Hollywood is a distinct type of business. We have a proclivity for deviating from industry best practices and trends. This may be seen in the way studios and production firms producing movies conduct their bookkeeping. Hollywood accounting appears unethical and perhaps illegal to many outside the industry. Neither is the case. Onlookers are sceptical since it is so rare.
Outsiders have no understanding of what’s going on because things are done differently. Countless myths have arisen as a result of this ignorance.
One myth I despise is one that has been around for, well, I don’t know, forever. According to the report, 80 percent of movies fail to make money. The obvious inference from this fallacy is that the 20% of films that earn money somehow offset the losses and allow the distributors to continue in business.
There is no industry in the globe that loses money on 80% of its projects but makes up for it on the other 20%, especially when each project costs between $25 million and $250 million. This is similar to the idea that brick-and-mortar shops don’t start making money until Black Friday. Indeed, some claim that this is where the term “Black Friday” originates from, since shops shift from the red to the black (accounting-wise) on the busiest shopping day of the year.
That is, of course, rubbish as well. Imagine the risk a business owner would take if he or she had to lose money for 11 months and only make a profit if one day was a blowout. If it were the case, nobody would start a retail store.
When you think about it, it’s mathematically impossible for 80% of movies to lose money and then make so much money on the other 20% to still make a profit.