How Hollywood gaslights WGA strikers, Uncle Sam and Darth Vader about its profits

The Writer’s Guild of America is currently striking after contract negotiations with studios failed.  

There are multiple demands behind the strike (like writers and directors wanting more compensation, especially regarding residual payments from streaming services). But really, what sits behind the strikes is simple. As Sasha Stewart, a writer for a Netflix documentary series says, “The corporations have gotten too greedy.”  

We agree.   

Creative accounting  

With Hollywood being the centre of so much of the creative universe, it was perhaps inevitable that some of that creativity would seep into its accounting practices, too. 

“Creative accounting” in this context is, of course, little more than cooking the books. 

As Planet Money explains, studios typically set up a separate corporation for each movie they produce. The main purpose is to erase any possible profit, by charging fees that overshadow the film’s revenue. For accounting purposes, the movie is a dud – and there are no profits to distribute, and so no taxes to pay. 

It’s not just the movie that “loses” money – any of the creatives whose contracts afford them a share of net profit (so, the vast majority of them) also lose. Because if there are no net profits on paper, there are no payments due to them. And so, despite the movies raking in obscene amounts of money for the studios, they are flops on paper, making no money for the creators, writers, actors and other creatives involved in the process. 

James Bond himself has raised the issue, with actor Sean Connery noting “I hired my own bookkeepers to keep a watch on everything. Hollywood bookkeeping can be very suspect.” The original Wonder Woman – aka Lynda Carter – agrees: “Don’t ever settle for net profits. It’s called ‘creative accounting‘.” 

Eddie Murphy refers to this share in net profits as “monkey points”.  

“Well, it’s like ‘stupid’ points. Stupid to take the points.” “Won’t be any net profits?” “You sit there with your points going, ‘Eeeh, eeh, eeh, eeh, eeh’.”  

Unfortunately, Eddie, while some big-name A-list actors may well be able to negotiate for a share in gross profits, the vast majority of them can’t, and are stuck with only your monkey points.  

Gaslighting the monkey points club 

What do Darth Vader, Harry Potter and Stan Lee all have in common? They all got stuck with monkey points. 

Think Star Wars was a successful franchise? Return of the Jedi may have been the 15th most successful movie in box office history, with $729 million in gross earnings – and Darth Vader may continue to be one of the most recognisable characters- but on paper the movie never made a profit. As a result, the late actor David Prowse  who played Darth Vader was never paid for the final instalment of the beloved original trilogy: “I get these occasional letters from Lucasfilm saying that we regret to inform you that as Return of the Jedi has never gone into profit, we’ve got nothing to send you.” 

Darth Vader, one of the most iconic characters in movie history, didn’t get paid a cent. 

Harry may be a wizard, but he’s certainly not the only one. Techdirt uncovered a balance sheet from Harry Potter and the Order of the Phoenix. The movie grossed nearly $1 billion – the fifth instalment in the third highest grossing series of all time- but with a sprinkling of Hollywood accounting magic, ended up with a $167 million “loss” in part as a result of a $60 million interest charge on a $400 million budget (far higher than industry standard), as well as unusually high distribution and advertising fees paid out to Warner Bros. subsidiaries. 

These net profit documents aren’t easy to come by, but a few others have surfaced, including one for the more recent Beatles-themed romance movie Yesterday. The movie itself grossed $153 million. Global revenues should sit at around $78 million. Universal, though, claims to have sustained a loss of -$87.7 million – and therefore won’t be paying a single dime to any of the creatives who worked on the movie under a net profit-sharing scheme.  

Men In Black, the hugely popular sci-fi comedy starring Will Smith and Tommy Lee Jones, still remains in the red despite making $589 million from a movie that cost $90 million to make.  Ed Solomon, who wrote it, made a public appeal in a Twitter post for Sony to just stop doing anything with the movie. In the decades since the movie came out, it continues to make a supposed loss of some $5 million a year, meaning that Solomon has not received a cent as writer, and instead notes somewhat dismally “At this rate I’ll get my 5 per cent of net profits in 4830 B.C.” 

The iconic Stan Lee, as co-creator of Spider-Man, had a contract entitling him to 10 per cent of net profits. The first Spider Man movie made more than $800 million in revenue, but Lee got nothing – not because the movie didn’t make a profit, but because of dubious bookkeeping.  

Lawsuits abound based explicitly on studios using dodgy practices and “underhanded accounting” of profits: Eddie Murphy’s Coming to America; Angelina Jolie’s Gone in 60 seconds; Forest Gump; Batman; Michael Moore’s Fahrenheit; Peter Jackson’s Lord of the Rings; Don Johnson’s Nash Bridges; Bones; Who wants to be a millionaire; My big fat Greek wedding; The Walking Dead. 

Anyone with monkey points got paid nothing for them. Creators, writers, actors, animators, other creatives – all short changed. Not because these movies were a box office flop, but solely and purely because of mendacious Hollywood accounting.  

Hollywood studios are gaslighting everybody from writers to movie stars to the US government about how much profit they’re making. They manipulate the books and expect us to believe that some of the most successful, highest grossing movies in history made no profit. 

A taxing affair 

The Tax Justice Network is perhaps better known for writing about beneficial ownership registers and country by country reporting, so why the interest in Star Wars and Harry Potter? 

Because the same opacity that cheats Hollywood writers and creatives out of legitimate income, cheats our nurses, teachers and librarians of legitimate funding. 

Opaque bookkeeping practices that are bad for Darth Vader and Stan Lee are bad for taxpayers too.  

The schemes that deprive them of income are little more than classic tax abuse scams: the use of arbitrary distribution fees; a subsidiary charging exorbitant fees for “services”; or a studio that cross-collateralises the accounting of two projects, shifting losses from one project to another, creating two unprofitable projects out of one. It’s a sophisticated game that lets them permanently distort the bottom line. 

In litigation, companies like Fox are called out for having a “company-wide culture and an accepted climate that enveloped an aversion for the truth.” And Warner have been called out for seemingly thinking that robust accounting is meaningless, so “they don’t even bother…Warner either has no serious accounting system or has mastered the art of obfuscating everything and purposely acting like their accounting department is run by six-year-olds.” 

If that culture comes at a cost to individuals who aren’t paid their fair share, it comes at an even greater systemic cost to our tax systems, which are so heavily dependent on financial transparency.  

The new Justice League: Darth Vader, Harry Potter and Uncle Sam 

Hollywood accounting is little more than a work of fiction to rival even the most compelling screenwriting. Most companies try to limit costs, so they can make a profit. In the movie business, though? It’s all about maximising costs to minimise profits.  

It’s a loser’s game, played by what Eddie Murphy calls monkeys. The rules need to change, so that creatives are paid their fair dues – but also to introduce some tax justice.  

We believe it’s possible to account for income and expenses transparently, so that both Caesar and Darth get paid their dues.  

Darth Vader would probably tell us not to choke on our aspirations, just like he told Director Krennic in Rogue One. We’re happy to have aspirations, though, because we believe that justice has a way of prevailing.  

Imagine a new Justice League of sorts: Uncle Sam and his trusty side-kicks Darth and Harry. Except in our movie, everybody gets paid their fair share, and our super-powers are transparency. 

The notion that we can all take back control of our tax systems sits at the heart of what we do at the Tax Justice Network, and underpins the work of many others like the FACT coalition. It’s time we reprogram our tax systems to work for all of us. The interests of the wealthiest cannot continue to trump the needs of other members of society. 

After all, if even Darth Vader doesn’t get paid, how is Uncle Sam supposed to get it done? 

Image credit: Fabebk, CC BY-SA 4.0, via Wikimedia Commons