Hollywood Accounting

I previously reviewed Edward Jay Epstein's book The Hollywood Economist. One of the most interesting things about it was its explanation of Hollywood accounting and why movies never make a profit.

Now Deadline Hollywood Daily has printed a profit and loss sheet for Harry Potter and the Order of the Phoenix and it's more of the same. "Though the film grossed $938.2 million worldwide, the accounting statement below conveys that the film is still over $167 million in the red."

The film "lost" money because Warner Bros. distribution sucked up all the money, leaving Warner Bros. the producer running a loss. It's a shell game and the pea is never under the producer's shell.

I don't know why any independent producer would take a chance on a system that is structurally corrupt. While the web is hardly mature as a distribution medium, its great advantage is that it frees producers from having to deal with distributors. I look forward to the day when film distributors suffer the same fate as record companies.