I just have one more question about the accounting here...
March 12, 2019 6:16 AM Subscribe
Columbo is one of the most highly regarded and successful detective shows in the history of television, but somehow didn't turn a net profit until 2016, some 45 years after Peter Falk first donned the raincoat. In a rare courtroom result against the "Hollywood accounting" system, a jury has held that at least $160 million has been improperly deducted from Universal City Studios' admitted profits.
The judge will decide whether another jury trial is in order to resolve remaining disputes or whether to appoint an accounting referee to calculate cumulative damages based on an aggregate of all the rulings.
While watching Russian Doll on Netflix, I couldn't stop thinking of Columbo. They should reboot it with Natasha Lyonne in the lead.
posted by dobbs at 7:02 AM on March 12, 2019 [52 favorites]
posted by dobbs at 7:02 AM on March 12, 2019 [52 favorites]
It's kind of shocking just how profitable TV is (or used to be?)
posted by gwint at 7:04 AM on March 12, 2019 [1 favorite]
posted by gwint at 7:04 AM on March 12, 2019 [1 favorite]
I'm still unclear how one industry can unilaterally decide to opt out of GAAP and everybody else is just OK with it. Can you imagine if, say, the plastics industry decided to make up their own set of accounting rules that was specifically designed to misrepresent the actual economics underlying their business transactions? What's weirder is that these studios are usually owned by large multinationals (AT&T, Comcast, Disney) and they do normal accounting for all their other business units. They must have whole departments dedicated to keeping and reconciling the two sets of books.
posted by leotrotsky at 7:10 AM on March 12, 2019 [27 favorites]
posted by leotrotsky at 7:10 AM on March 12, 2019 [27 favorites]
While watching Russian Doll on Netflix, I couldn't stop thinking of Columbo. They should reboot it with Natasha Lyonne in the lead.
"Just one more fucking thing..."
posted by leotrotsky at 7:12 AM on March 12, 2019 [20 favorites]
"Just one more fucking thing..."
posted by leotrotsky at 7:12 AM on March 12, 2019 [20 favorites]
On the other side of things, the reason Judge Judy makes so very much money is officially NOT that paying her a high salary keeps profits on the show down, so she doesn't have to share them with other profit participants. But maybe a little bit that, you know?
posted by jacquilynne at 8:05 AM on March 12, 2019 [1 favorite]
posted by jacquilynne at 8:05 AM on March 12, 2019 [1 favorite]
I'm still unclear how one industry can unilaterally decide to opt out of GAAP and everybody else is just OK with it. Can you imagine if, say, the plastics industry decided to make up their own set of accounting rules that was specifically designed to misrepresent the actual economics underlying their business transactions?
I believe the fracking industry does exactly that: https://www.sightline.org/2019/02/11/fracking-financial-depreciation-dodge/
Anyway: I watch a LOT of Columbo re-runs, so I'm glad to see the creators getting a shot at the money. I'm mystified how the studio generated "costs" to explain the fraud. Columbo had to be relatively cheap to produce. Sometimes they had high-profile guest stars, and they filmed in tony California locations, but they didn't rely on pricey plot elements like car chases the way, say, Rockford Files did. The show's strength was the character of Columbo, and the writing. That's what generated the profit, so why wouldn't you share it with the people who created it? I sure hope the jury sees it that way.
posted by helpthebear at 8:05 AM on March 12, 2019 [11 favorites]
I believe the fracking industry does exactly that: https://www.sightline.org/2019/02/11/fracking-financial-depreciation-dodge/
Anyway: I watch a LOT of Columbo re-runs, so I'm glad to see the creators getting a shot at the money. I'm mystified how the studio generated "costs" to explain the fraud. Columbo had to be relatively cheap to produce. Sometimes they had high-profile guest stars, and they filmed in tony California locations, but they didn't rely on pricey plot elements like car chases the way, say, Rockford Files did. The show's strength was the character of Columbo, and the writing. That's what generated the profit, so why wouldn't you share it with the people who created it? I sure hope the jury sees it that way.
posted by helpthebear at 8:05 AM on March 12, 2019 [11 favorites]
They must have whole departments dedicated to keeping and reconciling the two sets of books.
You are making an assumption about where the skim occurs.
posted by srboisvert at 8:28 AM on March 12, 2019
You are making an assumption about where the skim occurs.
posted by srboisvert at 8:28 AM on March 12, 2019
+1 for the title.
posted by Greg_Ace at 8:33 AM on March 12, 2019 [10 favorites]
posted by Greg_Ace at 8:33 AM on March 12, 2019 [10 favorites]
While watching Russian Doll on Netflix, I couldn't stop thinking of Columbo. They should reboot it with Natasha Lyonne in the lead.
