12.14.2011

A Call for More Transparency

Jeremy Juuso shares his thoughts on "Accounting Transparency: The Path to More Film Investors" that matters to anyone who wonders why in an industry that makes so much money why there is such a lack of outside investment in it.

As the large number of audits relating to the accounting practices of film distribution companies seems to indicate, distributors appear quite reluctant to allow artists, producers, and investors to lay claim to profits unpaid, but agreed to, in contracts. It is not unusual for profit participants in successful movies to wade through the swampy dentistry of auditing and litigation (or threatened litigation) in pursuit of such profits.

This is why actual ancillary film data, beyond just estimates, prove so challenging to locate. Releasing actual numbers could result in a bevy of profit participants contesting amounts owed and amounts paid.

In a time when the industry was flush with DVD income and cash from investors chasing it, treating profit participants to opaque accounting made sense. Any problems could be left to the courts, where profit participants seldom had the means and the will to tread, and new profit participants would always be around the corner to take the place of old ones.

But now, as piracy and new media fragmentation bleed the industry dry, forcing financiers to rely more heavily on the discounting of receivables, can film distributors really afford to treat profit participants, particularly the industry’s shrinking pool of equity investors, so poorly? 
And the best solution to enforce this...

Ultimately, only the government could push the industry collectively toward transparency, but this remains highly unlikely, as the government has bigger fish to fry, namely deficits.

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