2/25/2008

The End of Hollywood Accounting?

Will 1+1 someday = 2?

The WGA, the Teamsters and California State Senator Sheila Kuehl have just announced the introduction of the "Fair Market Value Bill." The bill seeks to prevent studios from selling programming to sister companies for below market value. This particular strain of Hollywood accounting is designed to shift profits away from the studios (where they must be shared with talent and producers and serve as a basis for pension and health contributions) to networks, where they may be enjoyed without the pesky need to pay one's "partners."

Press release below. We'll have more soon on the bill in particular and Hollywood skulduggery in general.

And if you're a studio accountant or lawyer looking to go all Michael Clayton on the Big Six, send us a tip or a post.

NEW BILL TAKES AIM AT HOLLYWOOD ACCOUNTING

California State Senator Sheila Kuehl Introduces Bill to End the Practice of Selling Television Series and Films for Less Than Fair Market Value

Los Angeles and Sacramento – California State Senator Sheila Kuehl (D-Los Angeles) has introduced Senate Bill 1765, the "Fair Market Value Bill," to end the practice by some major studios and networks of “underselling” television series or movies.

Since the major media networks in the United States have come to own many cable channels, the practice of selling TV series or movies for less than the fair market value of the content has become more and more prevalent. In many cases, the product is sold or licensed from one entity to another entity within the same parent company. This creates a problem for actors, writers, and performers who rely on the amount of a sale of material for their residuals – payments made to the creators or performers of a work for showings or screenings after an initial use. Other union members in the entertainment industry, including the Teamsters, also rely on the amount of a sale price to determine contributions to their health and pension funds.

"As a SAG member I care deeply that creative talent is treated fairly and that all workers in the entertainment industry receive the compensation they deserve," said State Senator Sheila
Kuehl (D- Los Angeles). "Many of my constituents work within the entertainment industry, and I have recently heard more and more about the growing practice of selling entertainment content, such as television series or films, for less than their fair market value. This practice has a deeply detrimental effect on the amount of compensation for creative talent like writers and actors. But the damage goes further because so-called below-the-line staff, like the Teamsters, rely on the proceeds from such a sale of content to fund their health and pension plans. This bill simply ensures that workers in the entertainment industry have the protection they need."

"The WGA West wholeheartedly supports this bill and we applaud Senator Kuehl for authoring it," said Patric M. Verrone, president of the Writers Guild of America, West. "This important piece of legislation will help ensure reliable accounting among the major Hollywood studios so that creative talent and all entertainment employees that rely on residuals will be fairly compensated for the contributions they make to the industry. The WGA is excited about the bill, and we look forward to involving our members in the process of educating elected leaders about the need for it."

In the last few years, there have been many high profile court cases on this issue. Creative talent from TV series, such as The X-Files, Will & Grace, and Home Improvement, among others, have filed suit to prevent the practice of selling television programs from one network to another for less than fair market value.

The bill is coauthored by State Senators Darrell Steinberg and Carole Migden and Assembly Members Fiona Ma and Sandre Swanson. The bill is supported by International Brotherhood of Teamsters and the Writers Guild of America, West. Each union represents workers in the entertainment industry, and each union negotiates for compensation derived from the sale of television programs and films.

The Writers Guild of America, West (WGAW) represents writers in the motion picture, broadcast, cable, and new media industries in both entertainment and news. For more information, please visit: www.wga.org.

7 comments:

Tennyson E. Stead said...

This is interesting... What filmmakers need to watch out for in the wake of this - especially independent filmmakers who work on the studio fringe like the Steven Soderbergh, Geroge Clooney crowd, is that this bill narrows the incentive gap between just working for the studios and building new business. Complacency in the creative community is how something like this can actually benefit the moguls. It's entirely plausible that creative talent will take this as a victory, and allow themselves to be exploited in other, perhaps more profound ways.

Stay sharp, gang! Just because more dollars are coming doesn't make the system better or worse than it already is.

Crystal said...

Kudos to Senator Sheila Kuehl

Captain Obvious said...

Can I get a "Hell yeah"?!

. said...

As an accountant within the studio environment as well as, at times, on the set as show accountant, I applaud this bill. It's about time the studios who use "one-off" companies to dodge union agreements, use the profit/loss of the "one-off" to show there is no profit only loss because it technically isn't the studio.

Technically, anyone who has a clue can trace the ownership but few do the work.

The term net profit participant is akin to jumbo shrimp, an oxymoron. If you see any of the real books you'll see immediately that while not cooked - their not that stupid the overhead costs charged are stupendous.

All the indie i.e. Soderbergh/Clooney have their housekeeping deals charged at a percent, the "entertainment" expenses, the costs of film fests, executive travel. It makes me ill.

I once worked to a Los Angeles Public Television Station that fired me because I wouldn't sign off on a budget that heaped equipment the station needed onto a show budget.

These loopholes need to be closed, now.

TES said...

. -

Thanks for the comment. This is something I think most people in Hollywood need and would like to understand better. Are you interested in an anonymous column / video segment on the subject? Email us at unitedhollywood@gmail.com to discuss further. I am a former studio exec with some limited insight into the chicanery. Would love to do a short primer on the subject. Get in touch.

. said...

Tes,

E-mailed you...I hope you meant me?

Luzid said...

An end to it?

Historical precedent doesn't suggest this will be the case.

Guess we'll see just how screwed the writers get this time around. I'd love to be wrong and see it turn out to be "not at all", but I live in reality.