the numbers from their a55es
Nah, the piercing of the veil is simply for narrative gain
The accountants, producers, directors, actors, and studio owners all get together at the Carnegie Deli.
Sounds like they’re trying to show losses the entire time.
Amazing how we are forced to live in a system that punishes honesty and hard work and rewards the thieves and snakes. Well done law makers 👏👏🤡🤡
It has been like that since the dawn of time. Even monkeys are like that. Survival of the fittest.
Keep digging and find out what group of people have profited from usury for thousands of years.
@@SteveSherman-jp1dz That's on us for being dumb enough to allow it.
@SteveSherman-jp1dz survival of the fittest.
This is the same thing record labels do to claim artists never recoup the budget to keep them in their deal.
It's almost as if they are part of the same group of people. If only we could figure out what that group is....
J e w s
"some days these accounting loop hole will be closed"
it should have been closed long ago. financial statements are required to disclose transactions between related parties
also, if you publish a consolidated profit and loss of the studio and it's subsidiary, you should see the actual profit or loss on the studio and all it's subsidiaries as a group for one production
wont happen. The #1 issue is shell companies, and fortune 500 companies that fund our politicians use shell companies to dodge the IRS.
That's why all of Hollywood donates to liberal democrats, to keep those laws in place.
I’m impressed y’all made the Good Work poster.
Yeah that artist must have cost "10 million"!
And now we know why Dan's not wearing the trench coat anymore. (His mom wanted it back.)
I’m here for Dan
This honestly needs more views. I hope it gets them.
I first learned about this from Freakazoid, where he taught an alien to always ask for a percentage of the gross, not the net. "The net is non-existent."
"A movie I KNOW you saw." You don't know me! Listening to this subject I keep hearing songs from the Producers in my head
True, the whole shenanigan sounds exactly like the plot from The Producers...
This was eye=opening! You also have the rare, modern example of the actor that gets a big payday from the gross box office for a particular project. A big example I've seen of this was Cameron Diaz in Bad Teacher.
The most unbelievable part of this is the idea that a Clippy biopic would flop.
Ikr
Clippy has come back as ChatGPT, convince me otherwise
@@00bean00 You're obviously failing at writing that letter. I'll just do it for you.
I can't believe this video is only 9 mins long. It packed so much in. Hollywood could use your editing skills, if not your financial acumen!
To quote The Producers: You're an accountant! You're in a noble profession! The word "count" is part of your title!
And when they shelve an already completed movie by simply deciding not to release it, like the Batgirl movie, it's used as a tax write off so they still recoup money they never made.
That's not how tax write offs work.
How would that work? They cant profit from tax write offs
@@arandombard1197 I'm not sure business owners know how tax write offs work. Companies trash so much sellable product if they would just discount it as slightly used/damaged. So they must think the expenses of shrinkage is a tax credit instead of only a deduction from their taxable profits. I mean trash is basically selling for $0. Surely selling for any amount is more profitable than that. But good luck telling those fraud committers.
I believe it's that they can scrap it and write offs basically pay for the movie for free in exchange for never releasing it so they don't pay the taxes. But, essentially they made their money and a free product. At least my understanding.
@zetok45 they don't lay taxes yeah.
But they still spend the money.
If you pay even 50% taxes for example.
You spend 2 million. You scrap and use it for tax write offs. You will only be saving 1 mill in taxes. So you still lost money.
They scrap movies not to get tax writes offs, it's to save the money on distribution and adds for it, if they think the movie wont make enough to even recoup those
So at the end of the day... lawyers are always winners
This video leaves open the question every explanation has left me with: If actors aren't getting paid for making movies, why are actors making movies?
contractual obligation
@@jasonmullinder But you understand that the next obvious question to ask is why did they sign the contract. In other words (as you understannd), when I asked why are actors making movies, that included within it the question why are actors signing contracts to make movies.
@@krisrhodes5180 Because they want to be actors, we can go round in circles forever, actors are still making movies
@@krisrhodes5180 people acting won't be a requirement much longer, see;
1. Disney "stuntman" robot for mocap-CG overlay
2. Many big studios putting "We have an eternal, transferrable, unrevokable right to your face, voice, and acting style in return for you appearing as an *extra* in this production" in their extras clauses
This means you could scan someone for one production and have an "actor" for all eternity to insert in any production via "big screen" (The Mandalorian), mocap-CG, or straight up full CG
Actors do get paid for the roles they are doing. They don't get paid extra amount that comes with movie's success. For example, lwts say Tom Hanks got paid $10 million for Forrest Gump and he also has clause that gives him 5% of the profits. In this case, Hanks does get $10 mil upfront but studio will do everything to not give him 5% of movie's profits by saying Forrest Gump didn't make money
Never agree to a deal based on "accounting profit."
