1991 Articles

There’s No Business Like Show Business: The Legal Implications of Hollywood’s “New Math” and Its Impact on Unsuspecting Artists

Hampton, Paris

"According to standard Hollywood practice, Buchwald or any other writer is not promised a share of the true profits in a contract. Royalties to writers and other creative people under contract are paid out only after the movie company deducts from gross revenue their distribution fees (a percentage based on what the company thinks is appropriate—usually about 30 percent) leaving an adjusted gross revenue. Against roughly 70 percent of the revenues the studios apply 100 percent of the costs for purpose of determining the participation rights of writers and performers. Because there are essentially two categories created by this accounting system (what the studio makes and what the film makes), the studios profit handsomely while the film shows a loss —meaning no royalties for actors, directors, and writers. Using this formula, Paramount could claim that Coming to America, the second-highest grossing movie in 1988, was $18,000 in the red and would never show a profit. This calls into question whether the system that is being used in the drawing up of movie contracts is fair and equitable."--from pages 33