How Does the Film Industry Actually Make Money?

nytimes.com

21 points·kfk··6 comments

As I understand it, there is a big difference between what the studios say that made and what they actually made - see "Hollywood accounting".

Example: According to this, "Return of the Jedi" did not turn a profit.

http://www.techdirt.com/articles/20110912/13500315912/hollyw...

This is actually a more general issue. Profit/loss is wrt an entity. A given entity's profit/loss says nothing about the profit/loss of related entities.

For example, many "non-profits" have associated entities that are very profitable.

Also, if you're interested in "Hollywood accounting", I suggest checking out the book The Hollywood Economist[0]

[0]http://www.amazon.com/The-Hollywood-Economist-Financial-Real...

That is true indeed. But I think the article makes some points that give us a different picture on the profitability of the movie industry. I always thought why not many good movies are shot per year if they are so profitable, I think it's because the returns on a movie are not that great after all.

"For the cost of “Men in Black 3,” for instance, the studio could have become one of the world’s largest venture-capital funds, thereby owning a piece of hundreds of promising start-ups."

That assumes you know how to do that of course. People know and are comfortable with what they know. Drawing a comparison to a skill in another industry that takes years to hone really makes no sense.

Most blockbusters make money. They simply record the income in a different entity (or entities) than the entity (or entities) which recorded the expenses.

A large part of not getting screwed in a Hollywood contract is making sure your percentage relates the right entity.

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