‘Hollywood accounting’ duds Cruise, Bullock out of millions

After years of losses and underwhelming performance, the movie studio Paramount Pictures has delivered its best box-office results in a decade. The first five movies it released in theaters this year all opened in the top spot, culminating with “Top Gun: Maverick,” the highest-grossing film of the year so far.

But not everyone is celebrating. Many of the stars and producers of these movies, including Tom Cruise, Sandra Bullock and the creators of “Jackass,” believe they are going to miss out on millions of dollars because of a deal involving Paramount, its Paramount+ streaming service and the cable channel Epix, which is owned by Amazon.com Inc.

Movie stars, producers and filmmakers often get a cut of the profits from their movies, including a share of digital sales and licensing to third parties. Those paydays can amount to tens of millions of dollars on a big movie like “Top Gun: Maverick,” starring Cruise, or millions on a smaller-scale hit like “The Lost City,” starring Bullock.

Profit participants in Paramount movies believe their earnings are below what they should be because the studio is receiving less from Epix than other studios are getting in similar deals, according to several people familiar with the conversations. Representatives for the talent have met with Paramount to ask for extra money, said the people, who asked not to be identified because the talks are ongoing.

While no one has threatened a lawsuit yet, lawyers are assessing their options. One possibility is that Hollywood labor unions will take action. Guilds also collect residuals on these movies, and Paramount’s deal with Epix means they too may have also missed out on millions of dollars relative to what they get from other studios. The guilds declined to comment. Representatives for Cruise, Bullock and “Jackass” star Johnny Knoxville didn’t respond to requests for comment.

In a statement to Bloomberg News, Paramount said it hasn’t had an ownership interest in Epix for five years, and that “our agreements are entered into at market rates.”

Lawyers and agents have always bemoaned “Hollywood accounting,” in which studios overstate costs and disguise profits so as not to share proceeds with financial partners. Both sides would rather avoid a lawsuit, but there have been some big cases over the last decade. AMC Networks Inc. was forced to pay $US200 million to one of the creators of “The Walking Dead,” while Fox settled a multimillion dollar dispute with the participants in the show “Bones.”

Workers worry that the rise of streaming services has made it even easier for studios to hide their profits from talent by self-dealing. Most studios used to license their films to premium cable networks like HBO, but now they license them to streaming services, often ones they own. Warner Bros. puts its movies on HBO Max, Walt Disney Co. sends its movies to Disney+ and Universal has a deal with its corporate sibling, Peacock. Universal also struck a deal with Amazon.

Streaming services typically don’t license their original movies to others at all. Rather than give talent a share of the ownership in a project, Netflix, Amazon and Apple buy out their rights up front. The Writers Guild has already secured $US42 million in arbitration from Netflix for what the union called “self-dealing” and $US4 million from Amazon in unpaid residuals.