This makes me think of the producers by Mel brooks. Mel brooks first made the producers as a movie in 1967 basically with the idea that a shady producer and an accountant who discover that can make more if it flops, later he produces a broadway version of the show with new cast. And they adapted that into a movie in 2005 which ironically flopped.
It's "The Producers" all over again.
Finally someone said it 😂😂😂
(((The Producers)))
Came here for this.
I had to scroll way too far down for this comment.
Conflict of interest isn't typically allowed in government agencies and nonprofit organizations. Seems like the private sector need this policy. Until then, hopefully no one else falls for the profit sharing model and instead focus on upfront fees with percentages regardless of profitability.
And yet we file our taxes honestly like good citizens
This doesn't affect their taxes. The expenses and revenue net out at the entity level.
why ? Get smart
One place, I am aware of, that a % profit agreement worked out, was with Jack Nicholson playing the Joker in Batman. I don't quite 100% remember the context, but he ended up profiting off of either every Batman movie, and/or the merchandising.
is like work, boss told you, ohh we didn't made much profit this year, sorry, only bare minimum raise and got to cut your bonus
2:21 "Studios hate sharing their success more than a box office flop" Thats just sad. Every passing day, i believe capitalism and greed is getting horrible
I see why studios wouldn't want to do this, but couldn't actors insist on contracts that grant them a share when revenue of a movie surpasses $X (where X is the "real cost" of making the movie)? Then, inventing costs wouldn't help.
They'll just invent extra costs to tack onto the "real cost"
It's "The Producers"!😂
Not even remotely close.
If “The Producers” were smart enough to make their musical production look like a flop even if it was a broadway hit.
@@AarmOZ84 It wasn't intended to be a hit. It was intended to be a flop and make an actual real loss. They oversold to investors so any profit would require them to pay out more than a dolalr for every dollar invested. If the play is a disaster that closes on opening night with the books firmly in the red, there is no profit to seek a percentage of.
So it's not like the producers at all because they're not hiding their profit and benefitting from it.
This is basically the plot for "The Producers ". Not exactly hot off the press😢
The producers is completely different.
The Producers scams the investors, this trick scams the workers that share the profit. Another trick, is to scam the debtors, those the company owes money too. You just use a new startup, and drive them bankrupt with expenses.
So relevant.
They really need to start showing the viewer numbers on Netflix.
I suppose after Alec Guinness made off with a percentage of a new hope, the accounting stasi were brought in for Jedi. Great video, I am now aware that Hollywood studios are absolutely corrupt 😳
Did you somehow believe before seeing this that billion dollar companies aren't corrupt?
Genuinely disgusting practice
Just another thing (they) do
This should have been a Dan Toomey video. I guess he was too expensive.
I appreciate this video in a profound way.
Having grown up watching the movies, now knowing my favorite actors were getting reamed by Hollywood Accounting, I no longer feel bad for not going to movie theater releases.
This is INSANE!!!! Thank YOU for informing us in such an easy way to understand these types of topics!!
I miss the days when the shadiest thing movie producers did was making the movie poster first to find what would sell and then making a movie around that concept.
That’s not even shady, just genius tbh
A director sold his film to Crown International Pictures. The head of Crown was a relatively honest producer, so after the deal was done, the head of Crown said: "Ha! You know what you just did? You sold me a movie for $10,000 that'll make $100,000."
The director learned his lesson. The next time, he asked for a portion of the profits. The head of Crown was a relatively honest producer, so after the deal was done, the head of Crown said: "Ha! Do you know what you just did?" He then explained Hollywood accounting, & told the director to ask for "Gross! Gross! Gross!"
The director learned his lesson. For his next film, he asked for & got Gross. And they all lived happily ever after, at till the 70's ended & the exploitation market collapsed.
True story, tho my quotes may not be exact.
See also:
"The Producers" 1967.
"The Way We Live Now" 1875.
The Producers has nothing to do with this.
Was it Ben Stein who said "every movie in Hollywood has either made money or lost money and sometimes both at the same time'.
I had an uncle in the business and the entire thing is quite the baffling, money-laundering, magic taxes, weirdly somehow involved diamonds and modern art and none of it makes sense to us normies. But this video helped a lot! good stuff.
Great video. I remember Arnold Schwarzenegger used to be paid a % of "first gross," which meant if a movie earned $100m in revenue, he'd get $20m or 20% (but I'm assuming the theater gets paid 1/2 so maybe that would be $10m). Either way, actors can't really get those deals anymore. But I'd heard that Matt Damon was offered 10% of the gross for the original Avatar but he turned it down. He's told that story a hundred times in interviews. So, maybe those deals still happen from time to time.
