Examples of Hollywood Accounting

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Winston Groom's price for the screenplay rights to his novel Forrest Gump included a share of the profits; however, due to Hollywood accounting, the film's commercial success was converted into a net loss, and Groom received nothing. As such, he has refused to sell the screenplay rights to the novel's sequel, stating that he cannot in good conscience allow money to be wasted on a failure.

Stan Lee filed and won a lawsuit after the producers of the movie Spider-Man cheated him out of his share of the profits of the movie. [4]

The estate of Jim Garrison sued Warner Bros. for their share of the profits from the movie JFK, which was based on Garrison's book On the Trail of the Assassins. [5]

Art Buchwald received a settlement after his lawsuit Buchwald v. Paramount over Paramount's use of Hollywood accounting. The court found Paramount's actions "unconscionable," noting that it was impossible to believe that a movie (1988's Eddie Murphy comedy Coming to America) which grossed US$350 million failed to make a profit, especially since the actual production costs were less than a tenth of that. Paramount settled for an undisclosed sum, rather than have its accounting methods closely scrutinized.

The film My Big Fat Greek Wedding was considered hugely successful for an independent film, yet according to the studio, the film lost money. Accordingly, the cast, with the exception of Nia Vardalos who had a separate deal, sued the studio for their part of the profits. The original producers of the film have also sued Playtone, HBO and Gold Circle Films due to Hollywood accounting practices because the studios have claimed that the film had actually lost $20 million. [6]

According to his publisher's website [7], fantasy novelist Peter S. Beagle is owed a substantial amount of money by Granada Media International, the current owner of the animated movie based on Beagle's book The Last Unicorn. Beagle's contract entitles him to 5% of the net profits in the animated property, and 5% of the gross revenues from any film-related merchandising. Granada apparently claims that the movie cost more to make than it took in, that it earned no money between 1986 and their acquisition of it in 1999, and the compounded interest on the loss adds up to several times what it cost to make. Beagle is currently attempting to raise sufficient funds to challenge Granada in court.

Hollywood accounting is not limited to movies. An example is the Warner Bros. television seriesBabylon 5 created by J. Michael Straczynski. Straczynski, who wrote 90% of the episodes in addition to producing the show, would receive a generous cut of profits if not for Hollywood accounting [citation needed]. The series, which was profitable in each of its five seasons from 1993–1998, has garnered more than US$1 billion for Warner Bros., most recently US$500 million in DVD sales alone. But in the last profit statement given to Straczynski, Warner Bros. claimed the property was $80 million in debt. "Basically," says Straczynski, "by the terms of my contract, if a set on a WB movie burns down in Botswana, they can charge it against B5's profits." [8]

Peter Jackson, director of The Lord of the Rings, and his studio Wingnut Films, brought a lawsuit against New Line Cinema after "an audit... on part of the income of The Fellowship of the Ring". Jackson has stated this is regarding "certain accounting practices", which may be a reference to Hollywood accounting. In response, New Line stated that their rights to a film of The Hobbit were time-limited, and since Jackson would not work with them again until the suit was settled, he would not be asked to direct The Hobbit, as had been anticipated. [9] 15 actors also are suing New Line Cinema claiming that they have never received their 5% of revenue from merchandise sold in relaton to the movie, which contains their likeness. [10]

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