Book contents
- Frontmatter
- Contents
- Preface
- Entertainment Industry Economics
- PART I Introduction
- PART II Media-dependent entertainment
- Chapter 3 Movie macroeconomics
- Chapter 4 Making and marketing movies
- Chapter 5 Financial accounting in movies and television
- Chapter 6 Music
- Chapter 7 Broadcasting
- Chapter 8 Cable
- Chapter 9 Publishing
- Chapter 10 Toys and games
- PART III Live entertainment
- PART IV Roundup
- Appendix A Sources of information
- Appendix B Major games of chance
- Appendix C Supplementary data
- Glossary
- References
- Index
- References
Chapter 5 - Financial accounting in movies and television
from PART II - Media-dependent entertainment
Published online by Cambridge University Press: 01 June 2011
Book contents
- Frontmatter
- Contents
- Preface
- Entertainment Industry Economics
- PART I Introduction
- PART II Media-dependent entertainment
- Chapter 3 Movie macroeconomics
- Chapter 4 Making and marketing movies
- Chapter 5 Financial accounting in movies and television
- Chapter 6 Music
- Chapter 7 Broadcasting
- Chapter 8 Cable
- Chapter 9 Publishing
- Chapter 10 Toys and games
- PART III Live entertainment
- PART IV Roundup
- Appendix A Sources of information
- Appendix B Major games of chance
- Appendix C Supplementary data
- Glossary
- References
- Index
- References
Summary
Happy trails to you, until we meet again.
– Dale Evans.This song is perhaps more appropriately sung by Hollywood accountants than by cowboys. But, as this chapter indicates, the problems that arise in accounting for motion-picture and ancillary-market income are more often due to differing viewpoints and interpretations than to intended deceits.
Dollars and sense
Contract clout
No major actor, director, writer, or other participant in an entertainment project makes a deal without receiving some kind of high-powered help beforehand, be it from an agent, personal manager, lawyer, accountant, or tax expert. In some cases, platoons of advisors are consulted; in others, only one person or a few individuals may perform all functions. Thus, an image of naive, impressionable artists negotiating out of their league with large, powerful, and knowledgeable producer or distributor organizations is most often not accurate.
As in all loosely structured private-market negotiations, bargaining power (in the industry's jargon, “clout”) is the only thing that matters. A new, unknown talent who happens on the scene will have little if any clout with anyone. Top stars, by definition, have enough clout to command the attention of just about everyone. In Hollywood as in other businesses, it has been observed, “you don't get what's fair; you get what you're able to negotiate.”
By hiring people whose ability to attract large audiences has already been proved, a producer can gain considerable financial leverage.
- Type
- Chapter
- Information
- Entertainment Industry EconomicsA Guide for Financial Analysis, pp. 178 - 243Publisher: Cambridge University PressPrint publication year: 2010
References
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In 1956, MGM received about $250,000 for a network showing of Gone with the Wind
in 1979, based on a $35-million face-value 20-year contract with CBS, the average per run was over $1 million
in a 1994 agreement, NBC paid MCA $50 million for precable rights (four runs) of Jurassic Park
in 1996, ABC acquired the rights to two runs (after pay-per-view and pay cable) to Mission: Impossible for $18 million to $22 million
Other important deals include the Fox network agreement in 1997 to pay $80 million for early broadcast rights to Lost World
Fox's $80 million television rights deal for Star Wars Episode I: The Phantom Menace, and Disney's acquisition of the broadcast and basic cable television rights to Harry Potter and the Sorcerer's Stone in 2001 for about $70 million (plus rights to the sequel for an additional $60 million)
BusinessWeek, March 5, 2001. The second Disney/Pixar deal that covered Finding Nemo
Pixar was acquired by Disney in 2006. After the 2008 success of Iron Man
Wall Street Journal, September 30, 2008
“Universal Pictures to Distribute DreamWorks Films,” Los Angeles Times, October 14, 2008
Variety, February 8, 1999. The modern era of “profit” participations for talent began in the 1950s with Jimmy Stewart's deal for Winchester '73
Another such Jimmy Stewart participation was for the movie Harvey. Earlier participations, however, go back to the days of Irving Thalberg at MGM in the 1930s. The first profit participation contract is believed to have been drawn in 1934 with the Marx Brothers for the MGM movies
Among the films first affected were Da Vinci Code, Mission: Impossible III, Holiday
Pirates of the Caribbean sequels. The trend away from such deals then accelerated after the 2008 writer's strike
(2008a) was deal for Yes Man
Gran Torino. See also (2006a)
Who Framed Roger Rabbit, Three Men and a Baby, and Beverly Hills Cop, are shown in (1992)
Variety, September 13, 1993, and also Daily Variety, November 20, 1995
A suit concerning net profits contracts for the film JFK moved through the courts in the late 1990s
In 2003 there was an accounting lawsuit concerning My Big Fat Greek Wedding filed at Los Angeles Superior Court
In 2005, director , triumphantly coming off his Lord of the Rings trilogy ($281 million cost, $4 billion total revenues)
