-Studios create a subsidiary corporation for each movie and they almost never show a profit.
-The studios charge the subsidiary service fees for services performed like distribution, which lowers net income to zero or less.
-They do this to avoid taxation and paying royalties to actors.
Quote from wikipedia: "Because of this, net points are sometimes referred to as "monkey points," a term attributed to Eddie Murphy, who is said to have also stated that only a fool would accept net points in his or her contract."
There are many more cases like this involving high profile people including Peter Jackson:
This is a very good insight. I wonder how often the figures that get flashed around about how much money Hollywood is losing due to piracy are drawn directly from these fictionalizations created for an entirely separate purpose.
Another example of how criminal it is: A major studio will pay Technicolor $25 million annually for an exclusivity fee. Then Technicolor will charge inflated rates to the studios, so the films will appear to lose money.
http://en.wikipedia.org/wiki/Hollywood_accounting
Summary:
-Studios create a subsidiary corporation for each movie and they almost never show a profit.
-The studios charge the subsidiary service fees for services performed like distribution, which lowers net income to zero or less.
-They do this to avoid taxation and paying royalties to actors.
Quote from wikipedia: "Because of this, net points are sometimes referred to as "monkey points," a term attributed to Eddie Murphy, who is said to have also stated that only a fool would accept net points in his or her contract."
There are many more cases like this involving high profile people including Peter Jackson:
http://en.wikipedia.org/wiki/Hollywood_accounting#Examples