Law Commons^™

The Net Profits Puzzle, Victor P. Goldberg

Faculty Scholarship

The use of "net profits" clauses in the movie business poses a problem. The standard perception is that Hollywood accounting results in successful films showing no net profits. If that is indeed so, then why have they survived for over four decades? This Essay argues that a successful movie will fail to yield net profits only if a "gross participant" (a major star whose compensation is in part a function of the film's gross receipts) becomes associated with the film. Since the net profits participants typically are associated with a project first, the question becomes: Why would they be willing …