A show like Columbo but where Lyonne is an... investigative exterminator?... who gets brought in when nobody can figure out where the cockaroaches are coming from. Oh one more fucking thing... are you by any chance using old ham and cheese sandawiches as insulation in your walls?
posted by GCU Sweet and Full of Grace at 8:42 AM on March 12, 2019 [7 favorites]
A show like Columbo but where Lyonne is an... investigative exterminator?... who gets brought in when nobody can figure out where the cockaroaches are coming from. Oh one more fucking thing... are you by any chance using old ham and cheese sandawiches as insulation in your walls?
posted by GCU Sweet and Full of Grace at 8:42 AM on March 12, 2019 [7 favorites]
Just to pull a few thoughts from the article, the creators of the show were contractually entitled to 10% (and up to 20%, depending) of the show’s profits. But it looks like Universal did several things to make sure the show never made a “profit”.
1. Universal grossly overstated production costs, and engaged in wonky accounting on home video revenues.
2. Universal deducted distribution fees for the show...fees that they paid back to themselves, as they were the distributors. Thus, the loss they claimed for these fees was pouring in as revenue in the back door.
3. They also tried to claim that the revived syndication in the 1980s, which was less profitable than the show’s initial run, should be coupled to the initial run, and thus any losses the revived syndication saw should offset profits the initial run may have made.
4. Universal is trying to reduce “profits” by deducting Peter Falk’s profit participation payout. On the one hand, yes, a profit pool is reduced by any amount a profit participant may receive. But the calculation of percentage owed to the creators is supposed to be based on the whole profit pool amount, not based on the remaining pool amount after other participants receive their payouts (wtf).
Anyway, it sounds like all those questions are still to be determined, either by jury trial or by a court-appointed accountant. The main thing decided here was that the creators were not too late to sue.
...
I once worked at a smallish (24-person) software development house in which I was a co-founder and owned a percentage of the company. The owners had a profit-sharing agreement. But the President of the company, who owned controlling share, always managed to spend just enough company cash to make sure there was no profit to share. The last straw, for me, was when he bought an NBA Jam arcade game for something like 4 grand, and installed it in the break room, where it became the bane of workplace productivity.
We (the other shareholders) were desperately trying to sacrifice, work long hours, save money and economize wherever possible, to be profitable. So, in addition to being a technical writer, developer and project director, I was also the Director of Operations for the company. So I understandably had access to the corporate accounts and reviewed them regularly. I printed a list of the superfluous expenses he’d racked up in the last year — his private “business dinners”, his car lease, and tens of thousands of dollars on his corporate AMEX card for expenses such as flowers for his girlfriend, movie tickets, and vacation airfares — and told him we’d need to bring these things up at the next shareholders meeting.
Within a week, he bought me out of my shares, in a transparent attempt to keep me quiet.
When the agreement was done and I’d received a check, I sent copies of the paper trail to each of the other shareholders and to the company’s CPA. I dont know if the other shareholders ever acted on the information, but I do know that they all left the company within the following year, and the company failed shortly after that.
My point is, I guess, corrupt “Hollywood accounting” (or at least the spirit of it) is alive and well throughout corporate America.
posted by darkstar at 9:01 AM on March 12, 2019 [34 favorites]
1. Universal grossly overstated production costs, and engaged in wonky accounting on home video revenues.
2. Universal deducted distribution fees for the show...fees that they paid back to themselves, as they were the distributors. Thus, the loss they claimed for these fees was pouring in as revenue in the back door.
3. They also tried to claim that the revived syndication in the 1980s, which was less profitable than the show’s initial run, should be coupled to the initial run, and thus any losses the revived syndication saw should offset profits the initial run may have made.
4. Universal is trying to reduce “profits” by deducting Peter Falk’s profit participation payout. On the one hand, yes, a profit pool is reduced by any amount a profit participant may receive. But the calculation of percentage owed to the creators is supposed to be based on the whole profit pool amount, not based on the remaining pool amount after other participants receive their payouts (wtf).
Anyway, it sounds like all those questions are still to be determined, either by jury trial or by a court-appointed accountant. The main thing decided here was that the creators were not too late to sue.
...
I once worked at a smallish (24-person) software development house in which I was a co-founder and owned a percentage of the company. The owners had a profit-sharing agreement. But the President of the company, who owned controlling share, always managed to spend just enough company cash to make sure there was no profit to share. The last straw, for me, was when he bought an NBA Jam arcade game for something like 4 grand, and installed it in the break room, where it became the bane of workplace productivity.
