Wow. This is sleazy.
Wikipedia: Hollywood Accounting
In accountancy, Hollywood accounting is the practice of distributing the money earned by a large project to corporate entities which, though legally distinct from the one responsible for the project itself, are actually owned by the same people. This substantially reduces the profit of the project proper, sometimes eliminating it altogether. The effect of this practice is to reduce the amount which the corporation must pay in royalties or other profit-sharing agreements.
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Due to Hollywood accounting, it has been estimated that only about 5% of movies officially show a net profit, and the “losers” include such blockbuster films as Rain Man, Forrest Gump, Who Framed Roger Rabbit, and Batman, which all took in huge amounts in box office and video sales.Because of this, net points are sometimes referred to as “monkey points,” a term attributed to Eddie Murphy, who is said to have also stated that only a fool would accept net points in his or her contract.
…Examples
Winston Groom’s price for the screenplay rights to his novel Forrest Gump included a share of the profits; however, due to Hollywood accounting, the film’s commercial success was converted into a net loss, and Groom received nothing. That being so, he has refused to sell the screenplay rights to the novel’s sequel, stating that he “cannot in good conscience allow money to be wasted on a failure”.
Stan Lee filed and won a lawsuit after the producers of the movie Spider-Man did not give him a portion of the gross revenue.
The estate of Jim Garrison sued Warner Bros. for their share of the profits from the movie JFK, which was based on Garrison’s book On the Trail of the Assassins.
Art Buchwald received a settlement after his lawsuit Buchwald v. Paramount over Paramount’s use of Hollywood accounting. The court found Paramount’s actions “unconscionable,” noting that it was impossible to believe that a movie (1988’s Eddie Murphy comedy Coming to America) which grossed US$350 million failed to make a profit, especially since the actual production costs were less than a tenth of that. Paramount settled for an undisclosed sum, rather than have its accounting methods closely scrutinized.