I see no fraud as long as the IRS gets its share… actors just need to read the contract and deny the businesses the ability to do this, their fault for signing a bad contract at least to some extent.
@@ottof9808 Have you ever read the terms of service for any major service? They’re full of jargon and vague language, making them difficult to read and even harder to fully understand. While many actors might have lawyers to review their contracts, those who don’t are at a significant disadvantage and are more likely to get taken advantage of. On top of that, Hollywood is super competitive. Even if an actor recognizes and rejects a bad contract, someone else might take it out of desperation, perpetuating the cycle. We don’t blame victims of scams for losing their money-so why should we blame actors for being exploited by unfair contracts? The responsibility to ensure fair pay lies with the industry and its practices, not solely on the individual actors.
There’s 174,000 producers in the US workforce. The average pay is $70,000. Thanks to this video you now know that is how much they get paid on a line item on the films budget as their profession. However all the companies they own that leased & sold items & loans at ridiculous costs means they’re other “businesses” give them access to buy alot of those crazy 25+ million dollar homes & exotic cars under their “paper cup” company. Just a note there’s still plenty of good honest producers that make no money too.
Very glad to hear both extremes doing well. Both dishonest practices netting obscene amounts of wealth *AND* plenty of honest folk not getting thier due props. (pun intended) if only there wasn't a perverse insensitive both of those extremes share.
"some days these accounting loop hole will be closed" it should have been closed long ago. financial statements are required to disclose transactions between related parties also, if you publish a consolidated profit and loss of the studio and it's subsidiary, you should see the actual profit or loss on the studio and all it's subsidiaries as a group for one production
Corporate America picked up on this years ago. It's called Financial Engineering, where you show Profits to the Shareholders and Losses to the Taxman. ( see Enron, Worldcom, Tyco etc)
This was eye=opening! You also have the rare, modern example of the actor that gets a big payday from the gross box office for a particular project. A big example I've seen of this was Cameron Diaz in Bad Teacher.
@@thehousecat93 It's a global competition, and when another country (Ireland, Australia etc.) undercuts with better tax credits, the industry and all its jobs move there instead. This is especially true of the less location-dependent VFX and animation, where the work is constantly flitting between the UK, Canada, Singapore, New Zealand, and increasingly India and Malaysia.
Accountant here (but not one that serves this industry), but the reason studios can probably get away with this (at least from an accounting standpoint, not necessarily legal) is from a consolidated basis it is a net zero affect. Charge 30% interest to a wholly owned subsidiary and at the consolidated entity (like Warner Brothers or Paramount), that nets to zero. As long as they are disclosing the nature of the transaction (i.e., we have a wholly owned distribution company that assists in distribution of our films that receives a fee for marketing, distributing, etc.) they are good. These sub entities most likely are not getting individual audits, where things like this would potentially get flagged.
Conflict of interest isn't typically allowed in government agencies and nonprofit organizations. Seems like the private sector need this policy. Until then, hopefully no one else falls for the profit sharing model and instead focus on upfront fees with percentages regardless of profitability.
This kinda goes to explain why so many movies have these outrageous budgets, like Red One with over $200 million or Indiana Jones close to $250 mill. They can legitimately report them as losses. But...I don't get how this makes sense from an industry standpoint. Surely big successful movies wouldn't get sequels then? Why aren't they clamoring to make another Flash or Indiana Jones then? I guess because then it's too transparent?
Some movies are legitimate flops, not just on-paper flops. People like Dwayne Johnson and Chris Evans can demand high pay and wouldn’t always take lower upfront pay for points, especially on a wannabe blockbuster. CGI is expensive.
I feel like big companies like Disney have to be burying other employee or operating expenses in each movie to also save on taxes. I feel like every successful movie can be a place to hide existing expenses. That’s how they can afford to lose money on all their movies.
this i kinda old news. Famous actors nowadays negotiate big upfront fees. Often times about 20 Million dollars. The accounting tricks are still apllied. Like in the past to save on paying taxes
It's definitely this. This "one simple trick" to not pay headline actors isn't a secret. They all know. This is about taxes only at this point, but this clickbait stuff makes ordinary people think they've got the inside scoop. Hey maybe they should be a Hollywood agent now! You've just got to know this one secret trick!