We (the other shareholders) were desperately trying to sacrifice, work long hours, save money and economize wherever possible, to be profitable. So, in addition to being a technical writer, developer and project director, I was also the Director of Operations for the company. So I understandably had access to the corporate accounts and reviewed them regularly. I printed a list of the superfluous expenses he’d racked up in the last year — his private “business dinners”, his car lease, and tens of thousands of dollars on his corporate AMEX card for expenses such as flowers for his girlfriend, movie tickets, and vacation airfares — and told him we’d need to bring these things up at the next shareholders meeting.
Within a week, he bought me out of my shares, in a transparent attempt to keep me quiet.
When the agreement was done and I’d received a check, I sent copies of the paper trail to each of the other shareholders and to the company’s CPA. I dont know if the other shareholders ever acted on the information, but I do know that they all left the company within the following year, and the company failed shortly after that.
My point is, I guess, corrupt “Hollywood accounting” (or at least the spirit of it) is alive and well throughout corporate America.
posted by darkstar at 9:01 AM on March 12, 2019 [34 favorites]
It's kind of shocking just how profitable TV is (or used to be?)
Reruns we were the money was really made. Shows would celebrate hitting the 100-episode mark because that was enough completed episodes to syndicate the series.
The cast of Friends were noted for asking $1 million per episode per cast member for the tenth season, but it turns out they're making even more money in broadcast reruns and streaming services.
posted by JoeZydeco at 9:21 AM on March 12, 2019 [4 favorites]
Reruns we were the money was really made. Shows would celebrate hitting the 100-episode mark because that was enough completed episodes to syndicate the series.
The cast of Friends were noted for asking $1 million per episode per cast member for the tenth season, but it turns out they're making even more money in broadcast reruns and streaming services.
posted by JoeZydeco at 9:21 AM on March 12, 2019 [4 favorites]
This is pretty much the reason why there is/was a "Music Industry". It just so happens to be music. It could be any industry which buys talent cheaply and screws them out of the profits.
posted by petebest at 9:21 AM on March 12, 2019 [2 favorites]
posted by petebest at 9:21 AM on March 12, 2019 [2 favorites]
Interesting thing about the streaming revolution is that it's unclear what kind of profit participation there is for shows produced by Netflix, Amazon, etc. I mean, I say "unclear," but I mean "they're totally not getting any profit participation." Like I imagine some people are getting good deals, but...probably not most people.
I'm actually curious and not at all in the loop. Anyone know if there are any streaming platform only deals that pay out in perpetuity or whatever on the basis of views? I highly doubt it, but am willing to be pleasantly surprised.
Also, Hollywood accounting is absurd, I can't believe it's legal. Just...made up numbers. Those are called lies. They are lies. For money. Which is also called fraud.
posted by schadenfrau at 9:39 AM on March 12, 2019 [3 favorites]
I'm actually curious and not at all in the loop. Anyone know if there are any streaming platform only deals that pay out in perpetuity or whatever on the basis of views? I highly doubt it, but am willing to be pleasantly surprised.
Also, Hollywood accounting is absurd, I can't believe it's legal. Just...made up numbers. Those are called lies. They are lies. For money. Which is also called fraud.
posted by schadenfrau at 9:39 AM on March 12, 2019 [3 favorites]
Streaming deals are almost all Cost+ deals from my understanding. Almost no profit participation, even for the producers.
posted by jacquilynne at 9:49 AM on March 12, 2019 [2 favorites]
posted by jacquilynne at 9:49 AM on March 12, 2019 [2 favorites]
That's really bullshit. I wonder if anyone will ever have the juice to challenge that model.
posted by schadenfrau at 10:09 AM on March 12, 2019
posted by schadenfrau at 10:09 AM on March 12, 2019
While watching Russian Doll on Netflix, I couldn't stop thinking of Columbo. They should reboot it with Natasha Lyonne in the lead.
Well before Russian Doll, I once opined that the natural star for a remake (not reboot) of Columbo would be Mark Ruffalo. A friend of mine argues he has too many eyes.
posted by ricochet biscuit at 10:19 AM on March 12, 2019 [5 favorites]
Well before Russian Doll, I once opined that the natural star for a remake (not reboot) of Columbo would be Mark Ruffalo. A friend of mine argues he has too many eyes.
posted by ricochet biscuit at 10:19 AM on March 12, 2019 [5 favorites]
Regarding casting a new Columbo, Mark Ruffalo has been suggested and that would totally work for me.
https://wegotthiscovered.com/movies/mark-ruffalo-weighs-possibly-starring-columbo-movie/
Unfortunately it appears to be only a notion so far.
