
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, May 25, 1995                   TAG: 9505250080
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: Associated Press
DATELINE: LOS ANGELES                                 LENGTH: Medium

LIFE IS LIKE A SHARE OF GUMP PROFITS

YOU NEVER KNOW WHAT YOU'RE GONNA GET. Thanks to an accounting practice as creative as the movie itself, Paramount says worldwide blockbuster "Forrest Gump" is in the red - at least as far as net profit participants are concerned.

In one of the most striking examples yet of creative Hollywood accounting, the makers of ``Forrest Gump,'' the fourth highest-grossing movie ever, say the blockbuster is more than $60 million in the red.

It's called ``net profits'' accounting. It's standard industry practice, meaning this is not the first time it's caused jaws to drop.

``Forrest Gump,'' winner of this year's best-picture Oscar and five other Academy Awards, claims worldwide ticket sales of $661 million and strong sales in its first month of home video release.

The movie has been hugely profitable for Paramount, Tom Hanks and the director, Robert Zemeckis. People close to the film estimate they each will earn close to $40 million.

Paramount, Hanks and Zemeckis enjoy a percentage of the film's gross receipts - taking a cut of the first dollars that come in from theaters, video stores and soundtrack sales.

As for others involved in the project, they'll have to wait before they see the really big money.

Winston Groom, who wrote the novel; co-producer Steve Tisch; and screenplay writer Eric Roth are what are known as net profit participants: Their share comes from the net profits - the profits left after various costs are deducted.

And so far, Paramount says, the movie has yet to show a net profit.

Groom, who is writing a sequel novel, was paid $350,000 for the book's rights and is entitled to 3 percent of the net profits. He has hired a lawyer to claim his share from the movie.

Paramount said the film eventually will show a net profit and has advanced Groom $250,000.

In columnist Art Buchwald's 1988 lawsuit against Paramount, a judge ruled that the studio's ``net profit'' accounting was ``unconscionable.'' Nevertheless, it continues to be standard industry practice.

By December, Paramount had collected about $191 million from domestic and international ``Forrest Gump'' ticket sales (theater owners keep half), according to a Paramount accounting document. That figure will increase when 1995's significant home video revenue is included.

Paramount deducted $50 million in ``Forrest Gump'' production costs, a distribution and marketing fee of about $74 million, $62 million in distribution expenses, payments to Hanks and Zemeckis of close to $62 million and $6 million in interest.

The result: a loss of more than $60 million.

by CNB