I see why studios wouldn't want to do this, but couldn't actors insist on contracts that grant them a share when revenue of a movie surpasses $X (where X is the "real cost" of making the movie)? Then, inventing costs wouldn't help.
totally adds up, when you remember which group of people were highly involved in the development of the film industry in the US, it makes a lot of sense...
This is a really good video. Well articulated and easy to explain. Learnt a lot! Keep up the good work! (this sounds like a bot comment but it's not I promise lol)
I wonder if anyone else has thought of creating an LLC to sell products to themselves at a huge markup... I think I heard of a NY real-estate magnate who did this and put his kids in charge of the company to transfer his wealth to them
A director sold his film to Crown International Pictures. The head of Crown was a relatively honest producer, so after the deal was done, the head of Crown said: "Ha! You know what you just did? You sold me a movie for $10,000 that'll make $100,000." The director learned his lesson. The next time, he asked for a portion of the profits. The head of Crown was a relatively honest producer, so after the deal was done, the head of Crown said: "Ha! Do you know what you just did?" He then explained Hollywood accounting, & told the director to ask for "Gross! Gross! Gross!" The director learned his lesson. For his next film, he asked for & got Gross. And they all lived happily ever after, at till the 70's ended & the exploitation market collapsed. True story, tho my quotes may not be exact.
If studios always cheat anyone who takes a net profit deal nobody would accept it over cash or gross points. It's been done for at least 45 years per this video.
Don't all these shenanigans undermine the original purpose of an actor getting a percentage? Why haven't the top actors started demaning a share of gross instead?
the solution is for the beneficiaries to structure percentage based on box office receipts. Say a tiered payout and also for online sales. Knowing game theory helps
This video is what someone who thinks they know how it works tells you how it works. Every actor, and their agent, and their own accountants and lawyers know how "creative" film accounting works. Did everybody watching this video think somehow they're in on a secret that none of the actors or their agents know about? The contracts they sign don't just say "I'll take x percentage of whatever random number you say it made in profit."
We lost so much money on this video.
tax write-offs are a thing.
Soooo, fraud, they are committing fraud
nononono it’s _“creative accounting”_
I see no fraud as long as the IRS gets its share… actors just need to read the contract and deny the businesses the ability to do this, their fault for signing a bad contract at least to some extent.
@@ottof9808 Have you ever read the terms of service for any major service? They’re full of jargon and vague language, making them difficult to read and even harder to fully understand. While many actors might have lawyers to review their contracts, those who don’t are at a significant disadvantage and are more likely to get taken advantage of.
On top of that, Hollywood is super competitive. Even if an actor recognizes and rejects a bad contract, someone else might take it out of desperation, perpetuating the cycle. We don’t blame victims of scams for losing their money-so why should we blame actors for being exploited by unfair contracts? The responsibility to ensure fair pay lies with the industry and its practices, not solely on the individual actors.
@@ottof9808The IRS only taxes net profits, not revenue. So it sounds like they're scamming the govt too.
Well no, but actually yes
I’m impressed y’all made the Good Work poster.
Yeah that artist must have cost "10 million"!
At this point I’m convinced their accountants are just using a crystal ball to predict losses
There’s 174,000 producers in the US workforce. The average pay is $70,000. Thanks to this video you now know that is how much they get paid on a line item on the films budget as their profession. However all the companies they own that leased & sold items & loans at ridiculous costs means they’re other “businesses” give them access to buy alot of those crazy 25+ million dollar homes & exotic cars under their “paper cup” company. Just a note there’s still plenty of good honest producers that make no money too.
Very glad to hear both extremes doing well. Both dishonest practices netting obscene amounts of wealth *AND* plenty of honest folk not getting thier due props. (pun intended) if only there wasn't a perverse insensitive both of those extremes share.
