Landmark Legislation Aims to End Unfair Accounting Practices in Hollywood

By Jeffrey Jolson

HOLLYWOOD, CA (Hollywood Today) 3/8/08 — The California State Senate passed a bill apparently designed to put a stop to Hollywood’s famous “creative” accounting practices, as their Judiciary Committee today passed Senate Bill 1765, the Fair Market Value Bill.

It was introduced by Senator Sheila Kuehl (D- Los Angeles ) and coauthored by State Senators Darrell Steinberg, Gloria Romero, Carole Migden, Elaine Alquist and Assembly Members Fiona Ma, Sandré Swanson, and Mike Davis. The bill would end the practice by some major studios of “underselling” television series or movies, thus shortchanging the talent community as well as production workers. The bill can now move to the full Senate for consideration and then to the State Assembly.

After decades of staying out of the way of Hollywood issues, from agencies, studios and TV networks, suddenly the Senate gets busy, hours after a protest by reality show workers from shows like “American Idol,” which reportedly earns $200 million per year, but pays far less to employees than network series.

However, this legislative action brought the film studios into play as well as the networks.

“Studios should not be allowed to undervalue their products in sweetheart deals with their own parent company and cost creative talent and crewmembers their rightful share in residuals and contributions to health and welfare funds,” said Senator Sheila Kuehl.

“This bill is good public policy because it ends a long-standing Hollywood accounting technique that has cost the talent community, both above and below the line. We thank the Senate Judiciary Committee for their affirmative vote, and we will continue our efforts to help this reasonable bill become law,” said Patric M. Verrone, president of the Writers Guild of America, West.

Since the major media networks in the United States have come to own many cable channels, the practice of selling TV series or movies for less than the fair market value of the content has become more and more prevalent. In many cases, the product is sold or licensed from one entity to another entity within the same parent company. This creates a problem for actors, writers, and performers who rely on the amount of a sale of material for their residuals – payments made to the creators or performers of a work for showings or screenings after an initial use. Other union members in the entertainment industry, including the Teamsters, also rely on the amount of a sale price to determine contributions to their health and pension funds. Lastly, major profit participants are often short-changed when a movie or television series is sold for less than the fair market value of the content.

In the last few years, there have been many high profile court cases on this issue. Profit participants from TV series, such as The X-Files, Will & Grace, and Home Improvement, among others, have filed suit to prevent the practice of selling television programs from one entity to another for less than fair market value.

Barry Broad, Legislative Director of the California Teamsters Public Affairs Council, commented:

“Our members, who are truck drivers, animal trainers, location managers, and casting directors in the film and television industry, depend on residual payments for their health and welfare benefits. If games are being played to avoid paying these hard working men and women their fair share, then the time has come for the Legislature to pass a law that will protect workers in the entertainment industry from such unfair conduct.”