LucasFilm Tells Darth Vader that Return of the Jedi Hasn’t Made a Profit

http://www.slashfilm.com/lucasfilm-tells-darth-vader-that-return-of-the-jedi-hasnt-made-a-profit/

by thinker • 15 years ago

242 82 15 years ago

Maven911• 15 years ago

Its an interesting perspective that seems to suggest the opposite view from the 'other' article on the front page about contracts: Just Sue Me

bwillard• 15 years ago

I disagree that it is the opposite. In fact I think it is more like LucasFilm is saying Just Sue Me. From the article Seth (I am assuming he is a reliable source as I know nothing about the film industry) seems to think that if LucasFilms was sued that they would lose (or settle), but luckily people, specifically Darth, are either to lazy or the amount they would win wouldn't cover the legal expenses of suing. So in effect LucasFilms is pretending like the risk of litigation isn't there and it is working out OK for them so far. Just like the experiences of PUD.

rdl3• 15 years ago

I never cease to be amazed at how honest and forthright everyone in the (top tier) of the startup industry is, vs. the entertainment, government contracting, small business, etc. space. To say nothing of finance or politics.

That silicon valley and tech is taking over the world might be a result of this, but in any case, it's better for humanity.

jarek• 15 years ago

http://techcrunch.com/2009/11/06/zynga-scamville-mark-pinkus...

GeneTraylor• 15 years ago

I disagree, look at the options given to Skype employees [1], being in the valley doesn't magically mean that your safe from the dark side of the force.

[1] http://techcrunch.com/2011/06/26/skypes-worthless-employee-s...

rdl3• 15 years ago

Skype was Private Equity, not normal VC/founder/team terms.

very rarely do founders fuck their employees over, relative to how employees are treated in most places. Founders vs. VCs or Founders vs. PE is more common, but founders at a late-stage company should be a lot more educated and resourced.

It's mainly at the idea to startup to series A stage where people are fairly universally honorable, at least among the top people.

wavephorm• 15 years ago

Like it or not, this is just the way capitalism works. It pays very handsomly to be corrupt, or to be a cartel member in a self-regulated industry. And it will not get better until we move to a new economic paradigm.

autarch• 15 years ago

I think there may be less intentionally deceptive, but they make up for it in cluelessness and incompetence.

Founders may not give their employees good deals because they just make stuff up and don't do any analysis.

wheels• 15 years ago

Are you really suggesting that it's rare for employees to get hosed on options because they don't understand the terms in their contract? Because that's about the closest parallel I can think of. Net points sound like the showbiz equivalent of liquidation preferences. "Oh, no, you don't actually get a percentage of the $50 million sale because there are these investors that have a different kind of stock that says that they get at least a 5x return before you get anything..."

rdl3• 15 years ago

Tech contracts are pretty transparent by comparison.

Aside from value of options (which most people consider to be $0-$20k for the average $100-150k/yr job), all the other benefits of working in tech are straightforward and employee-favorable.

In an early stage startup, you're not likely to see worse than 2x participating, and 1x non is the standard for Series A financings now.

patio112• 15 years ago

Why isn't there an enterprising law firm going through the credits of all the Star Wars (and similar-vintage films with ongoing commercial potential), contacting every person on the list, and telling all the retired ones "There is a pot o' money with your name on it if you sign these papers which let us sue them for residuals on your behalf."?

I have to imagine that the legal strategy required there is a for loop with half-dozen templated documents: "Settle with $CLIENT regarding the residuals from the production of $FILM or in discovery we will subpoena all of $FILM's books and hand them to the forensic accounting department of $BIG_FIVE who will describe in vivid detail how they are an utter fiction, resulting in $DISTRICT_JUDGE issuing a judgement in excess of $GUESS against $YOUR_COMPANY."

anamax• 15 years ago

> Why isn't there an enterprising law firm going through the credits of all the Star Wars (and similar-vintage films with ongoing commercial potential), contacting every person on the list, and telling all the retired ones "There is a pot o' money with your name on it if you sign these papers which let us sue them for residuals on your behalf."?

Because they'd lose.

