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The curious case of the missing film profits

8th Jun 2015
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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.

David Prowse explained the situation to Techdirt:

“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.

Lights, camera, accountancy!

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Replies (7)

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By Rebecca Cave
08th Jun 2015 16:39

To "pony up "???

I have never heard that expression before. According to The Phrase finder it's American and very rarely used in the rest of the English speaker world.

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Francois
By Francois Badenhorst
11th Jun 2015 12:47

You'll have to forgive me

I was raised on a diet of American literature - I still adore the great American writers - and it manifests in my writing sometimes. But yeah, it just means to stump up the cash. 

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By JC
08th Jun 2015 18:19
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By Antony Rose
09th Jun 2015 15:41

Blame his agent

Should have gone for a percentage of the gross...

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
11th Jun 2015 17:38

Otherwise known as "pay"

I write this as a native of the Land of the Free and afficionado of the more pulpy end of its 20th century literary tradition, but also a grumpy old editor.

One good trick to improve your writing is to ask how Hemmingway would have put it. As he once wrote to F. Scott Fitzgerald: “Write the best story that you can and write it as straight as you can.”

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Francois
By Francois Badenhorst
11th Jun 2015 22:09

Can you imagine how boring writing would be if that were actually true? 

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By Satwaki Chanda
05th Jul 2015 10:21

How much did George Lucas make from the Star Wars merchandise?

Would be interested to know what proportion of the money came from the toys and the tee shirts compared to the actual film itself.

I remember reading the Star Wars story a while ago - the story of how the film was made, that is. It seems that from Day One, Lucas had arranged business deals for the IP rights to the spin-offs - as I mentioned - toys, tee shirts, comic strips, Star Wars mugs etc. Very canny businessman. He'd probably seen what Disney did

If only David Prowse's agent had claimed some rights to the little Darth Vader toys and light sabre...

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