LucasFilm Tells Darth Vader that Return of the Jedi Hasn’t Made a Profit

Less than 5% of movies actually show a net income (or net profit as the article calls it). It's called Hollywood Accounting:<p><a href="http://en.wikipedia.org/wiki/Hollywood_accounting" rel="nofollow">http://en.wikipedia.org/wiki/Hollywood_accounting</a><p>Summary:<p>-Studios create a subsidiary corporation for each movie and they almost never show a profit.<p>-The studios charge the subsidiary service fees for services performed like distribution, which lowers net income to zero or less.<p>-They do this to avoid taxation and paying royalties to actors.<p>Quote from wikipedia: "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."<p>There are many more cases like this involving high profile people including Peter Jackson:<p><a href="http://en.wikipedia.org/wiki/Hollywood_accounting#Examples" rel="nofollow">http://en.wikipedia.org/wiki/Hollywood_accounting#Examples</a>

Why isn't there an enterprising law firm going through the credits of all the Star Wars (and similar-vintage films with ongoing commercial potential), contacting every person on the list, and telling all the retired ones "There is a pot o' money with your name on it if you sign these papers which let us sue them for residuals on your behalf."?<p>I have to imagine that the legal strategy required there is a for loop with half-dozen templated documents: "Settle with $CLIENT regarding the residuals from the production of $FILM or in discovery we will subpoena all of $FILM's books and hand them to the forensic accounting department of $BIG_FIVE who will describe in vivid detail how they are an utter fiction, resulting in $DISTRICT_JUDGE issuing a judgement in excess of $GUESS against $YOUR_COMPANY."

One of my intellectual property law professors, with fifty years experience in just about every kind of I.P. licensing scenario possible, all over the world, recommended it's almost always best in an I.P. license to ask for a flat fee first, and a small percentage of gross revenue with a short, hard reckoning date second. The more bargaining power you have, the higher you should bump up your position for upfront flat fee first and percentage of gross revenue second. Agreeing to a percentage of "net profits" is almost always a commitment to sue the other party down the road or get nothing. Whatever I've learned since then has left his recommendation intact.

I'm always fascinated by the way institutionalized dishonesty creeps into entire industries. From used car salesmen to film moguls, once a certain practice has ossified over the years into "everyone in the biz does it", practices that would result in jail time in other industries are simply accepted as business as usual. Even more curious, <i>everyone</i> to the man knows its wrong, but no one moves to change it. The emperor has no clothes and we just like him better naked.

Geez, Lucas. Have you no sense of decency, sir, at long last? Have you left no sense of decency?<p>I mean, really. I can see being a greedy fuck for a couple decades, while you're still unsure if you are, in fact, going to become and remain wealthy beyond the dreams of avarice. But once you have the fuck-you money put away for you, your entire family and everyone you've ever met who was halfway interesting, can't you toss Lord Vader some coin for his trouble?<p>Shameful.

I don't know why this is such a surprise to everyone. Outside of the startup scene, showing net profit is a Bad Thing. It increases liability to taxes and to employees[1], etc.<p>Maybe public companies are different (though since, movie studios are just about all subsidiaries of public companies, maybe not), but in my dealings with many multi-million dollar companies (especially those with union contracts to deal with), they find any way possible to show a loss on the balance sheet.<p>Between accounting tricks and taking money off the table through reinvesting (real or imagined) and executive salaries, profit is basically a made up number based on whatever management wants it to be.<p>Taking any percentage of net profit, in plenty of industries, is basically the same as taking nothing.<p>On a side note: the article and the one from the other day that mentioned this story as well only seemed to consider box office gross as the movie's revenue. I mean how many of us just on HN have more bought or gotten than one copy of the Star Wars movies over the years? I know I have at least 3 hanging around, to say nothing of TV airings and the like.<p>[1]Liability to employees: Through profit-sharing programs, raise discussions, union contract talks, etc., publicly showing a "profit" can cost the company money.

I seem to remember Alec Guinness hit the jackpot on the SW franchise by demanding a % of the profit (gross?), so I assume this guy had a different contract. I suppose Guinness had a lot more pull and negotiating leverage than a dude whose primary contribution to the films was to be tall.

Even shares on "gross profit" can fail: it can be beneficial for the publisher to give away the product for free. I've had this happen to a J2ME app, which the publisher gave away for free in exchange for advertising (they were building presence and reputation by this).<p>Another trick seems to be bundling - "buy this collection of things and you get thing x for free". So profits for selling thing x would be zero.<p>I am sure there are many more tricks like this...

I never cease to be amazed at how honest and forthright everyone in the (top tier) of the startup industry is, vs. the entertainment, government contracting, small business, etc. space. To say nothing of finance or politics.<p>That silicon valley and tech is taking over the world might be a result of this, but in any case, it's better for humanity.

Wouldn't it be nice if Lodsys got out of the patent troll game, and into using it's lawyers to fight for net-profit-residuals for people who worked on films that earned huge profits over time?<p>Wouldn't it be nice.

I remember reading something similar in the music industry, written by courtney love. Anyone have a link?

it's a link from an article which was here yesterday <a href="http://news.ycombinator.com/item?id=2981442" rel="nofollow">http://news.ycombinator.com/item?id=2981442</a> <a href="http://www.filmschoolrejects.com/features/6-things-the-film-industry-doesnt-want-you-to-know-about.php/all/1" rel="nofollow">http://www.filmschoolrejects.com/features/6-things-the-film-...</a>

Possible this is due to the kind of "creative accounting" detailed here: <a href="http://www.deadline.com/2010/07/studio-shame-even-harry-potter-pic-loses-money-because-of-warner-bros-phony-baloney-accounting/" rel="nofollow">http://www.deadline.com/2010/07/studio-shame-even-harry-pott...</a>

Its an interesting perspective that seems to suggest the opposite view from the 'other' article on the front page about contracts: Just Sue Me

I wonder if you add in the marketing and distribution cost for bit torrent &#38; associated search sites you can find that the movie companies should be paying them?

TL;DR: He finds their lack of profit disturbing

Best quote from article:<p>"Can you imagine the hedlines if Darth Vader sued George Lucas?"

I was expecting a video: 'nooooo!'

olllld article from 2009 rehashing longtime complaints of bitter Vader suit wearing actor. He didn't get a cut of the only-named-in-merchandise Ewoks toys. Boohoo.