That castle at 3:15 is in my hometown!! it's the "Alcazar de SEGOVIA"!!
I am so happy for you 😆❤
rich people fighting other rich people over money
The guy at 5:05 looks like a possible uncle to the guy from Pitch Meeting
Yeah totally
That new hairline is tight!!
Xxdd so true
Wow wow wow wow... Wow
Dude youre unironically saving me hours of research and a lifetime of regret.. i already uploaded a third of my 1st film to YT.. i knew i need protection..LLC? Tyvm my man. 😎
This becomes a huge equity issue for independent filmmakers, who don’t have the resources to spin the numbers in a favourable way. Essentially, this means low budget indie films have to play by the rules, whereas the big studios can get away with having their cake and eating it too when it comes to profitability. This is why we rarely see lower budget films succeed in the current filmmaking landscape.
There are independent filmmakers doing pretty decently right here on RUclips
Studios are greedy I work for a movie theater and studios take almost 90% of the total ticket sales on top of making you rent in advance the film. One reason why concessions is expensive because it’s the only way the theater makes money.
I thought studios take 50% off ticket sales not 90% not one cinema would be able to survive if they had to work to shell 90% of what they earn it's unsustainable
@ it may vary depending on how big a theater chain is but ours is only one small local theater and we keep about 10% of ticket sales.
As a kid growing up in Socal, I heard an adult once say "the middle class all works in hollywood". There hasn't been a middle class for a few decades now. The "stay in your lane" mentality has only got more expected as no one likes to get stepped on or caught doing the same thing. As times got more deseperate for jobs, "you have to know someone" to get your foot in the door. As frusterating as this has been to see Socal crumble, at least there's a name to the tactic. Here's hoping it gets better because I want to afford to live back home
I went to business school and absolutely hated accounting. It was very obvious to me that it was ripe for abuse. Fast forward to more recent times, and I'm constantly having know-nothings tell me how I'm wrong, don't understand how accounting works, and that you can't fake numbers. You don't need to fake numbers. You just need to add a few numbers from different places and make it a few layers deep. Film/Tv Production LLCs are literally built to lose money so that the profits can be funneled to the main studio. The LLC will eventually close down, taking a bunch of "debt" with them (but also helping to send some tax write offs to the main studio along the way).
"They don't...."
I watched that part multiple times.
This is a fantastic watch. Well done @morning-brew crew.
this i kinda old news. Famous actors nowadays negotiate big upfront fees. Often times about 20 Million dollars. The accounting tricks are still apllied. Like in the past to save on paying taxes
It's definitely this. This "one simple trick" to not pay headline actors isn't a secret. They all know. This is about taxes only at this point, but this clickbait stuff makes ordinary people think they've got the inside scoop. Hey maybe they should be a Hollywood agent now! You've just got to know this one secret trick!
True, A Listers get 10 or 20m per movie now.
I don't feel bad about pirating every movie I watch now.
You should, it's a crime.
Sounds like how a certain stable genius showed the bankers one balance sheet but filed a conflicting one with his taxes.
Rent-free.
Fraud is fraud
Yeah... Mel Brooks taught us about this in 1967... 😆
Great video Sir😊💙
As someone who works in the film industry full time, this was a fantastic breakdown of the biz.
The guy at 1:52 sounds like Mozzie from White Collar.
White collar, another awesome show from our youth
This kinda goes to explain why so many movies have these outrageous budgets, like Red One with over $200 million or Indiana Jones close to $250 mill. They can legitimately report them as losses.
But...I don't get how this makes sense from an industry standpoint. Surely big successful movies wouldn't get sequels then? Why aren't they clamoring to make another Flash or Indiana Jones then? I guess because then it's too transparent?
Some movies are legitimate flops, not just on-paper flops. People like Dwayne Johnson and Chris Evans can demand high pay and wouldn’t always take lower upfront pay for points, especially on a wannabe blockbuster. CGI is expensive.
The point is that movies aren't supposed to make money, studios are. The purpose of Hollywood accounting is to syphon profits out of the movies and into the studios.
The most important thing that should be on everyone mind currently should be to invest in different sources of income that doesn't depend on the government. Especially with the current economic crisis
Thank goodness you brought this up! Truly, investing has changed my perspective on how one can succeed in life; working multiple jobs isn't the optimal way to attain financial freedom and unfortunately, we discover this later in life. Currently earn as much as 10 grand weekly and this has improved my financial life. Great piece!
