« The Subprime Predators' Other Ball | Main | Why Ultramarathons are Easier Than Marathons »

Latest Stories

• Excel Wankers and Recession Averages
• Sorry, New York is Closed. Check Back Later.
• Catching Falling 2009 Earnings Estimate Knife
• Survivorship Bias in Global Markets
• Talking Positions on a Lazy-ish Retirement Portfolio

February 12, 2008

Fatal Subtraction, Part XXIV in a Series

Humorist Art Buchwald wrote years ago in his book Fatal Subtraction about the entertainment industry's great hide-the-profits skills. His subject was profits from his writing credit on the successful Eddie Murphy film Coming to America, but the idea that New Line maintains the Tolkien estate is owed no profits on the $6b-grossing Lord of the Rings films seems equally silly.

I'm sure there's more to it than there seems -- or then again, maybe there isn't --- but it's still deliriously fun Hollywood accounting nuttiness.

Charging  "unabashed and insatiable greed," [ed., that's a good line!] the plaintiffs said in the complaint that New Line, which produced and distributed the "Lord of the Rings" movies, had failed to pay anything despite  a nearly 40-year-old contract that entitles the trusts and the publishers to 7.5 percent of the films' gross revenues, less certain costs.

According to the complaint, the three movies generated about $6 billion in box office receipts and ancillary revenues from DVD sales, cable television licensing fees and other sales, although Steven Maier, the British-based lawyer for the trustees, said they had not been allowed to audit the receipts from the second and third films.

In the complaint, the plaintiffs argue that New Line has "clearly engaged in the infamous practice of creative 'Hollywood accounting,' " by excluding certain revenue from calculations and racking up costs that have so far prevented the studio from paying out a single dime.

"I think that it's going to be extremely interesting to see how New Line is going to explain to a jury that these films grossed $6 billion and yet by their calculations the creators' heirs are not going to get even a single penny," said Bonnie Eskenazi, the United States lawyer for the trustees.

Sphere It   |   Digg it   |   Bookmark it   |   Stumble it   |   Facebook it