Movie profit sharing, defining terms. Brad Fittler, first-time author of The Sporting Life, has just had a meeting with Bill Harrigan, a senior executive of Golden Ventures

(GV). GV is a major movie studio wdth many successes. The Sporting Life is a best-selling novel about the personal and professional career of Allan Danger, a recently retired football superstar. Harrigan bubbled with excitement during the meeting. He said the book was the “best thing he had seen in many years” and would make “Titanic look like a minor movie.” Fittler felt great about a luminary such as Harrigan being so full of praise for a film based on a book that many publishers initially rejected as “not meeting their commercial criteria.”

After the meeting, Fittler called Penny Carr, a friend for many years. Carr showed Fittler some extracts from an expose on “Accounting, Hollywood Style”—see the exhibit above for this problem. Fittler was dismayed by the Cumulative Distribution Statement.

He thought Bill Goldberg Superstar was a box-office success and yet it still was more than

$74 million “in the red.”

Required You are asked to give advice to Brad Fittler. You should

a. identify the weaknesses in the Golden Ventures Cumulative Distribution Statement for an author whose payment is 5% of net profits

b. propose ways to reduce (or even eliminate) the weaknesses you identify in

(a) for a con¬

tract for Fittler.