A Fix for Shady Hollywood Accounting?

A filmmaker is suggesting a new way to avoid skirmishes over notoriously dubious Hollywood accounting.

In the new issue of the Hollywood Reporter, movie and TV producer-director Gavin Polone points to recent lawsuits involving the TV series “Bones” and “The Walking Dead” over the amount of money paid to so-called “profit participants.” For many studios, paying out big checks to the profit participants is a major no-no.

“The feeling was that paying out to the participants was spending the studio’s money, not that it was the participant's money to begin with,” a former manager of participation accounting at a major studio told Polone.

Another of Polone’s sources told him about how some studios would charge overhead for advertising on a film against a participant’s profits, even when the contract explicitly stated that advertising was not to be included in overhead.

Few filmmakers have enough money to pursue lawsuits against a movie studio and pay for an audit of the studio’s books. But Polone believes such practices hurt the studios too. He argues that it encourages filmmakers to waste the studio’s money if they have less concern about the profitability of the work they do.

He suggests that forward-thinking studio heads should offer a better deal to filmmakers making it clear that reducing the project’s budget would result in a larger back-end payment for the artist. This could help both sides avoid the cost of protracted litigation and audits. The plan would include engaging an independent auditing firm to use the proper accounting standards and investigate the practices used. That could be a workable solution to a perennial problem for moviemakers and studios alike.