ZachPruckowski2• 15 years ago

Look at how hard it is to get traction on investigations into the current foreclosure/securitization boondoggle - it's taken 3 years for judges to actually start looking, the federal regulators are completely uninterested, and maybe 4 state AGs out of 50 have even started looking. And these are obvious and clearcut violations of pretty straightforward laws. Their reputations and legal teams have been a buffer against all sorts of suits and investigations.

A Hollywood investigation would be worse politics, since you've have every TV station screaming about the government intrusion in investigating their parent companies. Look at things like the just failed Attorney General settlement with the banks - the worst case here is the company makes a one-time payment of a few pennies on every dollar of profit to some fund nominally targeted towards the victims. Then you throw in all the indemnification offered by corporate structuring and the fact that there probably aren't technical violations of the law here and good luck selling some accounting irregularities as a prosecution.

Maybe in a few years that stuff will change, but right now the environment is such that nobody really buys the idea of government actually smacking someone with TR's Big Stick.

ahlatimer• 15 years ago

Except that it isn't the government suing these companies, it's the people named in the credits.

elliottcarlson• 15 years ago

I could easily see such an enterprising law firm becoming the type of patent trolling law firm that everyone here dispises. While this is an extreme case of someone not getting a dime when he clearly deserves it, I am sure there is enough book doctoring out there that simply going after $STUDIO/$FILM/$TVSHOW could become profitable if the threats are there and the fear of where the monies should be gets uncovered.

anigbrowl3• 15 years ago

Because it's a violation of professional ethics to solicit clients in this way. That's one reason you occasionally see articles by lawyers explaining in copious detail why situation XYZ actually rests on a totally unstable legal foundation; they're hoping some interested party will notice the article and come to them.

bane• 15 years ago

weird, I get mail all the time from law firms..."you may already be owed this money!" or "we have records showing you purchased xyz lawnmower from abc, we have a class action suit blah blah if you simply sign and return this form you can join the class..."

ChrisArchitect• 15 years ago

olllld article from 2009 rehashing longtime complaints of bitter Vader suit wearing actor. He didn't get a cut of the only-named-in-merchandise Ewoks toys. Boohoo.

veyron2• 15 years ago

I remember reading something similar in the music industry, written by courtney love. Anyone have a link?

patio112• 15 years ago

Google [Courney Love RIAA], first result:

http://www.salon.com/technology/feature/2000/06/14/love/prin...

veyron2• 15 years ago

I should have guessed that it would be RIAA that would point me to the article :P

clobber• 15 years ago

Give this a read too: http://gizmodo.com/5417318/my-6247-royalty-statement-how-maj...

jackvalentine• 15 years ago

Not the link you're after, someone has already provided that but I found "Why I started Magnatune" really interesting. http://magnatune.com/info/why

wyclif• 15 years ago

The Problem With Music by Steve Albini (the original article Courtney Love was inspired by in her attack on the RIAA): http://www.negativland.com/albini.html

Bud2• 15 years ago

Geez, Lucas. Have you no sense of decency, sir, at long last? Have you left no sense of decency?

I mean, really. I can see being a greedy fuck for a couple decades, while you're still unsure if you are, in fact, going to become and remain wealthy beyond the dreams of avarice. But once you have the fuck-you money put away for you, your entire family and everyone you've ever met who was halfway interesting, can't you toss Lord Vader some coin for his trouble?

Shameful.

phxrsng• 15 years ago

Yes because he clearly knew they would be such a success at the time he was negotiating contracts. He made the standard contracts, which is what you have to do, because you can't just change the terms later based on how successful something is or isn't.

This isn't a case of Lucas being exceptionally greedy. Maybe its a case proving how 1-sided Hollywood contracts are, though.

kanamekun• 15 years ago

While I agree with you, the article is about Return of the Jedi which was released in 1983 - six years after the first Star Wars movie came out.

So by the time these contracts were being negotiated with David Prowse, the producers of the project knew that the movie was likely to be highly successful.

Joakal• 15 years ago

"... I accuse the corporations, who oppose the moral rights of the artist, of being dishonest and insensitive to American cultural heritage and of being interested only in their quarterly bottom line, and not in the long-term interest of the Nation. ..."

