Quote Originally Posted by billstew View Post
[I][B] profit by a substantial margin, sometimes eliminating it altogether. This is most often done to reduce the amount which the corporation must pay in royalties or other profit-sharing agreements.

http://en.wikipedia.org/wiki/Hollywood_accounting




Due to Hollywood accounting, it has been estimated that only about 5% of movies officially show a net profit, and the "losers" include such blockbuster films as Rain Man, Forrest Gump, Who Framed Roger Rabbit, and Batman, which all took in huge amounts in box office and video sales.

Because of this, net points are sometimes referred to as "monkey points," a term attributed to Eddie Murphy, who is said to have also stated that only a fool would accept net points in his or her contract.

All of this shows why so many big-name actors insist on "gross points" (a percentage of some definition of gross revenue) rather than net profit participation. The saying in Hollywood is "a percentage of the net is a percentage of nothing."

This practice reduces the likelihood of a project showing a profit, as a production company will claim a portion of the reported box-office revenue was diverted directly to gross point participants.
I can't find it at the moment but I believe Mario Puzo and Stan Lee both got stung by this very loophole.