ABSTRACT
The complex and often misunderstood process of studio accounting is framed, explained and detailed by Ilan Haimoff, Partner, Green Hasson Janks Accountants and Leader, Contract Compliance and Forensics Department, who has conducted over 200 studio audits. The chapter frames a movie studio or financier-distributor’s reporting of revenue to profit participants, and details actual concepts using four hypothetical samples of revenue statements.
Sample One is the hypothetical statement sent from the financier-distributor to the production company for an independent movie budgeted at $20 million doing average business worldwide. Starting with defined gross receipts, revenues are deducted from revenue streams including theatrical, home entertainment, pay television, free television, and ancillary revenue to arrive at total defined gross receipts. Then, distribution fees are deducted. Then, distribution expenses are deducted, including prints and advertising (plus overhead), dubbing, subtitles, transportation, checking and collections, residuals, trade association dues and taxes. Then the negative cost of the production is deducted, plus administrative fee and finance charge. Third-party participations are deducted next, before arriving at the production company’s share, 50% of net proceeds, or $9,000,000 in the red.
Sample Two is the hypothetical statement sent from the financier-distributor to the 50% financing partner for the same movie. The deal between them is more favorable to the financing partner, which ends up with 50% of net proceeds, or over $3,500,000.
Samples Three and Four are for a hypothetical studio movie budgeted at $84.5 million with strong success worldwide. Sample Three traces backend for a typical star whose percentage of adjusted gross proceeds after artificial breakeven, results in nearly $700,000 in the red. Sample Four traces backend for a very big star, whose 5% of adjusted gross receipts yields over $15,000,000 in contingent compensation, in addition to the star’s cash compensation.
