Good post from Cory Doctorow, looking at the economics of one of the Harry Potter films that was apparently in the red despite grossing over $1B. He makes an interesting point that we should be dubious about how much money media companies claim to lose to piracy if this is how they account for expenditure, much of which will have gone to other parts of the Warner’s empire:

Last summer, Deadline released this balance-sheet (“participation statement”) detailing the alleged financial state of the corporate entity struck to run the Warner Bros movie “Harry Potter and The Order of the Phoenix.” The movie, which had grossed nearly $1B at the time, was nevertheless running $167M in the red. The losses are largely attributable to to prints and advertising/marketing — and, as many commenters on the original post point out, a major recipient of that marketing budget would have been Warner’s itself, in the guise of its other media divisions. Another culprit is high interest fees, though the film didn’t have outside financing, so Deadline speculates that the loan note was also held by Warner’s.

…I think this is also a great example of why all financial numbers released by the entertainment industry should be treated as fiction until proven otherwise. Especially piracy “loss” figures, alleged contributions to national GDP, and job creation numbers.

via Hollywoodonomics: how Harry Potter and The Order of the Phoenix “lost” $167M – Boing Boing.