Tuesday, March 21, 2006

The Importance of Gross Versus Net

How not to get screwed, Part 17: I hate to dwell on Hollywood stuff, because it gives a false impression, but I was just addressing the gross/net issue last night and this story pops up this morning(link below.) As I wrote in my email of last night: “The bonus clauses in the original contract were all in terms of box office as reported in Variety. In other words, they shouldn't be triggered by the actual studio accounting as in the Art Buchwald case.
Let's just base them as before on easily verifiable information.”

The Buchwald case refers to a movie called, “Coming to America” starring Eddie Murphy. Buchwald was involved and had a bonus clause based on what the picture made. Using creative accounting the studio reported to Art that this picture, which was a big hit, actually hadn’t made a dime. Art fought it all the way and eventually won although his legal fees were unbelievable. They have buildings full of lawyers and you don’t.
The reason you tie your incentive clauses to the gross box office for the U.S. and Canada as reported in Variety, is that these have to be accurate.
Technically, it would help you if they wildly exaggerated what the picture made, but they can’t because that is illegal. That would imply a movie is a hit when it isn’t, to draw more people. So the number is as high as it can be, and reflects reality, rather than the net number which has the special effects added by accountants. Now, the producer of a huge movie, Chicago, is arguing that the studio never paid up. If the contract says gross, the producer should get the money, although his company might have to go to court to force the payment. If the contract says net, it becomes a gigantic legal hassle from which there is no easy escape. Base everything on gross versus net.
The studio involved is Miramax, co-owned by Harvey Weinstein. I met him and shook hands with him at the Producer's Guild Awards Dinner. He could play the role of a producer in the movies. He's physically huge and exudes power. I gave my ridiculous business card to movie stars like Tom Hanks, but I didn't give my card to Harvey Weinstein. Why? He owns half of Miramax - what would be the point?
While rereading this, the email bell rung, it’s 6:52 a.m. and the producer has emailed back from Hollywood. I hope I don’t screw this up.

'Chicago' Producer Sues Miramax for $10M - Yahoo! News


Post a Comment

<< Home