the $160 million film Sahara, which lost at least $78 million, involved a lengthy trial from which detailed budget items were revealed in Bunting (2007)
and (1992, p. 184) suggest that the probability of renewal increases markedly for series that have been renewed at least once
The longest-running TV series through the 1992–93 season were Gunsmoke with 402 episodes
Dallas with 356, Knots Landing with 344, Bonanza with 318, and The Love Boat with 255. Through 2010
the longest-running prime-time series have been 60 Minutes (42 years beginning in 1968)
The Ed Sullivan Show (24 years, 1948–71)
20/20 (24 years), Gunsmoke (20 years, 1955–75), Law and Order (original, 20 years ending 2010, 456 episodes)
The Red Skelton Show (21 years, 1951–71)
Saturday Night Live has been running on NBC since October 1975
And as of 2009, The Simpsons, with 20 seasons completed, had far surpassed Ozzie & Harriet (14 seasons)
The longest-running program in worldwide broadcasting history is NBC's Meet the Press, which debuted November 6, 1947
(2003) recounts that in 1999 Paramount was the first studio to put a television series (Star Trek) on DVD
Buffy the Vampire Slayer, 24) and by 2003 had captured a 42% share of the TV-to-DVD market
Sex and the City. TV-to-DVD sales were around $3.0 billion in 2006
In 2005, the top-selling Seinfeld (seasons I&II) generated $90 million. See also (2005b) and (2005). (2006) indicates that DVD sales of $200 million between 2002 and 2006 for the Fox series 24 made the show profitable for the producers
Jeopardy! Among the longest-running shows in syndication as of 2009 are Soul Train
as of 1998, NBC agreed to pay a record $13 million per episode for E.R. – equivalent to $850 million over three years
BusinessWeek, June 2, 1997
the Los Angeles Times, January 16, 1998
(2006) notes with regard to NBC's tenth season of Friends
New York Times, May 15, 2000
Note also that in 2001, Frasier star Kelsey Grammer was able to negotiate for the upcoming tenth and eleventh seasons (48 shows) a record $1.6 million per episode
(2002b), in which the contract extension for Friends was based on NBC's paying $7 million per half-hour episode
A second extension of Friends into a tenth season (see New York Times, December 21, 2002 and Nelson and Flint 2002) was made possible by a December 2002 agreement to pay Warner Bros. around $10 million (up from $7 million) for each half-hour episode
Frasier is discussed in the New York Times and Los Angeles Times of December 7, 2000
Dharma & Greg discussed in Carter (2001b)
(2001) covers the resolution (three years and a bit more than $5 million per episode) of the NBC and Frasier negotiations
American Idol was generating $630,000 per 30-second spot in the 2007 season and in the low $900,000s in the WGA strike-affected 2008 season
a record total of $200 million ($1.5 million per episode) was initially received in the mid-1980s by MCA for the one-hour series Magnum, P.I
And syndication of the half-hour Seinfeld in 1998 brought a record $6 million an episode for a total $1.6 billion
Cosby series in 1988
Variety, March 23, 1998
(2004). The first syndicated show was The Lone Ranger
Walker, Texas Ranger was sold in 1996 for $750,000 per episode to the USA Network and for about the same from weekend runs on broadcast stations
As of 2005, the leading cable syndication prices per episode were $2.5 million for Sopranos (A&E)
New York Times, February 1, 2005
Cold Case (in 2005)
rerun rights of the network series NCIS: Los Angeles were sold in 2009
2010, The Big Bang Theory to TBS and Fox TV for around $1.5 million per episode
cable's A&E network bought HBO's The Sopranos for $2.5 million an epidose. See (2009)
The possible adverse affect from VOD on such prices is discussed in (2005)
In 2007 an unusual reversal in the flow of episodes involved Law & Order: Criminal Intent
The repurposing of programs from cable to network television also picked up steam after the writers' strike in 2008. Shows such as Dexter
Magnum (which ultimately averaged $1.7 million per episode) was obtained, television industry demand for hour-long series plummeted and, through the second half of the 1980s
Murder She Wrote, Cagney and Lacey, and Miami Vice. And hour-long dramas such as E.R. have later been sold to cable for $1.2 million an episode. Lifetime, owned jointly by Disney and Hearst, bought rights in 1996 to 112 episodes of the sitcom Ellen for more than $600,000 per episode, a record for a cable network purchase. See also (1992)
Star-Trek…The Next Generation, with an initial per-episode budget of $1.3 million plus $75,000 for special effects, had been among the costliest first-run series produced in the early 1990s
Nor are all network productions high-budget; for example, as of 1997 it had cost about $400,000 an hour (one-third as much as drama) to produce network newsmagazine programs such as 60 Minutes (CBS), 20/20 (ABC), PrimeTime Live (ABC), and Dateline (NBC)
Millionaire generated more than $1 billion of revenues and perhaps $800 million of EBITDA for ABC in the year beginning with the fall 2000 season. In 2010
In 1999, in addition to the Wind Dancer/Home Improvement
A more recent situation with regard to in-house cable network sales involves NBC's Law and Order series franchise and is described in (2008)
(1999) and the Los Angeles Times of April 9, 2001 on settlement of NYPD Blue issues