Based on this story, New Line et al have paid not a dime of the 7.5% of gross profits (around $450 million, I guess) to
As a result, the future of the Hobbit movie(s) could be in doubt.
Early days yet, but this seems like typical movie studio sleaziness. Good thing for the estate that they got a percentage of the gross; net profits never seem to exist when it comes time to pay percentages.
Roddy
Seeing as the film rights to the Tolkien works are held by Saul Zaentz, I’m not surprised. As John Fogerty once sang, Zaentz can’t dance, but he’ll steal your money.
This could go into litigation for decades, if not longer.
Film studios have very creative accounting departments. At one time, they actually claimed that Titanic didn’t make money when it came time to distribute payments based on gross percentages.
This is why most big Hollywood stars have more air-tight contracts when it comes to gross vs. net profits, and front end or back end payments. Let’s just say many have learned the hard way that what seems like an easy concept (5% of final gross profit) turns into a nightmare when it comes time to getting paid.
I sincerely doubt that New Line and MGM have not covered their legal butts in the original contract agreement well enough to continue with plans to make The Hobbit.
The article says that the percentage is of “gross receipts”, not gross or net profit. Maybe someone can explain to me how accounting tricks can disguise the amount of gross receipts from a movie?
Also, I am curious as to how “front end” payments would work if the amount of those payments depends on box office performance? These seem not to go together.
Please, dilute my ignorance of how film finances work!
Roddy
From the article:
Bolding mine.
This seems to be saying that they get 7.5% of gross receipts, once a certain profit threshhold has been met.
If I recall correctly, part of the original problem that Jackson had with New Line was their contention that the movies never made that much profit. I find it hard to imagine how they could NOT have turned a profit. But many times you hear it told that a movie makes 100 million dollars, only cost 50 million to make, but is considered a flop, presumably because of marketing costs, distribution costs and other sundry expenses.
It’s entirely possible that they’ve managed to somehow include the production costs of goods, and premieres, and travel for junkets, and what have you to ensure that the “costs” of the movie were somewhere around the 2.5 billion dollar mark. It seems remarkably far fetched, but I guess it’s possible.
It would be interesting to know on what basis the Tolkien Estate claims that they are owed any money at all, since according to everything I’ve read they don’t own any part of the film rights to the books at all:
Well, they’re the ones who leased the rights to studios. And they, y’know, own the copyrights to everything Lord of the Rings related.
The Tolkien Estate didn’t lease the film rights- Tolkien Enterprises (Saul Zaentz) did. Based on the Wikipedia article, it looks like the Estate only holds the publishing rights- Tolkien Enterprises owns the film and merchandising rights.