posted by lockedroomguy at 10:26 AM on March 12, 2019
https://wegotthiscovered.com/movies/mark-ruffalo-weighs-possibly-starring-columbo-movie/
Unfortunately it appears to be only a notion so far.
posted by lockedroomguy at 10:26 AM on March 12, 2019
My favorite part of the trial was when Link and Levinson's attorney asked the Universal lawyers "Just one more thing..."
posted by happyroach at 12:03 PM on March 12, 2019 [4 favorites]
posted by happyroach at 12:03 PM on March 12, 2019 [4 favorites]
Isn't the issue with all entertainment accounting that a few big hits make all the money while the median show/book/song is a money loser? If you did accurate, dollar-for-dollar accounting, the studio would end up hugely in the hole because, e.g., a failed pilot would never have any revenue with which to offset its considerable costs. So the overhead costs are deliberately inflated for everyone, the failed pilot racks up an even bigger loss (which doesn't matter because it was never going to recoup the first dollar), and the hits effectively pay for the entire rest of the studio. This sort of thing used to drive me nuts, but I'm not convinced it's actually nefarious. Obviously, Return of the Jedi is not $250 million in the hole (still), but somehow you have to pay for the other dozen movies that didn't recoup their costs.
posted by wnissen at 12:12 PM on March 12, 2019
posted by wnissen at 12:12 PM on March 12, 2019
Columbo is one of the most highly regarded and successful detective shows in the history of television, but somehow didn't turn a net profit until 2016
IIRC, October 2015 was the first year I observed Columbo Day. When there's always just one more thing to celebrate.
posted by The Underpants Monster at 1:29 PM on March 12, 2019 [3 favorites]
IIRC, October 2015 was the first year I observed Columbo Day. When there's always just one more thing to celebrate.
posted by The Underpants Monster at 1:29 PM on March 12, 2019 [3 favorites]
This is pretty much the reason why there is/was a "Music Industry". It just so happens to be music. It could be any industry which buys talent cheaply and screws them out of the profits.
posted by petebest at 12:21 PM on March 12 [2 favorites −] Favorite added! [!]
Yes, I was surprised to learn recently that the reason George Harrison agreed to do the Beatles Anthology in the 90s was that he was near bankruptcy.
I mean, George Harrison.
posted by PhoBWanKenobi at 2:38 PM on March 12, 2019 [2 favorites]
posted by petebest at 12:21 PM on March 12 [2 favorites −] Favorite added! [!]
Yes, I was surprised to learn recently that the reason George Harrison agreed to do the Beatles Anthology in the 90s was that he was near bankruptcy.
I mean, George Harrison.
posted by PhoBWanKenobi at 2:38 PM on March 12, 2019 [2 favorites]
To be fair, Ruffalo apparently knows who he looks like.
posted by ricochet biscuit at 2:39 PM on March 12, 2019 [2 favorites]
posted by ricochet biscuit at 2:39 PM on March 12, 2019 [2 favorites]
Isn't the issue with all entertainment accounting that a few big hits make all the money while the median show/book/song is a money loser? If you did accurate, dollar-for-dollar accounting, the studio would end up hugely in the hole because, e.g., a failed pilot would never have any revenue with which to offset its considerable costs. .
I don't think that's accurate. My understanding is that ultimately accounting is trying to represent the economics at play for a given entity, and much of that comes down to how those economics are presented. If project A brings in $100M and project B tanks and brings in none, whether I mark less of a profit for A to offset a smaller loss for B, the studio itself had the same economics / amount of financing at play and will be at no greater risk of insolvency. Now within the studio, it makes sense to have some creative accounting, because then an individual executive can massage their portfolio to have fewer duds even if it means their blockbusters aren't quite as blockbustery. This might allow individual executives more wiggle room to take risks, but primarily just from the perspective of investors/stakeholders who don't want to invest in someone who produces box office losers, not because they'll actually lose more money than if they'd accounted for their projects differently.
posted by avalonian at 2:50 PM on March 12, 2019 [1 favorite]
I don't think that's accurate. My understanding is that ultimately accounting is trying to represent the economics at play for a given entity, and much of that comes down to how those economics are presented. If project A brings in $100M and project B tanks and brings in none, whether I mark less of a profit for A to offset a smaller loss for B, the studio itself had the same economics / amount of financing at play and will be at no greater risk of insolvency. Now within the studio, it makes sense to have some creative accounting, because then an individual executive can massage their portfolio to have fewer duds even if it means their blockbusters aren't quite as blockbustery. This might allow individual executives more wiggle room to take risks, but primarily just from the perspective of investors/stakeholders who don't want to invest in someone who produces box office losers, not because they'll actually lose more money than if they'd accounted for their projects differently.
