Posts tagged ‘accounting’

Movies are Corporations (Hollywood Accounting)

By Chad Upton | Editor

One of the most interesting classes I took in College was taught by a film producer. He only taught that one class, for two hours, once a week. He shared learnings from the entire film making process, from writing a script and getting funding to shooting and distribution.

From this class, I learned is that each film is incorporated as its own corporation and there are a number of reasons why they do this.

For one, it offers limited liability. If someone sues the production, the people who financed and produced the film have some legal separation between the film and their personal assets and other businesses.

It also offers financial abstraction from the people and companies who financed the film. Here’s a little math test to help explain this concept: if it costs $300 million to make a product and then you sold $1 billion worth of it, how much was your profit? $700 million right? Yes. Unless, your product was a film or TV show.

This is almost exactly what happened with Harry Potter and the Order of the Phoenix (2007). The studio invested just over $300 million to make the film and it grossed almost $1 billion from the box office and other distribution deals. But, instead of making $700 million, it actually lost $167 million (on paper). So, what happened to all of that money? (more…)

May 19, 2012 at 4:00 pm 4 comments


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