It’s so wild to me that shelving a fully complete movie can somehow be better to a studio than simply releasing it. I’m glad that they changed their minds.
It’s hollywood accounting at it’s finest. They make the film cost a fortune to produce, because they use department billing to turn $1 of cost into $40 of expenses. Then they burn it to the ground and say they realized $250M of losses when it really only cost $20M to produce. And don’t forget that a huge amount of the cost was just paying themselves enormous salaries to figure out how to make it a net loss for the company from a structured tax perspective.
No. The Producers was all about over-selling profit shares. I just watched the original a few weeks ago and they had sold 25000% of the shares. So if it made any money then they would have to pay out 250x what was earned. But if it was a flop and closed the doors after the first show then no profits would be paid out - so all of the costs could be kept.
Ah! That makes so much sense. The way they explain it in the scene, it’s such a panicked moment and they both know what they’re talking about, but as a not-money person I always got confused.
Well the the real world version of Hollywood Accounting - they just use inflated costs. Usually a large studio will outsource aspects of the production to smaller companies. Those companies could be a wholly owned subsidiary, a company owned by an exec or a close connection of an executive, or even an internal department. The important aspect is each of them will be able to set the price for the service they provide at a very highly inflated amount relative to the cost. This allows the production to claim they spent $5 million on lighting when the actual cost was closer to tens or hundreds of thousands. Did the difference in cost and price ever actually exist? Was that money ever actually paid? That depends on the scheme and who is the recipient. Either an exec is trying to siphon corporate cash off to himself or family. Or they’re trying to inflate production costs for a failed movie (Coyote v Acme, Batgirl, etc) to make it appear as if the company made no taxable profits at the end of the year.
It’s so wild to me that shelving a fully complete movie can somehow be better to a studio than simply releasing it. I’m glad that they changed their minds.
It’s hollywood accounting at it’s finest. They make the film cost a fortune to produce, because they use department billing to turn $1 of cost into $40 of expenses. Then they burn it to the ground and say they realized $250M of losses when it really only cost $20M to produce. And don’t forget that a huge amount of the cost was just paying themselves enormous salaries to figure out how to make it a net loss for the company from a structured tax perspective.
I could never wrap my mind around the trick of the plot, but is this in some way related to how the scam works in The Producers?
No. The Producers was all about over-selling profit shares. I just watched the original a few weeks ago and they had sold 25000% of the shares. So if it made any money then they would have to pay out 250x what was earned. But if it was a flop and closed the doors after the first show then no profits would be paid out - so all of the costs could be kept.
Ah! That makes so much sense. The way they explain it in the scene, it’s such a panicked moment and they both know what they’re talking about, but as a not-money person I always got confused.
Well the the real world version of Hollywood Accounting - they just use inflated costs. Usually a large studio will outsource aspects of the production to smaller companies. Those companies could be a wholly owned subsidiary, a company owned by an exec or a close connection of an executive, or even an internal department. The important aspect is each of them will be able to set the price for the service they provide at a very highly inflated amount relative to the cost. This allows the production to claim they spent $5 million on lighting when the actual cost was closer to tens or hundreds of thousands. Did the difference in cost and price ever actually exist? Was that money ever actually paid? That depends on the scheme and who is the recipient. Either an exec is trying to siphon corporate cash off to himself or family. Or they’re trying to inflate production costs for a failed movie (Coyote v Acme, Batgirl, etc) to make it appear as if the company made no taxable profits at the end of the year.
I really wish the only way they could get a tax write off would be to release it into the public domain.