Hollywood accounting

According to Lucasfilm, Return of the Jedi (1983), despite having earned $475 million at the box office against a budget of $32.5 million, "has never gone into profit".[7]

Art Buchwald received a settlement from Paramount after his lawsuit Buchwald v. Paramount (1990). The court found Paramount's actions "unconscionable", noting that it was impossible to believe that Eddie Murphy's 1988 comedy Coming to America, which grossed $288 million, failed to make a profit, especially since the actual production costs were less than a tenth of that. Paramount settled for $900,000,[8] rather than have its accounting methods closely scrutinized.

Producers Michael Uslan and Benjamin Melniker filed a breach of contract lawsuit in Los Angeles County Superior Court on March 26, 1992. Uslan and Melniker claimed to be "the victims of a sinister campaign of fraud and coercion that has cheated them out of continuing involvement in the production of the 1989 film Batman and its sequels. We were denied proper credits, and deprived of any financial rewards for our indispensable creative contribution to the success of Batman."[9] A superior court judge rejected the lawsuit. Total revenues of Batman have topped $2 billion, with Uslan claiming to have "not seen a penny more than that since our net profit participation has proved worthless."[9] Warner Bros. offered the pair an out-of-court pay-off, a sum described by Uslan and Melniker's attorney as "two popcorns and two Cokes".[10]

The estate of Jim Garrison sued Warner Bros. for their share of the profits from the movie JFK (1991), which was based on Garrison's book On the Trail of the Assassins.[11] The case was settled in 1999, with Garrison's estate receiving a "very small settlement."[12]

Winston Groom's price for the screenplay rights to his 1986 novel Forrest Gump included a 3% share of the profits; however, due to Hollywood accounting, the 1994 film's commercial success was converted into a net loss, and Groom received only $350,000 for the rights and an additional $250,000 from the studio.[13]

Screenwriter Ed Solomon says that Sony claims Men in Black (1997) has never broken even, despite grossing nearly $600 million against a $90 million budget.[14]

Gone in 60 Seconds (2000) grossed $240 million at the box office, but the studio declared a $212 million loss, primarily through Hollywood accounting as explained on NPR.[15] The real figure is likely closer to $90 million.[16]

Stan Lee, co-creator of the character Spider-Man, had a contract awarding him 10% of the net profits of anything based on his characters. The film Spider-Man (2002) made more than $800 million in revenue, but the producers claim that it did not make any profit as defined in Lee's contract, and Lee received nothing. In 2002 he filed a lawsuit against Marvel Comics.[17] The case was settled in January 2005, with Marvel paying $10 million to "finance past and future payments claimed by Mr. Lee."[18]

The 2002 film My Big Fat Greek Wedding was considered hugely successful for an independent film, yet according to the studio, the film lost money.[19] 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 sued Gold Circle Films in 2007 due to Hollywood accounting practices because the studio has claimed the film, which cost less than $6 million to make and made over $350 million at the box office, lost $20 million.[20]

Peter Jackson, director of The Lord of the Rings (2001-03), and his studio Wingnut Films, brought a lawsuit in 2007 against New Line Cinema after an audit. Jackson stated this is regarding "certain accounting practices". 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.[21] Fifteen actors sued New Line Cinema, claiming that they have never received their 5% of revenue from merchandise sold in relation to the movie, which contained their likenesses.[22] Similarly, the Tolkien estate sued New Line, claiming that their contract entitled them to 7.5% of the gross receipts of the $6 billion hit.[23] According to New Line's accounts, the trilogy made "horrendous losses" and no profit at all.[24]

Michael Moore sued Bob and Harvey Weinstein in February 2011, claiming that they had used creative accounting to deprive him of his share of profits for the film Fahrenheit 9/11 (2004). Eventually, Moore reached a settlement with the Weinsteins and the lawsuit was dropped in 2012.[25]

The 2005 film Sahara grossed $119 million against a production budget of $160 million, resulting in a $105 million loss for the studio. However, due to Hollywood accounting tactics, the loss was only reported as $78.3 million.[26]

A Warner Bros. receipt was leaked online in 2010, showing that the hugely successful movie Harry Potter and the Order of the Phoenix (2007) ended up with a $167 million loss on paper after grossing nearly $1 billion.[27] This is especially egregious given that, without inflation adjustment, the Wizarding World film series is one of the highest-grossing film series of all time both domestically and internationally.[28] The Hollywood accounting in the Harry Potter case included a $60 million interest charge on a $400 million budget over two years – an interest rate far higher than industry standard[29]—as well as high distribution and advertising fees paid out to Warner Bros. subsidiaries and sister companies.

The Walt Disney Company lost a $270 million lawsuit in 2010 to Celador over accounting tricks used to mask profits on the Who Wants to Be a Millionaire (1999-07) licensed franchise in the United States: "ABC artificially deflated fees the network should have paid the production company BVT and Disney-owned Valleycrest, which in turn decreased Celador's share of revenue. Loss of merchandising revenue was also claimed."[30]

Don Johnson won a lawsuit in 2010 against Rysher Entertainment which had attempted to wipe profits for the show Nash Bridges (1996-01) off the books in order to reduce Johnson's 50% backend stake to zero; the jury awarded Johnson $23.2 million in damages.[31]

21st Century Fox was found guilty of using Hollywood accounting practices to defraud the producers and stars of the procedural drama Bones (2005-17) and ordered to pay $179 million in missing profits, with the arbitration ruling made public in 2019.[32] Fox subsequently contested the $128 million punitive damages component in Los Angeles County Superior Court, whereas it declared it would pay the $51 million in actual damages awarded by the arbitrator. In September 2019, the lawsuit was settled on confidential terms.[33][34]

Despite grossing $911 million against its $55 million budget, the 2018 Freddie Mercury biopic Bohemian Rhapsody was written down as a $51 million loss by the studio.[35]

Despite grossing $153 million against a $26 million budget, the 2019 romantic-comedy Yesterday reportedly lost $87.8 million, according to Universal Pictures accounting sheets.[36]

In July 2021, a lawsuit brought by developer and executive producer Frank Darabont along with Creative Artists Agency against AMC Networks over profits from TV series The Walking Dead was settled for $200 million, plus sharing of certain future revenues.[37] The plaintiffs had alleged that AMC had deliberately set the imputed fees "paid" by the eponymous AMC Networks cable TV channel to AMC Studios—both subsidiaries of AMC Networks—far below fair market value, and thus illegitimately curtailed the payments due to the plaintiffs under their profit-sharing agreements.[38]