Net Profits
A film's revenue minus all costs as calculated by studio accounting, often structured to show minimal or no profits.
Definition
Net profits represent revenue after deducting all costs: production, marketing, distribution fees, overhead, interest, and various charges. Studio accounting methods notoriously maximize deductions, often showing no net profits even on successful films.
The practice is legal but controversial. Studios charge distribution fees, overhead allocations, and interest that inflate costs. Even billion-dollar films frequently show no "net profits" by studio calculation.
Why It Matters
Understanding net profit manipulation protects deal negotiation. Inexperienced talent accepting net points instead of gross participation may receive nothing despite film success.
Industry lawsuits have challenged net profit calculations, occasionally forcing settlements. But the fundamental accounting practices persist because gross participants are rare and powerful.
Examples in Practice
Harry Potter and the Order of the Phoenix, with $938 million worldwide gross, reportedly showed a $167 million loss according to Warner Bros. accounting—demonstrating how net profits can be calculated to zero.
Peter Jackson sued New Line over Lord of the Rings accounting, claiming he was owed millions despite the trilogy's $3 billion gross. The case settled with undisclosed terms.