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Principles of Finance Videos 156 videos
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Principles of Finance: Unit 3, Hollywood Accounting 18 Views
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Description:
How is accounting done in La La Land (the place, not the movie)? Eh, not entirely ethically, as it turns out. In fact, it would make for a great Liam Neeson flick.
Transcript
- 00:00
principles of finance a la shmoop- Hollywood accounting. ever read missives
- 00:08
about the Hollywood accounting? well the vibe is undoubtedly bad. like who thinks [accounting explained on a whiteboard]
- 00:13
a Hollywood accountant is generally like good anyway? other than the power player
- 00:18
who hired her of course outright lying about expenses is too easy a method of
- 00:22
cheating. instead in bad accounting costs get overstated a producer has to rent a
Full Transcript
- 00:28
ranch to shoot a horse chasing an alien scene. it's lo alien. but that ranch just
- 00:35
happens to belong to the producer. is it accounting leak kosher to have the
- 00:40
producer actually rented from herself? well technically it is in fact kosher
- 00:45
but the optics are bad too much room for corruption to take place, and you know
- 00:50
the producer really wanted that West field plowed for personal reasons ,but
- 00:54
maybe you suggested that the film needed the West field plowed right? so the movie [black and white of horse pulling a plough]
- 00:59
pays for that plowing and/or the house and or anything else. that fair not fair?
- 01:03
well not fair. optics matter. when you're the financial manager that cliche holds.
- 01:08
you build a reputation over decades and you can destroy it in five minutes .and
- 01:12
yes your personal life enters into your professional life these days whether or
- 01:15
not you think that's fair. even in Hollywood. but here's a hard thing to
- 01:19
think about only one in 20 movies make a profit. like a real profit .so that one
- 01:24
movie has to pay for the losses of the other 19. well when you've greenlit a
- 01:29
slate of 20 movies which will rent a soundstage for two years for two million
- 01:34
dollars how do you account for the cost of that two million dollars? well if you
- 01:38
allocate by revenues then you'd quote burden unquote the big hit monster movie
- 01:44
starring Brad Pitt aful which was 90% of the revenues of the 20 movies and with [revenues listed]
- 01:49
90% of the cost. the whole slate of movies generated a billion dollars of
- 01:54
revenues and while shmoop wars with Brad pitiful was 900 million of that. the
- 01:59
other 19 movies totaled only a hundred million of revenues. you know in the one
- 02:03
starring Amanda Bynes that only was 14 bucks. even though she mop wars took only
- 02:07
one twentieth of the time of the rental of that soundstage is it fair to burden
- 02:13
it 90% of the costs? hmm so is it fair well
- 02:17
we're thinking. and then how do the profit participants feel about that
- 02:21
allocation ?meaning that Justin Boober or Brad pitiful stars of the movie, [profit participant defined]
- 02:26
well Brad anyway was to keep 10% of the profits of the film the film was clearly
- 02:32
very profitable. have you charged one twentieth of the two million dollars for
- 02:37
that soundstage rental well then it's rental expense in the film would have
- 02:40
been a hundred grand but instead you charged one point eight million in
- 02:45
studio costs so you just essentially well you took away one point seven
- 02:49
million dollars in profits from Brad pitiful profit pool and that would have
- 02:54
netted him a hundred and seventy grand Brad's agent will be none too happy
- 02:58
about this arrangement. legal yes. fair? well maybe why maybe well because when [equations]
- 03:03
the movie was funded nobody knew it would be a big hit had the movie done
- 03:07
horribly would the studio have asked Brad pitiful for his salary back? no the
- 03:12
studio will argue that it's totally fair because this big hit movie just made
- 03:17
Brad pitiful even more valuable and on his next contract he can secure even
- 03:23
better terms. and in fact in real Hollywood definitions of profit are a
- 03:27
big part of the contract negotiations for big stars accountants as deal [people frown sitting at a table discussing terms]
- 03:32
quarterbacks. yeah who knew?
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