why the writers demands shares of revenues instead of profits

After I casually mentioned my support of the writer’s strike, a good friend told me that he thought that the strike was bad, in part because the writers should be getting a share of the profits and not of revenue (and since there were no profits in internet video yet, they should be getting nothing in the internet yet, hence, no good reason for the strike.)

The response to that, of course, is that you can’t trust the studios to report their profits at all accurately- even if they were going to be honest with their writers (unlikely), they have plenty of other incentives (including tax rules) that make them distort their profit reports. Revenues are much more easily auditable, so one of the things you get taught even in first year contracts is that rational participants in the process key their payments off revenue instead of profit.

Two reminders of this came across today that I thought might be instructive for people interested in the issue but unfamiliar with how Hollywood functions. In one, the folks who did the Lord of the Rings movies have been failing to pay the royalties owed to the Tolkien family. Oops. Six billion dollars in revenue, and apparently no payment to the writer. (Of course, they didn’t pay Peter Jackson either.) And it happens in lower profile cases too; the LA Times has a good writeup of ‘Hollywood accounting’ today too, completely outside of the high-profile Tolkien/Jackson cases.

Hopefully I’m not the only one who finds this fascinating ;)