And even without this, there is no law saying you get paid a percentage of profits. Those with enough clout can negotiate a contract where they will actually see some money.
Here’s an old article on Entertainment Weekly about this. The big shots negotiate for a percentage of the gross, knowing full well the movie will never see a net profit. For the movie Batman Jack Nicholson cut his salary in exchange for a piece of the movie’s earnings on toys bearing his likeness and walked away 50 million richer.
Well a kinder interpretation is that the losses from box office bombs have to be made up some where…
The number of dead studios of the past…go watch some old movies… names like orion kind of say its not that easy to make money
Mgm went bankrupt recently…
IIRC, George Lucas also got rich this way. Star Wars was a blockbuster, but the studios all turned it down… “C’mon George, you made your name on teen hijinks/teen angst nostaligia like your ‘American Graffiti’ move. Nobody goes to kids’ movies, they don’t make any money.” Quite a few studios turned him down before Fox agreed to let him try. He and the actors had points and there was no way to make that much money disappear - but Fox also did not bother to take the toy rights, so they belonged to Lucas. After all, how much money could he possibly make off a bunch of toy robots and spaceships?
From movies, you’d think keeping multiple sets of books was illegal or something. But pretty much every company whether they make movies or chemotherapy drugs has “financial books” and “tax books” as well a books for each entity a business has, and there are processes to reconcile between the books.
Don’t learn accounting from movies 
But clearly the first set of books is being brought into civil court as showing the profitability of the film, when we have already established it has little connection to reality.
These are the sorts of debates that keep accountants up all night and put normal people to sleep.
Let’s say we build a complete studio in Mexico for a single stunning blockbuster about the Titanic. That cost the studio $40M, say. At this point, nobody has any use for it, so the whole $40M is charged to the film. After all, the money was legitimately spent. The studio now owns a studio, paid for by the film.
Now, a year later *Gone With The Wave *and Waterworld II and *American Pie - Surf Edition *each come along and use the same studio, because of its ocean charms and lack of union laws. How do you account for it?
Do you charge each one $10M for the facility and go back to Cameron and say “look, your film made $30M extra!”? Do you leave Titanic accounting the way it is, and the other films get it for free? Do you charge each one $10M rent and pocket the money as free cash for the studio, and each film adds $10M to its costs?
A picture is not an ongoing enterprise with assets like costumes, sets, etc. that it rents out in perpetuity to keep making money. That’s the studio.
The way I’d set it up is that the studio owns the production company, and both Titanic and these other movies paid to rent it. The studio already knows that the set is going to be used for other movies, so they can price for Titanic accordingly. And, yes, by the end, they’d make a profit on the studio. But so does someone who builds any other structure and charges rent.
It’s very simple…the only reality it has to connect to is the one that the two parties agreed to. There may be some debate re the agreement or one party’s capacity to agree but that’s it.
What you are overlooking is that most movies these days are made by an LLC formed solely for the purpose of making that movie. Watch the credits all the way through and you are likely to see something like “© Big Whopping Movie, LLC” and the end of the credits.
So now you have a movie, but that is all that you have.
Then you need to distribute it, and for distribution to go well you will need to promote it.
So if a movie “cost x million to make”, that is what it cost to make.
It will cost Y million to promote and distribute.
Then you get your lawyers involved and work out a tiered compensation structure for the producers, like this…
Producer puts up $10 million, they get 10 million from the first 20 million in gross, 5 million from the second 10 million in gross, etc, etc.
You set up tiered compensation structures for the remaining parties with interest in the production, distribution and promotion of the movie as well.
So, the compensation comes out of the revenue and voila, NO PROFITS.
Why does anyone ever sign a contract that includes a percentage of the profit, knowing full well the accounting is rigged and they’ll never see a nickel of it?
It’s amazing what you can do when you are one of a very few distributors and cinema chains in the country.
First, there are no other customers when the facility is planned or being used. They show up later. If there were nibbles, why would the studio tell the first film about the potential for re-use?
Plus, I recall reading about an episode of the making of Butch Cassidy and the Sundance Kid. Apparently they wanted a short scene in New York as the two make their way to South America. There was a perfect studio set of olde New York, but the film that last used it was being released after* BC&SK* and did not want audiences to say “oh look, they are recycling the Sundance set.” So sometimes the studio cannot allow rapid recycling of existing assets.
Besides, accounting is also firm on - you do not count income until it is earned. A suggestion “we could use that facility next year” is not sufficient to split costs… especially when there’s more profit in not doing the split.
Like I said, the arguments that keep accountants up all night and put the rest of us to sleep.
Depends on how well your contract is written. See this article for a quick analysis of Arnold Schwarzenegger’s contract for Terminator 3:
I’m blanking on his name and don’t have the cite handy, but the guy that played Biff in the Back to the Future movies says that he’s never been paid a dime in royalties from those movies and that the studio officially maintains that they lost money.
A contract doesn’t really need a connection to reality. If you agree that you get paid 10% of A-B-C+D, then we have an enforceable contract. The fact that A-B-C+D is designed to pay you 10% of $0 is not really important except that maybe you should have thought about that before you signed.
In the words of Canada Bill Jones, “I know it’s crooked, but it’s the only game in town.”
I shall give your advice all the consideration it deserves.
Reported (to the Cabal).
Because every Hollywood producer will offer you the same contract. It’s a cartel.
The really big names have the clout to make sure they get their money. The guy playing the convenience store clerk has to take it or leave it.
In the UK at least, directors of a company pay a lot less tax on dividends than employees do on wages and contractors on fees or royalties. For this reason most people who can sell their talent will set up limited companies for various different enterprises. For example The Spice Girls had dozens of them. Each ‘girl’ was a company in her own right and every album and every tour was a separate financial entity.
It is also the case that films generally have special tax breaks.