I absolutely adore the cinema. So much so that I often head to cinema and, against my better financial judgment, pony up the ridiculous £10 to £13 admission. I enjoy it too much to forego the pleasure.
Because films are magic to me, all of the tricks and wizardry they use to fool the viewer. They are as much a tribute to pure human ingenuity as they are just about entertainment.
I’m under no illusions, though: It’s in the studio’s interest to peddle their product as pure and wonderful imagination. But what really drives the film industry is, of course, the colossal, unfeeling gears of corporate America.
That’s why I wasn’t surprised when I read an article in The Atlantic about the dark magic that is Hollywood accounting. The article provides an amazing anecdote about David Prowse, the actor who played Darth Vader (that is, the physique of Darth Vader – not the voice!):
“[He] still has not received residuals from the 1983 film "Return of the Jedi" because the movie, which ranks 15th in U.S. box office history, still has no technical profits to distribute,” explains The Atlantic’s Derek Thomas.
“I get these occasional letters from Lucasfilm saying that we regret to inform you that as Return of the Jedi has never gone into profit, we've got nothing to send you. Now here we're talking about one of the biggest releases of all time,” said Prowse. “I don't want to look like I'm bitching about it,” he said, “but on the other hand, if there's a pot of gold somewhere that I ought to be having a share of, I would like to see it.”
So now you might be rightly wondering just how in the hell has a movie as rapturously successful as “Return of the Jedi”, a movie that grossed $475 million on a $32 million budget, failed to turn a profit? Well, it’s because the special FX aren’t just limited to the screen.
Studios typically set up a separate “corporation” for each movie they produce. The trick is that the studio will then charge this ‘movie corporation’ a big fee that overshadows the film’s revenue. For accounting purposes, the movie is a money ‘loser’ and there are no profits to distribute. Magic!
In the real world, most corporations try to make a profit by limiting costs. In the fantasy land of Hollywood, movie corporations manage to record a loss by maximizing costs.