What are Exploitation Costs?

Exploitation costs are those costs incurred in relation to the distribution of a film, including advertising, marketing, promotions, and publicity.

Accounting for Exploitation Costs

Exploitation costs are charged to expense as incurred, rather than being capitalized into film costs and amortized over time. Any advertising reimbursements received from third parties should be offset against exploitation costs, thereby reducing the amount of expense that is recognized.

Example of Exploitation Costs

Spotlight Films spent $50,000 on promotions for its new film, Accountants After Dark. Promotional costs are classified as exploitation costs, so the entire amount was charged to expense as incurred. The film went on to incur substantial losses, since it could not attract viewers - after all, everyone knows that accountants only fill out tax returns after dark.