No. The Producers was all about over-selling profit shares. I just watched the original a few weeks ago and they had sold 25000% of the shares. So if it made any money then they would have to pay out 250x what was earned. But if it was a flop and closed the doors after the first show then no profits would be paid out - so all of the costs could be kept.
Ah! That makes so much sense. The way they explain it in the scene, it’s such a panicked moment and they both know what they’re talking about, but as a not-money person I always got confused.
Well the the real world version of Hollywood Accounting - they just use inflated costs. Usually a large studio will outsource aspects of the production to smaller companies. Those companies could be a wholly owned subsidiary, a company owned by an exec or a close connection of an executive, or even an internal department. The important aspect is each of them will be able to set the price for the service they provide at a very highly inflated amount relative to the cost. This allows the production to claim they spent $5 million on lighting when the actual cost was closer to tens or hundreds of thousands. Did the difference in cost and price ever actually exist? Was that money ever actually paid? That depends on the scheme and who is the recipient. Either an exec is trying to siphon corporate cash off to himself or family. Or they’re trying to inflate production costs for a failed movie (Coyote v Acme, Batgirl, etc) to make it appear as if the company made no taxable profits at the end of the year.
No. The Producers was all about over-selling profit shares. I just watched the original a few weeks ago and they had sold 25000% of the shares. So if it made any money then they would have to pay out 250x what was earned. But if it was a flop and closed the doors after the first show then no profits would be paid out - so all of the costs could be kept.
Ah! That makes so much sense. The way they explain it in the scene, it’s such a panicked moment and they both know what they’re talking about, but as a not-money person I always got confused.
Well the the real world version of Hollywood Accounting - they just use inflated costs. Usually a large studio will outsource aspects of the production to smaller companies. Those companies could be a wholly owned subsidiary, a company owned by an exec or a close connection of an executive, or even an internal department. The important aspect is each of them will be able to set the price for the service they provide at a very highly inflated amount relative to the cost. This allows the production to claim they spent $5 million on lighting when the actual cost was closer to tens or hundreds of thousands. Did the difference in cost and price ever actually exist? Was that money ever actually paid? That depends on the scheme and who is the recipient. Either an exec is trying to siphon corporate cash off to himself or family. Or they’re trying to inflate production costs for a failed movie (Coyote v Acme, Batgirl, etc) to make it appear as if the company made no taxable profits at the end of the year.