ABSTRACT
Because most people fail to peel back the onion and learn the nuances (which can be frustrating, and appear unfair devoid of context), an element of prejudice has been affixed to the calculation of profits in Hollywood contracts. There is a pervasive feeling that the
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studios and networks are so-called “cooking the books”: how else can a project earn over $100M at the box office, sell successfully into large secondary markets such as TV and video, and be in the red? The answer is that under traditional income statement and/or tax accounting the project may in fact be profitable, but that pursuant to a contractual profit sharing definition (somewhat unfortunately also labeled net profits) the project still posts a loss.