@@stevenaustin3853
Wow, congratulations on your impressive investment success! Your discipline and focus on delayed gratification is truly inspiring. I'm curious, what are some of the key factors that you consider when making investment decisions? Do you have any tips for those of us who are just starting to dip our toes into the world of investing? Thanks for sharing your story!
Things you can invest In
Real estate
Stock Crypto
Bonds
Bitcoin
You are right. The best approach I feel is to diversify investments- by spreading investments across different asset classes like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown.
Can you direct me to your financial manager
I'm so glad that despite being tempted by this industry, I decided to focus on RUclips
Every company does this today and then tell their employees they didn’t make money so no raises this year.
This was explained very well. I guess thats why every movie is losing like $200 mil
well also people arent going to movies like they used to
In addition, a lot of American movies are filmed in Canada for the tax credit, grants and other local incentives.
Studios are ripping off Canada.
Canada chooses to offer the tax credits. Nobody is ripping off anyone. If it’s a bad deal, stop offering it.
@@thehousecat93 It's a global competition, and when another country (Ireland, Australia etc.) undercuts with better tax credits, the industry and all its jobs move there instead. This is especially true of the less location-dependent VFX and animation, where the work is constantly flitting between the UK, Canada, Singapore, New Zealand, and increasingly India and Malaysia.
@@Bonyari_Boy No point explaining it to him, he's just a cat
Sorry, but it's Justin who's ripping off Canada. The "cultural industry" of English-speaking Canada has always been closely tied to the Liberal party, but it really took off in the late 1960's through the mid-1980's when his father was prime minister. Subsidies and tax breaks not only to production companies, but also to those financing them, have expanded under JT. He's going to do everything he can to keep them not only voting the right way, but also to keep the woke messaging flowing, and if the Canadian tax-payer is left holding the bag, what does he care?
I wonder if anyone else has thought of creating an LLC to sell products to themselves at a huge markup... I think I heard of a NY real-estate magnate who did this and put his kids in charge of the company to transfer his wealth to them
The government goes after individuals for stuff like this because we're not 'connected' and we're not an industry that is too big to fail.
There's probably also a certain demographic doing it, which is why they're protected, but that's a whole other topic.
This is only done for tax purposes and ease of managing large estates when an individual does it.
If the entity is managed in such a way tht profits are derived that are not incremental to the sale then they are taxed at the company tax rate which is higher than capital gains tax.
The Producers called it half a century ago.
Having been in the industry for quite a few years I can confirm that this is exactly what is happening lol.
Another common tactic I've seen is using joint venture contracts to split the "costs/debts" of a production with the talent. As they usually don't have cash on-hand they will end up in debt with the majority production company - thus essentially having to make more projects for them at a lower rate.
your group does real investigative journalism
Should be illegal
Same thing happened to the comic book writers and artists who originally created the characters for marvel comics who later appeared in the Marvel cinematic universe. They weren't paid the percentage they were due by either Marvel Studios or the Walt Disney Company
Avi Arad (/ˈɑːvi ˈɑːrɑːd/; Hebrew: אבי ארד; born August 1, 1948[1][2]) is an Israeli-American studio executive and producer of film, television and animation. He became the CEO of Toy Biz in the 1990s, was the chief creative officer of Marvel Entertainment and is the founder, former chairman and former CEO of the latter's successor, Marvel Studios
Robert Alan Iger (/ˈaɪɡər/; born February 10, 1951)[3] is an American media executive who is chief executive officer (CEO) of The Walt Disney Company. Robert Alan Iger was born to a Jewish family in New York City.
Afaik they were not “due” any percentages. Marvel artists and writers were usually under work for hire contracts that meant they saw no profits, didn’t own their creations, and had no control over it
Don’t get me wrong, that’s extremely messed up, but it’s an entirely different scenario, not “the same thing”
The movie crocodile dundee 3 explains this exact same thing. After releasing it Paul hogan was banned from Hollywood and put under a tax audit.
True story.
This has been going on forever! I remember James Garner suing because of these accounting shenanigans for the Rockford Files. Back in the 70s.
He had some interesting things happen to him. He once got beat up badly by an ex vet while on a freeway.
"Oh well, it was a blast while it lasted."
-Ace Rothstein
"Schoenstein"
Every single time.
I can't help but *notice*
What is shady af is shelving a COMPLETELY DONE film as a writer off. That is beyond scummy.
You did a Masteclass in demonstration, really the example you tookn was so well done and explained! absolute shaddy tactics used by the studios. Thanks for putting this in the public eye!
This is the premise for the Broadway show “the producers” which is an hilarious funny movie based on a Broadway flop and is well worth the watch.