posted by avalonian at 2:50 PM on March 12, 2019 [1 favorite]
Judge Judy is worth five times that as far as I’m concerned. Watching her yell at idiots for thirty minutes is at LEAST as cathartic as therapy and you don’t even need to leave the house.
posted by bitter-girl.com at 3:13 PM on March 12, 2019 [2 favorites]
posted by bitter-girl.com at 3:13 PM on March 12, 2019 [2 favorites]
More related to the article, profit can almost always be done away with by management in any organization. Raise salaries, give bonuses, buy a corporate yacht, accelerate purchases. I'm not sure there's anything irregular here that makes hollywood special that doesn't exist in other industries, save that the creators are made to feel they're owners of their craft when that was never going to be the case. I'm fairly certain Universal is still beholden to GAAP. It's just their contracts that aren't [necessarily].
posted by avalonian at 3:13 PM on March 12, 2019
posted by avalonian at 3:13 PM on March 12, 2019
Obviously, Return of the Jedi is not $250 million in the hole (still), but somehow you have to pay for the other dozen movies that didn't recoup their costs.
Why do you have to do that? Who says the studio has to be guaranteed a profit? I find that kind of thinking loathesome. Studios should be subject to the same risks as everyone else.
posted by M-x shell at 4:20 PM on March 12, 2019 [3 favorites]
Why do you have to do that? Who says the studio has to be guaranteed a profit? I find that kind of thinking loathesome. Studios should be subject to the same risks as everyone else.
posted by M-x shell at 4:20 PM on March 12, 2019 [3 favorites]
A lawyer friend of mine detested Colombo, any Metafite lawyers out there who also detested it ?
posted by Narrative_Historian at 12:24 AM on March 13, 2019
posted by Narrative_Historian at 12:24 AM on March 13, 2019
Your lawyer friend should marry a cop who hates Perry Mason.
posted by riruro at 7:26 AM on March 13, 2019 [3 favorites]
posted by riruro at 7:26 AM on March 13, 2019 [3 favorites]
Why do you have to do that? Who says the studio has to be guaranteed a profit? I find that kind of thinking loathesome. Studios should be subject to the same risks as everyone else.The audience previews of the Weird Al movie, UHF, were off-the-charts great. The highest since Robocop. The producers thought they had a major hit on their hands. This was a nearly-finished movie, everyone was really excited about it, careers were going to be made, etc. It ended up grossing... (checks Wikipedia) $6.1 million. A certified bomb. What went wrong? No one, not the studio head, not the producer, not the actors, not the crew, nobody can predict a hit, even a few weeks before release.
What does this have to do with outrageous cost recovery accounting? A studio head who could reliably give the green light only to profitable pictures would be the richest person in Hollywood. But it's impossible. You have to put up real money, in advance, knowing that 9 out of 10 are going to cost more to produce (the actual cost) than they are going to earn. But you don't know which is going to be the big hit. So the funny-money accounting is the only way to do it. Spread the risk over all the movies, using the profit from the hit to underwrite the losses from the rest, exactly like a life insurance policy. It's not that movie studios need to be exempt from risk, it's that they wouldn't produce any movies at all if they couldn't recoup the cost of the losers out of the profitable ones. The ten top-grossing movies in 2018 took in over a third of the entire box office, leaving the other 90ish films that opened "wide" (in over 1000 theaters) to pick up the crumbs.
This is true of the entire entertainment industry. The median book doesn't make back its advance, the median song doesn't turn a profit, etc. The answer to the question of why it's done this way, is that there wouldn't be any movies at all.
posted by wnissen at 10:15 AM on March 22, 2019
But if you said to the Director and Stars of a movie 'Hey, if this one is a big hit, we will totally share the proceeds with you!" and set out a specific formulate for doing that in your contract with them, then it is shitty and fraudulent to cook the books to make it seem like it wasn't a big hit, instead of admitting 'yes, it was a big hit, and here is your share, and now we are going to take a bunch of the rest of this money and use it to cover our losses'.
Movie studios could absolutely maintain a hits-cover-losses accounting practice AND pay bonuses to people who worked on hits AND do it all in an honest manner. But if you can make more money by pretending you will do that, and then not doing that, why not?
posted by jacquilynne at 12:39 PM on March 22, 2019 [2 favorites]
Movie studios could absolutely maintain a hits-cover-losses accounting practice AND pay bonuses to people who worked on hits AND do it all in an honest manner. But if you can make more money by pretending you will do that, and then not doing that, why not?
posted by jacquilynne at 12:39 PM on March 22, 2019 [2 favorites]
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