So Hollywood has a lot 'stars' who make their companies lose money?

So now the list is out about Hollywood's least-bankable actors, an interesting list compiled by 24/7 Wall Street. It comes out shortly after an SEO firm called Verve Search compiled a list of which actors get the worst reviews. End of the year is list time, and in Hollywood, the lists getting attention in that benighted industry are all negatives.

First thing you notice is that quite a few of them on both lists are left-wing loudmouths, always trying to enlighten us adamantly with their underdeveloped political views. Vaunted Robert De Niro is a big presence on the second worst-reviews list; Scarlett Johansson, Keira Knightley, Charlize Theron, Antonio Banderas, Julianne Moore, Colin Farrell are all famous for lecturing us about leftwing causes on the first list, showing that they're unbankable.

That's to say production companies lose money on these people any time they hire them. That's sort of the opposite of 'star,' that's better described as 'dud.'

But there they are, still acting and still getting movie roles and still saying left-wing things, with zero regard for how such blather might affect box office sales. Off they go, and the million-dollar contracts to these supposed A-listers keep rolling out. What other business or industry goes out of its way to hire people who have obviously proven themselves to be liabilities to the companies' bottom lines, paying them millions of dollars and calling them 'stars'? Not normal companies, that's for sure. Hollywood companies are different.

Which raises questions as to what might be going on.

No business can afford to hire money-costing underperformers, shelling out multi-million-dollar contracts for losses. So maybe there's more to the story. If you want one theory, these data might just suggest that these people aren't the money losers the compiled data say they are. 

And the Hollywood companies might just be cooking the books, given that 80% of all Hollywood movies "lose money." That's an old truism in the entertainment industry - make every movie a loss in order to avoid paying taxes, and more important, to avoid paying out royalties for hit performances. It's done by looking at the cost structure - take a look at this blog piece here about why all Hollywood movies seem to lose money:

These films are not a cautionary tale about how wasteful spending can turn a commercial success into a net failure. They had perfectly average production budgets and expenses for movies of their scale. Their lack of profitability, in fact, is typical. Over 80% of Hollywood movies fail to turn a profit. 

Reading this statistic, we agreed with Darth Vader that this seems implausible. Where is his pot of gold that lures businessmen and investors to Hollywood?

Buried in paperwork. Hollywood’s lack of profits exists only on paper, the result of creative accounting practices so institutionalized and infamous that a Wikipedia page on “Hollywood Accounting” includes the inside joke that Hollywood’s most creative minds are the accountants. Instead of cooking the books to hide losses and inflate profits, Hollywood accountants inflate costs to ensure that even smash hits stay in the red. 

A 2010 Planet Money podcast with “Hollywood economist” Edward Epstein explains how it’s done. For each new film, a movie “is set up as its own corporation, the entire point of which is to lose money” by paying fees to the studio producing the movie. So if Superhero Studios decides to film Spider-Man 10, they create a shell company, Spider-Man 10 Incorporated. Superhero Studios then overcharges Spider-Man 10 Inc for every aspect of making, marketing, and distributing the movie. By the time Superhero Studios finishes paying itself (through Spider-Man 10 Inc) to perform work that costs $100 million, Spider-Man 10 Inc will be on the hook for one billion dollars.

It's part of a famous load of business practices that raise eyebrows to industry outsiders. A well-known investor I once knew said the big reason he never wanted to invest in Hollywood productions was the bad accounting over leftover sets. Hollywood typically lavishes out spending on furniture and cars and designer clothes for production sets and when the program shuts down, the merchandise all disappears. The production companies write it off as losses, items of no value. But somehow it ends up as furniture in movie producer kids' homes and other unlikely places, very nice emoluments for items used once. He thought that was a sign of a fundamentally dishonest industry and he wanted no part of it.

Now we have the least bankable actors list, and well, given Hollywood economics, for these guys, it's probably a badge of honor.