There's more, including calling any such distortion of [his movie?] art as barbaric.

http://savestarwars.com/lucasspeechagainstspecialedition.htm...

socratic• 15 years ago

I hate citing Reddit, but this un-sourced imgur link makes it seem like he's not such a bad guy, no?

http://i.imgur.com/lTvOg.jpg

chc3• 15 years ago

Donating 5% of your net worth to charity is praiseworthy, but it's not really anything special, particularly for people in that range of disposable income. He could probably release another boxed set of the original trilogy and make the entire amount back. Every active Mormon donates twice that much to their church.

Bud2• 15 years ago

You are right, his philanthropy is very impressive.

I still think he ought to give Darth more money.

ErikCorry2• 15 years ago

So now we know the reason why he started all those companies. It's all part of "Hollywood Accounting".

Also, of course, he started the companies in order to make some great films.

mixmastamyk• 15 years ago

Why would someone hate citing reddit?

danssig• 15 years ago

Lucas ever had decency? The only reason his movies were ever popular is because he wasn't allowed to do anything he wanted.

bfe2• 15 years ago

One of my intellectual property law professors, with fifty years experience in just about every kind of I.P. licensing scenario possible, all over the world, recommended it's almost always best in an I.P. license to ask for a flat fee first, and a small percentage of gross revenue with a short, hard reckoning date second. The more bargaining power you have, the higher you should bump up your position for upfront flat fee first and percentage of gross revenue second. Agreeing to a percentage of "net profits" is almost always a commitment to sue the other party down the road or get nothing. Whatever I've learned since then has left his recommendation intact.

bfe2• 15 years ago

Just to add, there are a million different possible situations, and "almost always" is a big exaggeration here, and I don't know anything about the particular case in the post. But the point remains; there is often virtue in simplicity.

malbs• 15 years ago

Wouldn't it be nice if Lodsys got out of the patent troll game, and into using it's lawyers to fight for net-profit-residuals for people who worked on films that earned huge profits over time?

Wouldn't it be nice.

zalew• 15 years ago

it's a link from an article which was here yesterday http://news.ycombinator.com/item?id=2981442 http://www.filmschoolrejects.com/features/6-things-the-film-...

mmaunder• 15 years ago

Less than 5% of movies actually show a net income (or net profit as the article calls it). It's called Hollywood Accounting:

http://en.wikipedia.org/wiki/Hollywood_accounting

Summary:

-Studios create a subsidiary corporation for each movie and they almost never show a profit.

-The studios charge the subsidiary service fees for services performed like distribution, which lowers net income to zero or less.

-They do this to avoid taxation and paying royalties to actors.

Quote from wikipedia: "Because of this, net points are sometimes referred to as "monkey points," a term attributed to Eddie Murphy, who is said to have also stated that only a fool would accept net points in his or her contract."

There are many more cases like this involving high profile people including Peter Jackson:

http://en.wikipedia.org/wiki/Hollywood_accounting#Examples

mattm• 15 years ago

The link from the Wikipedia page to a leaked receipt from Harry Potter shows an example of this.

http://www.techdirt.com/articles/20100708/02510310122.shtml

Geez, a $57 million dollar loss in interest. How is that even possible?

scotu• 15 years ago

The effects of this accounting practice looks a lot like the claimed effect of piracy...

jordan0day• 15 years ago

This is a very good insight. I wonder how often the figures that get flashed around about how much money Hollywood is losing due to piracy are drawn directly from these fictionalizations created for an entirely separate purpose.

fialk• 15 years ago

Another example of how criminal it is: A major studio will pay Technicolor $25 million annually for an exclusivity fee. Then Technicolor will charge inflated rates to the studios, so the films will appear to lose money.

jongraehl• 15 years ago

You must mean that Technicolor pays the studio first, then overcharges later.

kprobst• 15 years ago

I seem to remember Alec Guinness hit the jackpot on the SW franchise by demanding a % of the profit (gross?), so I assume this guy had a different contract. I suppose Guinness had a lot more pull and negotiating leverage than a dude whose primary contribution to the films was to be tall.

philwelch• 15 years ago

Alec Guinness was a Serious Actor with plenty of impressive film appearances under his belt. Of course he had more pull.

