Entertainment & Sports: February 2015 Archives
The music and movie industries use scummy accounting to rake in huge profits, pay performers almost nothing, and evade taxes. Read both articles if you want to be shocked and appalled. Maybe Congress will crack down on this sort of scam?
If you follow the entertainment business at all, you're probably well aware of "Hollywood accounting," whereby very, very, very few entertainment products are technically "profitable," even as they earn studios millions of dollars. A couple months ago, the Planet Money folks did a great episode explaining how this works in very simple terms. The really, really, really simplified version is that Hollywood sets up a separate corporation for each movie with the intent that this corporation will take on losses. The studio then charges the "film corporation" a huge fee (which creates a large part of the "expense" that leads to the loss). The end result is that the studio still rakes in the cash, but for accounting purposes the film is a money "loser" -- which matters quite a bit for anyone who is supposed to get a cut of any profits.
And who is supposed to get a cut of the profits? Artists, actors, and the tax-man.