"some days these accounting loop hole will be closed"
it should have been closed long ago. financial statements are required to disclose transactions between related parties
also, if you publish a consolidated profit and loss of the studio and it's subsidiary, you should see the actual profit or loss on the studio and all it's subsidiaries as a group for one production
And now we know why Dan's not wearing the trench coat anymore. (His mom wanted it back.)
I’m here for Dan
Corporate America picked up on this years ago. It's called Financial Engineering, where you show Profits to the Shareholders and Losses to the Taxman. ( see Enron, Worldcom, Tyco etc)
It's "The Producers" all over again.
“Hollywood Accounting.”
“So, _fraud_ ?”
“Yes, Hollywood Accounting. That’s what I said.”
This was eye=opening! You also have the rare, modern example of the actor that gets a big payday from the gross box office for a particular project. A big example I've seen of this was Cameron Diaz in Bad Teacher.
This should have been a Dan Toomey video. I guess he was too expensive.
AFAIK most actors negotiate an upfront fee nowadays because of these accounting tricks.
What big actors like Tom Cruise, RDJ, etc, are negotiating for "first dollar" deals. What this means is they get a percentage of the gross revenue
In addition, a lot of American movies are filmed in Canada for the tax credit, grants and other local incentives.
Studios are ripping off Canada.
Canada chooses to offer the tax credits. Nobody is ripping off anyone. If it’s a bad deal, stop offering it.
@@thehousecat93 It's a global competition, and when another country (Ireland, Australia etc.) undercuts with better tax credits, the industry and all its jobs move there instead. This is especially true of the less location-dependent VFX and animation, where the work is constantly flitting between the UK, Canada, Singapore, New Zealand, and increasingly India and Malaysia.
Accountant here (but not one that serves this industry), but the reason studios can probably get away with this (at least from an accounting standpoint, not necessarily legal) is from a consolidated basis it is a net zero affect. Charge 30% interest to a wholly owned subsidiary and at the consolidated entity (like Warner Brothers or Paramount), that nets to zero. As long as they are disclosing the nature of the transaction (i.e., we have a wholly owned distribution company that assists in distribution of our films that receives a fee for marketing, distributing, etc.) they are good. These sub entities most likely are not getting individual audits, where things like this would potentially get flagged.
Conflict of interest isn't typically allowed in government agencies and nonprofit organizations. Seems like the private sector need this policy. Until then, hopefully no one else falls for the profit sharing model and instead focus on upfront fees with percentages regardless of profitability.
This kinda goes to explain why so many movies have these outrageous budgets, like Red One with over $200 million or Indiana Jones close to $250 mill. They can legitimately report them as losses.
But...I don't get how this makes sense from an industry standpoint. Surely big successful movies wouldn't get sequels then? Why aren't they clamoring to make another Flash or Indiana Jones then? I guess because then it's too transparent?
Some movies are legitimate flops, not just on-paper flops. People like Dwayne Johnson and Chris Evans can demand high pay and wouldn’t always take lower upfront pay for points, especially on a wannabe blockbuster. CGI is expensive.
I feel like big companies like Disney have to be burying other employee or operating expenses in each movie to also save on taxes. I feel like every successful movie can be a place to hide existing expenses. That’s how they can afford to lose money on all their movies.
WHOA, Hollywood is corrupt?!? Who could have seen that coming?
"A movie I KNOW you saw." You don't know me! Listening to this subject I keep hearing songs from the Producers in my head
That castle at 3:15 is in my hometown!! it's the "Alcazar de SEGOVIA"!!
this i kinda old news. Famous actors nowadays negotiate big upfront fees. Often times about 20 Million dollars. The accounting tricks are still apllied. Like in the past to save on paying taxes
It's definitely this. This "one simple trick" to not pay headline actors isn't a secret. They all know. This is about taxes only at this point, but this clickbait stuff makes ordinary people think they've got the inside scoop. Hey maybe they should be a Hollywood agent now! You've just got to know this one secret trick!
