Did you miss the part where this happens all the time? There is nothing new here. If anything, it's another reason studios should never make a movie based on something they don't own.

Everybody involved has already made more money than all of our lifetime salaries combined.   They either want even more, or want to give away less.

There's an old Hollywood joke that goes:  What's the difference between the producer of a hit movie and the producer of a flop?
The producer of a flop makes a lot of money.
The producer of a hit makes a LOT of money.

That's why these deals get made.  Everybody gets rich, then they can afford to quibble over who gets richer.

By all actual documentation, PL Travers was NEVER going to be happy with any version of it.  She never wanted to make it into a movie and only relented because she needed money.  Walt was a ridiculous fan and wanted to do right by it.  I'm wont to defend Disney often, but I think she was so disgusted with herself by selling out that any movie would have been fruit from a poisoned tree.

Hell, don't try and have it published. Changes WILL be made to your text you disagree with, at least a little bit.

I've heard about how studios claim not to make a profit on big films before and perhaps this is a naive question but how is it not fraud?

At this point, given how well known the practice is, it's up to creators signing the contract to protect themselves. JMS, creator of Babylon 5, said at one point he knew full well he was getting screwed out of money (despite renewal each season being dependent on the show making a profit), and in any future deal he'd insist on everything being paid on the front end. This may be why he hasn't done much in that department...