You would think that if you created a product that sold so well that it grossed six and a half times what it cost to make and that even after you factor in such things as advertising and distribution costs, you would still be making a profit, right?
Maybe so in other business, but not the movie business. The most recent case in point is the original 1997 science-fiction comedy Men In Black. Made for the tidy sum of $90 million it went on to sell nearly $588 million in tickets worldwide. But according to the film’s writer Ed Solomon, when it comes to Columbia Pictures’ accounting department, the film has yet to get out of the red. At least for the purposes of paying out those involved with the film who should be eligible for profit participation.
In honor of the release of MiB:International (I guess), I just got my new Men in Black profit statement.. which shows it STILL in the red. The fact that they've made a FOURTH ONE confirms, as I've always said, that the big studios are only in it for the art.
— Ed Solomon (@ed_solomon) June 13, 2019
Distribution fees, distribution expenses, direct cost, pre-break participations and deferments, supervisory fee, interest, over-budget charges..
— Ed Solomon (@ed_solomon) June 13, 2019
I was informed I'm not allowed to show it
— Ed Solomon (@ed_solomon) June 13, 2019
As awful as this sounds, it should really come as no surprise. Creative accountancy is nothing new in Hollywood. Studios have nearly always used numerous accounting tricks, chargebacks and other very dubious means to keep a film from showing a profit if it means that the studio will then not have to pay out any monies to actors or behind-the-camera creatives who would be contractually obligated to a percentage of the film’s profits as part of their compensation. So even when you are the second-highest grossing film of the year – following James Cameron’s Titanic – the studios can still somehow declare that they haven’t made a penny in profit.
Of course, these tricks only affect those who have profit participation based on a film’s net profits. Some high powered Hollywood players are able to get deals where their participation comes from the gross profits of a movie, before any of these tricks can be applied. In the case of Men In Black, star Will Smith reportedly has a deal which gives him a certain amount of the gross profits. While the studio pays this out, they also will count it as a cost against the film, thus making it harder for the film to show a net profit.
The studios very zealously guard these practices from the prying eyes of the public. Most famously, when humorist Art Buchwald sued Paramount Pictures for breach of contract over the Eddie Murphy comedy Coming To America and won, the studio tried very hard to avoid backing up their claim that the film – which made $289 million at the box office versus its $39 million budget – had yet to show a profit. Eventually the studio settled out of court. The lawsuit became the basis of Pierce O’Donnell and Dennis McDougal’s 1992 book Fatal Subtraction: The Inside Story of Buchwald v. Paramount. More recently, in 2017 Sylvester Stallone filed suit with Warner Brothers over profit distribution from his action film Demolition Man. Other Hollywood blockbusters that studios claim never turned a profit include Star Wars: Return Of The Jedi, Tim Burton’s Batman, Peter Jackson’s Lord Of The Rings trilogy and the indie smash My Big Fat Greek Wedding.