I see why studios wouldn't want to do this, but couldn't actors insist on contracts that grant them a share when revenue of a movie surpasses $X (where X is the "real cost" of making the movie)? Then, inventing costs wouldn't help.
This was explained very well. I guess thats why every movie is losing like $200 mil
well also people arent going to movies like they used to
Also, who about taxes?!?
I can't wait for Good work to cover this topic & maybe just maybe we can also get a Good work movie or series with the lead actors Dan & Macy 😂
On wikipedia they literally call it "creative accounting". In other words it should be illegal. Haha
Really well done video
The guy at 5:05 looks like a possible uncle to the guy from Pitch Meeting
The whole video looks like it was made 15 years ago, but somehow I like this
And yet we file our taxes honestly like good citizens
oh now I see, now I remember that *they* don't consider usury and greed to be sins, it all makes sense now
totally adds up, when you remember which group of people were highly involved in the development of the film industry in the US, it makes a lot of sense...
yeah you know who, the -steins, -tskys, -bergs, gold-, diamond, coen and so on
This is a really good video. Well articulated and easy to explain. Learnt a lot! Keep up the good work! (this sounds like a bot comment but it's not I promise lol)
rich people fighting other rich people over money
I wonder if anyone else has thought of creating an LLC to sell products to themselves at a huge markup... I think I heard of a NY real-estate magnate who did this and put his kids in charge of the company to transfer his wealth to them
They should just do gross sale percentage after hitting a box office milestone.
Presumably it also means every media company is functionally not paying taxes on billions in real profits because of imaginary losses
A director sold his film to Crown International Pictures. The head of Crown was a relatively honest producer, so after the deal was done, the head of Crown said: "Ha! You know what you just did? You sold me a movie for $10,000 that'll make $100,000."
The director learned his lesson. The next time, he asked for a portion of the profits. The head of Crown was a relatively honest producer, so after the deal was done, the head of Crown said: "Ha! Do you know what you just did?" He then explained Hollywood accounting, & told the director to ask for "Gross! Gross! Gross!"
The director learned his lesson. For his next film, he asked for & got Gross. And they all lived happily ever after, at till the 70's ended & the exploitation market collapsed.
True story, tho my quotes may not be exact.
Production on this vid was worth millions
they should just ask me, i can lose money real good
How dare you shaft Dan Toomey!
pause
your group does real investigative journalism
Merchandising. Star Wars merchandising.
5:40 Whoa Dan Toomey isn’t a real person?!?
Trying to stiff the actors seems like a losing proposition... That actors with enough pull would easily work around.
They should totally make the actors pay back the agreed % of the loss /j
Good vid
How do shareholders in these studio companies not sue?
the producers
Is there no such thing as auditing in this business? The lack of enforcement seems very odd.
If studios always cheat anyone who takes a net profit deal nobody would accept it over cash or gross points. It's been done for at least 45 years per this video.
The voice is panned in one shot in this video
Enjoyed it tho
What do we do then dawgs
this a good video
Good videooooooooooooooooooooooooooo
so actors are actually poor or
Don't all these shenanigans undermine the original purpose of an actor getting a percentage? Why haven't the top actors started demaning a share of gross instead?
the solution is for the beneficiaries to structure percentage based on box office receipts. Say a tiered payout and also for online sales. Knowing game theory helps
Never use your own money
Voice audio stereo?
Fraud.
it's fraud.
Tiny hats involved, not surprised
How is your remotely legal?
This video is what someone who thinks they know how it works tells you how it works. Every actor, and their agent, and their own accountants and lawyers know how "creative" film accounting works. Did everybody watching this video think somehow they're in on a secret that none of the actors or their agents know about? The contracts they sign don't just say "I'll take x percentage of whatever random number you say it made in profit."
Capitalism at it again.
It annoys me that these people call themself progressives.
They’re not, they’re actually pretty socially and financially conservative
So if these people don't pay their workers and don't pay taxes... why bother support them?.