"Sand millionaires"
Everybody responds to incentives

Hollywood studios are *so* tricky

From Edward Jay Epstein:

What goes largely unreported, however, is that the studio have found other ways to make money. Despite all the hand-wringing in the press over losses, the 6 major studios made record profits. . . . 

4. Studios have also managed to reduce actual production costs by paying stars only a fraction of their official “quote” or asking fee. In exchange for having them sigh a “side letter” in which they agree to the cut, studios allow them to claim they got their full fee in the contract .For example, a big name star may have a quote of $10 million, which is inserted in the contract, but he or she will be paid only $2 million. The $8 million vanished through a side letter which the star simultaneously signed relinquishing part of the sum in the contract. Since side letters are kept secret by studios, the star can pretend to receive far more than he does. . Stars accept these drastic cuts because they (and their agents and business managers) would rather make a fraction of their quote than no money at all, as long as the world does not find out. For studios, these side letters substantially decrease the cost of making movies.

Link via Seth Roberts

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