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Harry Potter, Return of the Jedi and LOTR all reported to lose money

Posted by mandyf on April 14, 2012

If you ever wondered how much money blockbuster films really make, the answer is likely nothing. That is if you believe the accounting used by studios. According to MPAA data, only about 5% of all films released (major studios and indie films) turn a profit which would make you think that the ones that do turn a profit must make billions upon billions of dollars to subsidize that 95% that do not, but again, when you look at the data, those that do make a profit usually report a very small profit at best.

 It all comes down to what is called Hollywood accounting which most of the world would call creative accounting. It is a game of estimating future expenses, shaving points, paying points forward, and inflating phantom costs to studio personnel for jobs like “technical adviser”, “creative consultant” and “wardrobe design approval consultant assistant advisor.” These are real jobs to a point – creative and technical consultants certainly are. What is often interesting is how many a film needs that just happen to have studio jobs and somehow never seem to consult with anyone. It is has been the Hollywood joke for decades.

Just how prevalent a practice this is remains anyone’s guess as some films do genuinely bomb, but what you may find interesting are some of the films reported as being losers. Not losers in the sense they failed to entertain and bring in millions or even billions at the box office, but losers in the sense that the studios claim they never turned a profit. If they did turn a profit, the amount is so negligible that even a third world country would want to send the film an aid package to get over the tough times if it were a country. What is more interesting is how many of those movies cited as never turning a profit spawned so many sequels. If they were really such losers, would it make sense to keep going back to the well, or is it like playing the lottery?

Harry Potter and the Order of the Phoenix

According to Warner Bros., they took a bath on this film, but they did make sequels. This particular film grossed around $1 billion by July of 2010, yet WB says they lost money. What is funny, is that after seeing a query about how much the $57 million in interest fees for loans to help finance the film cut into the profit margin, it turns out that Harry Potter films are under the wing of a WB subsidiary that “borrows” the money to produce the film from the WB parent company. In essence, WB borrows money from itself, charges itself interest, pays back the interest – sometimes with late penalties, and then calls it a loss. Surprisingly enough, this is a standard and somewhat legal practice.

Return of the Jedi

How could one of the most iconic films ever made in one of the most successful film series ever made lose money? A lot of people wonder that too. It was by no means the best in the trilogy, but it ran in theaters for months. It grossed $475 million worldwide (keep in mind that is early 1980’s $475 million), but supposedly it was so expensive to make that it was a net loss. Consider the film actually cost only $32.5 million to make and it is inconceivable how $442.5 million just sort of vanished in distribution expenses.

Lord of the Rings

Pick any one of the new LOTR films and it was a loser. Sure millions of tickets were sold, and the merchandising and DVD sales were through the roof, but if we believe the studio the overhead was a real bear to pay off. The gross profit of the trilogy was – hold your breath – $2.914 Billion. The budget for the three films was $281 million. Add on an extra…billion let’s say for paying off distribution, a few people’s kids that carried a clipboard, Aunt Sally’s masseuse that rubbed feet, and maybe a charge like $10 million for bottled water (facetiously speaking) and it is still hard to figure out how the films lost that much money to be called a loss.

Spider Man

Spider man cost $139 million to make, it took in $821 million, and it is another loser that incidentally spawned a sequel. This massive loss came to light when Stan Lee showed up with his hand out demanding his 10% of the profits as his contract with Marvel dictates that anything with Spider Man in it earns him that. The studio said – paraphrasing of course – Stan we’d love to pay you, but there isn’t a penny of profit. They said the sequel would be a different story, but somehow that lost money too and Stan Lee was left high and dry, aside from the lawsuit he filed for his movie money.

Forrest Gump

Forrest Gump took in $677 million worldwide and cost $55 million to make. Winston Groom, who wrote the novel the movie was based on, was supposed to get 3% of the net profit, which according to the studio he did – $350,000. To this day no one can figure out how this movie reportedly made such a tiny profit of around $11.666 million.

My Big Fat Greek Wedding

This is perhaps one of the biggest head scratchers of them all as the film cost only $5 million. This flick took in about $369 million worldwide, but somehow or another Tom Hanks who produced the film got almost nothing. The studio does not claim an actual net loss, just that they made so little money Hanks and the other producers can’t claim their profit sharing because the money went somewhere. Nobody knows where it went, how much of it went, just that it went – somewhere. Needless to say, a lawsuit was filed to try to recover some of the mysteriously vanishing money.

 Of course nobody really buys the line that blockbuster movies do not turn a net profit. If the biggest films of the year lose money then how does the industry stay in business? If they are such awful investment vehicles why do investors line up to throw money at Pixar, Lion’s Gate, WB, and all the other big boys in the game year after year? Why would any studio dump 9 figures into making a film that loses money and then make a sequel that loses money followed by another sequel that loses money? The answer is simple – they make a boatload of money, and the most creative people in the industry have nothing to do with the films because they are the accountants.

http://www.deadline.com/2010/07/studio-shame-even-ha rry-potter-pic-loses-money-because-of-warner-bros-ph ony-baloney-accounting/
http://screencrave.com/2009-04-14/blockbusters-that- claim-to-lose-money-to-make-money/


2 Responses to “Harry Potter, Return of the Jedi and LOTR all reported to lose money”

  1. txwikinger said

    Reblogged this on txwikinger's blog.

  2. txwikinger said

    Also talk about the millions of dollars of tax credits that are given to the production studios producing movies!

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