Film Studies: The A-Z of how to lose money in Hollywood

My Big Fat Greek Wedding, a movie derived from the comedy routines of Nia Vardalos, opened in the US on 22 April, 2002. It had cost a mere $5m to make. A year later, it had grossed $241m at the American box office. It had done £13m in the UK, and performed just as well in many other countries. This is good. At the same time, in July 2003, there was consternation and then legal dispute as the "official accounting" for the project reported that it had losses of $20m.

That is not good. That is weird, and likely to rekindle old suspicions over the accounting methods of the picture business. It has been remarked on before, all too often, that movies apparently playing to large audiences, and regularly reporting big numbers, still somehow could not get into that profit where the makers of the film might get back some real money. I don't know the contractual details on My Big Fat Greek Wedding, and this is not the time for trying to establish them. But I'll tell you one thing about this small, independent picture - it had 10 people who were producers, executive producers or co-producers (including Tom Hanks and his wife, Rita Wilson, who did a lot to bring the project to the screen).

Lets' sketch out the story of an independent producer on a much smaller picture: it cost $1m, and it grossed $100m. This movie is the dreamchild of A, the venture on which he was prepared to sacrifice anything, if it could be made. He got his wish.

A realised that he had no chance of fulfilling his dream without development money. So B put up $50,000, enough for A to devote himself to searching for the real money. B was prepared to kiss that money goodbye - so he argued that 15 per cent of the producer's revenue (if it ever existed) was fair. After all, 15 per cent is what agents charge.

A then found C and D who liked the script and said they would put in $100,000 (if the picture could be shot in Canada). In return, they only asked for 20 per cent of the producer's profits. And so the process builds. We don't need to do A to J, but I will say that there was this actress who could turn the deal with a distributor (and H was owed by the actress - don't ask). Then F made a crucial introduction to G (this was the turning point) - it was only a dinner party - but F asked for 3.5 per cent of the gross, first dollar.

"That's a lot," said A.

"Listen," said F. "I know G. You need G. The dinner is on my plastic. All I'm asking is points off the gross. There's no gross, I don't see a dime. Do you want your picture made?"

So, eventually the picture got made, but the distributor was startled when they heard that F had the first 3.5 per cent of the gross, so they put the distribution fee at 47.5 per cent.

A was never that good at maths, and he was desperate to make this picture. With the result that he never quite realised that he could be in trouble if it was made. Because he had actually dealt away 112.5 per cent of his profits. The more the picture made, the more he'd be in debt. So he made a deal with a lawyer, Z, who advanced him $2m at prime plus 13.5 per cent. This has enabled A to move to Los Angeles - where he can really operate. But the rental on his office/ house is $10,000 a month. And the divorce settlement (you remember that actress) is going to hit him hard. A got a nomination on the picture, but he is in a lot of trouble.

You see, he thought he was making a picture - whereas he was really making deals.

I daresay on My Big Fat Greek Wedding that things will work out. With foreign income and video, plus the publicity of the suit, as time goes by a little money is going to show. After all, this kind of investment doesn't pay off immediately. Returns get confirmed slowly. Profits are paid later still. Then there could be a withholding because of law suits pending. Actually, it's not unknown for A - eventually - to settle for a nice flat sum, payable in 90 days, if he'll just relinquish all claims and rights and undertake not to talk to the press. And sometimes an A sees the sense of taking the lump sum and moving on.

In other words, the picture business is a cash operation, and cash is funny - it can drain out through holes you never knew existed. Just look at the sign for per cent - that's two holes already.

d.thomson@independent.co.uk