I've Always Loved this Description of Hollywood Accounting

From The Last Don:

"I've never understood how I can have ten percent of the profit of a picture that grosses one hundred million dollars and costs only fifteen million to make, and then never see a penny. that's one mystery I'd like to solve before I die."

"It's absolutely legal," she said. "They are abiding by the contract, one you should not have signed in the first place. Look, take the one-hundred-million gross. The theaters, the exhibitors, take half, so now the studio only gets fifty million, which is called the rentals."

"OK. The studio takes out the fifteen million dollars the picture costs. Now there's thirty-five million left. But by the terms of your contract and most studio contracts, the studio takes thirty percent of the rentals for distribution costs on the film. That's another fifteen mil in their pockets. So you're down to twenty mil. Then they deduct the cost of making prints, the cost for advertising the picture, which could easily be another five. You're down to fifteen. Now here's the beauty. By contract, the studio gets twenty-five percent of the budget for studio overhead, telephone bills, electricity, use of sound stages etc. Now you're down to eleven million. But the Bankable Star gets at least five percent of the rentals, the director and producer another five percent. So that comes to another five million. You're down to six million. At last you'll get something. But not so fast. They then charge you all the costs of distribution, they charge fifty grand for delivering the prints to the English marked, another fifty to France or Germany. And then finally they charge the interest on the fifteen million they borrowed to make the picture. And there they lose me. But that last six million disappears."

Remember people, always negotiate for a percentage of gross, not net.