From: "Reggie Bautista" <[EMAIL PROTECTED]>
And the oil patch isn't the only place this kind of bookkeeping takes place,
of course. Here are a couple of other examples of how money gets moved
around and accounted for in, shall we say, interesting ways. Back in early
2000 there was a discussion on the moderated Babylon 5 newsgroup about this
kind of thing in the entertainment industry.
Hollywood has been pulling the "no net profits" trick on people for years...
Mario Puzo never made any money on The Godfather, due to the same trick. My grandmother was friends with his wife, so they heard all about it at the time. It sort of worked out OK in the end for the Puzos, though, because then Hollywood wanted to make Godfather II, and they were able to get a far better deal that time around.
I read some articles a while back about how the author of Gump was in a legal battle with the movie studio over not getting a penny from the $300 million movie release of Gump, which also managed to show zero net profit.
Most recently, I just read an article discussing the likelihood that New Line Cinemas will likely show no net profit on the $2.7 *billion* in estimated worldwide revenues from the LOTR trilogy. Many (most?) of the actors had only been a net percentage deal, and so were likely not to make any money and were understandably upset. They banded together and told New Line that they were expected to travel around the world helping to promote the movie (ie: on talk shows, etc), but it would be tough finding the goodwill to do so if they were all getting screwed out of any money. New Line eventually cut some sort of deal with them, undisclosed terms, of course.
I've seen the kind of stuff Reggie and Dan describe as well. I had a summer intership at NYNEX Materiel Enterprises, a subdivision of NYNEX that didn't fall under the phone company profit-cap regulations. It's whole purpose was to be the purchasing arm for the phone company; basically, if the phone division needed to buy a telephone switch (a big $$$ piece of equipment, not at all like a light switch), then the phone division was supposed to provide its requirements to my division (Materiel Enterprises), which would then meet with vendors, select and purchase the switch, and *resell* it to the phone division. This allowed the profit that Materiel Enterprises made to not be counted against the profit cap that the phone division was restricted by. A couple years after I left, I read that a new ruling (by the judge in charge of the phone company breakup) put an end to that scheme by forcing Materiel Enterprises' profits to also count towards the profit cap.
-bryon
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