ErikCorry2• 15 years ago

Maybe the fact that people would have noticed if they had replaced him in the sequels also strengthened his bargaining position.

noonespecial• 15 years ago

I'm always fascinated by the way institutionalized dishonesty creeps into entire industries. From used car salesmen to film moguls, once a certain practice has ossified over the years into "everyone in the biz does it", practices that would result in jail time in other industries are simply accepted as business as usual. Even more curious, everyone to the man knows its wrong, but no one moves to change it. The emperor has no clothes and we just like him better naked.

JoeAltmaier• 15 years ago

You can't be the 1st to change; you'd get run over.

rbanffy• 15 years ago

Only if you were unable to actually turn a net profit.

What would happen instead is that more actors and writers would be willing to work with you because they knew they'd get a fair share of the whole deal.

el_chapitan• 15 years ago

That is the attitude of all the people who later look at a either a working process, or a working product and say, "damn, why didn't I think of that?"

usedtolurk• 15 years ago

Many would say the same thing about the software industry.

illumin8• 15 years ago

There was actually a time in the 1980s when software developers got a percentage of profits. I remember working at WordPerfect in the late 80s and seeing some of the developers houses - one guy built a medieval castle complete with a working moat and drawbridge.

At the time I was hired in '89 or so they were doing away with that practice. "New developers don't get royalties any more."

But, it was a good business to be in for a short time. I'm not sure if Microsoft developers ever enjoyed royalties.

spullara• 15 years ago

I wonder if you add in the marketing and distribution cost for bit torrent & associated search sites you can find that the movie companies should be paying them?

Tichy• 15 years ago

Even shares on "gross profit" can fail: it can be beneficial for the publisher to give away the product for free. I've had this happen to a J2ME app, which the publisher gave away for free in exchange for advertising (they were building presence and reputation by this).

Another trick seems to be bundling - "buy this collection of things and you get thing x for free". So profits for selling thing x would be zero.

I am sure there are many more tricks like this...

chopsueyar2• 15 years ago

If there was an exchange, there was consideration, and this seems more like a barter, not a free give-away.

I bet a good lawyer could have made a case for you.

I believe the IRS would consider the advertising to have some monetary value, which is what your gross profit fee would be based on.

The fair market value of goods and services received in exchange for goods or services you provide must be included in income in the year received.

http://www.irs.gov/taxtopics/tc420.html

larrik• 15 years ago

I don't know why this is such a surprise to everyone. Outside of the startup scene, showing net profit is a Bad Thing. It increases liability to taxes and to employees[1], etc.

Maybe public companies are different (though since, movie studios are just about all subsidiaries of public companies, maybe not), but in my dealings with many multi-million dollar companies (especially those with union contracts to deal with), they find any way possible to show a loss on the balance sheet.

Between accounting tricks and taking money off the table through reinvesting (real or imagined) and executive salaries, profit is basically a made up number based on whatever management wants it to be.

Taking any percentage of net profit, in plenty of industries, is basically the same as taking nothing.

On a side note: the article and the one from the other day that mentioned this story as well only seemed to consider box office gross as the movie's revenue. I mean how many of us just on HN have more bought or gotten than one copy of the Star Wars movies over the years? I know I have at least 3 hanging around, to say nothing of TV airings and the like.

[1]Liability to employees: Through profit-sharing programs, raise discussions, union contract talks, etc., publicly showing a "profit" can cost the company money.

taylorbuley• 15 years ago

Possible this is due to the kind of "creative accounting" detailed here: http://www.deadline.com/2010/07/studio-shame-even-harry-pott...

chopsueyar2• 15 years ago

Best quote from article:

"Can you imagine the hedlines if Darth Vader sued George Lucas?"

zandorg• 15 years ago

I was expecting a video: 'nooooo!'

microtherion• 15 years ago

TL;DR: He finds their lack of profit disturbing

LucasFilm Tells Darth Vader that Return of the Jedi Hasn’t Made a Profit

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