This video was made possible by Dashlane. Speed up everything you do online for free
for 30 days at Dashlane.com/HAI. Welcome to Half as Interesting—we’re like
a Hogwarts class about weird Muggle facts taught by a less funny version of Fred and
George Weasley. If your boggart is outdated memes, you should
probably leave now, but if your Patronus is keyboard cat, you’re in the right place,
but here’s where the big reveal comes: this video isn’t really about Harry Potter stuff. It’s about accounting. First of all, goodbye everyone, but second
of all, we’re about to dive into how, despite having some of the highest box office grosses
in Hollywood history, some of the Harry Potter films technically lost money. Let’s start with some simple economics:
most people like having money, and most people don’t like giving money to other people. It’s a fact that some think is great, others
think is bad, but no one can dispute is true—kind of like how people feel about Dumbledore and
Grindelwald making out. With that in mind, let’s move on to another
economic concept: net profits. Simply put, net profits are what you get when
you take the money something makes and subtract the money that it costs to produce. So, if Brilliant pays me $100 to make an HAI
video, but it costs $40 to pay the security guard at my editor sweat shop, $30 to bribe
Susan Wojcicki to put the video on trending, and $20 to license the HAI initialism from
Helicopter Association International, I’ve turned a net profit of $10—just enough to
buy a banana. So now, let’s get into the accounting. A while back, movie stars decided that being
beautiful and famous and rich wasn’t enough for them—they wanted to be beautiful and
famous and very rich. They figured that the way to get very rich
was to negotiate into their contract not only a salary, but also a share of the movie’s
net profits. That way, if the movie made a lot of money,
the actor would get some of it, and for a while, this worked—but then the studios
realized that instead of giving the actors the money they wanted, they could just screw
them out of it. All they had to do was hire someone to lie
and cheat and steal—in other words, they had to hire accountants. Don’t worry, no accountants are watching
this video. It’s tax season, aka corporate slavery season. Here’s what those accountants did. They set things up so that each movie would
technically be made by its own little company, created specifically for that movie. So, when Warner Brothers made Harry Potter
and the Order of the Phoenix, they had their accountants create a shell company called
Harry Potter and the Order of the Phoenix, Inc, but for short, let’s called it HPATOOTPI…
okay actually no, let’s just call it Phoenix, Inc. Phoenix, Inc is who technically makes the
movie Harry Potter and the Order of the Phoenix, and if Phoenix, Inc were to make a net profit,
then anyone who is owed a portion of the film’s net profit would get paid. So, if Daniel Radcliffe had negotiated to
earn 1% of net profits, and Phoenix Inc made $100 million in net profits, Daniel Radcliffe
would earn $1 million—money he could use to avoid starring in movies where he plays
a corpse or has guns bolted to his hands—but the thing is, no matter how much money the
actual movie makes, Daniel Radcliffe will never get a cut of the profits, because Phoenix,
Inc will never make a profit, because it is designed specifically to lose money. Now of course, the company doesn’t actually
lose the money. They know exactly where it went—to the very
studio that created them. In this case, Warner Brothers. You see, to make sure it doesn’t make a
profit, Phoenix, Inc will pay Warner Brothers exorbitant fees for distributing and advertising
the film—no matter how much it actually costs to do those things. Here’s the actual balance sheet from Harry
Potter and the Order of the Phoenix. The movie grossed nearly $1 billion dollars—at
the time, it was the 6th highest grossing movie ever—but according to the balance
sheet, it lost $167 million dollars. So, where did that $1 billion go? Well, some of it went to the movie theaters,
some of it went to the cost of actually making the film, but the key to Hollywood accounting
lies here, in the costs of advertising, distribution, and interest. Phoenix, Inc paid the studio, Warner Brothers,
$212 million dollars to distribute the film, $130 million for advertising and publicity,
and another $57 million in interest, but remember, Warner Brothers created Phoenix, Inc, so they’re
paying all that money to themselves. By doing it this way, they ensure that Phoenix,
Inc overpays, and thus makes no profit, and thus, anyone who would have shared in Phoenix,
Inc’s net profits gets nothing either. It’s not just Harry Potter films that have
had their profits disappear like Neville Longbottom’s baby fat. In fact, according Edward Jay Epstein—author
of The Hollywood Economist and yet another Epstein who didn’t kill himself—nearly
every movie ever released has, on paper, lost money. In an interview in 2011, David Prowse—the
man who played Darth Vader in Star Wars: Return of the Jedi—said that he still gets letters
claiming he can’t be paid any residuals because the film hasn’t turned a profit,
despite the movie grossing $475 million on a $32 million budget. So remember, if someone offers you the net
profits of a movie instead of paying you upfront, tell them no. Meanwhile, if someone offers to speed up and
simplify everything you do online for free, tell them yes. Let’s practice now. What Dashlane is is simple—it’s a shortcut. Pretty much whenever you enter your info anywhere
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your data securely across devices, browsers, and apps so that, no matter what you use or
where you are, your online experience will be optimized. You can try Dashlane Premium for free for
30 days by signing up at dashlane.com/HAI, and then, by using the code, “halfasinteresting,”
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