The Financial Problems of Johnny Depp: Mismanagement and a Crisis of the Hollywood Lifestyle

The Hollywood Reporter this week highlights the case of Johnny Depp, who has recently sued his agency for mismanagement as the source of his financial troubles. The article, which details Depp’s behavior and lifestyle on set, with testimony from Jerry Bruckheimer, Tracey Jacobs, his agent, and Joel Mandel, owner of The Management Group, the agency, claims that it is Depp’s lifestyle choices that have led him to his current financial situation. The details are many and complicated, but in terms of the lawsuit itself, here is what THR reports:

“The possible catalyst for the lawsuit was a multimillion-dollar bridge loan TMG made to Depp in 2012. The managers say they tossed their client a lifeline as he faced default on a $5 million loan.

In his own lawsuit, Depp says he was kept in the dark about his finances and it was his ex-managers who weren’t handling his money wisely. (Waldman [Depp’s attorney] maintains that it was Depp, not Mandel and Bloom, who called the October 2012 meeting.)

Among other charges, Depp alleges that TMG disbursed almost $10 million in “loans” to his sister and other parties close to the actor without his knowledge and took out loans for Depp…TMG says the loans were needed to keep Depp afloat and that the actor was fully aware of them.

In addition to the loans, two other matters are central to the lawsuits.

First, the Depp suit claims, TMG failed to pay Depp’s taxes on time, resulting in $8.3 million in interest and penalties over the years — a claim TMG also denies, arguing that it had no choice, because the funds to pay the taxes were never available in April.

Second, perhaps most incendiary, Waldman alleges the Mandels were acting as both lawyers and business managers. Because they offered legal assistance, he says, they were bound by a California law forbidding attorneys from taking a percentage of clients’ earnings unless they have a contract expressly allowing them to do so.

Waldman’s case hinges on the question of whether the Mandels did indeed serve as de facto lawyers. Both were trained as attorneys but say they never did anything for Depp that would constitute legal work. (The law does not apply to agents, Waldman notes, even those operating without a contract.)”

While ultimately the case remains unresolved, one thing is clear, something is going to change in Hollywood as a result. Here are some of my predictions of what will happen as a result of the case:

  • Break Johnny Depp’s career or propel him forward
  • Bring in other similar cases that actors have with their agents if Depp wins
  • Change the actor-agent relationship in Hollywood from a personal and legal standpoint
  • Hurt Depp’s franchise ability, the actor being labeled as a liability risk

The full article can be found here: http://www.hollywoodreporter.com/features/johnny-depp-a-star-crisis-insane-story-his-missing-millions-1001513

 

 

The Sony Corporation Write-Off

In a statement made by the Sony Corporation on Monday, January 30th, the company has made a $962 million impairment charge that will greatly affect the output of its film division. The Hollywood Reporter‘s Gavin Blair, along with Georg Szalai had this to say on the issue, quoting an unnamed analyst at Sony: “”the film business has been struggling for years. This year, the only big release will be Spiderman and last year there were no big hits.””. Because there are not “big” hits, and frankly there hasn’t been any bit hits for Sony in a long time, since the end of the Andrew Garfield Spiderman era (if they were even hits at all, at best marginal successes; nowhere near Spiderman 2 levels in terms of lasting impact) it is no surprise that Sony is making this decision; but what exactly does this mean? What is an impairment charge?

An impairment charge by definition is a charge that the company records on their financial statements when the value of goodwill exceeds its fair value. Goodwill is the intangible portion of a company’s value and that portion’s ability to be transferred into physical tangible entities (such as cash or goods). This means that Sony’s value as a film company is decreasing. In a statement by Sony, from the aforementioned The Hollywood Reporter article: “The downward revision was primarily due to a lowering of previous expectations regarding the home entertainment business, mainly driven by an acceleration of market decline”. Later on, the company claims that further reasoning for the write-off was to allow for changes to “improve the profitability” of the motion pictures business, by which they are referring to their own film division.

What this write-off will mean in the grand scheme of things is uncertain for the moment; as the effects of an impairment charge are not necessarily immediate and can take several months to properly implement. The only thing that we can be sure of however, is that the Sony Corporation is going to change, and if it means that the company retrofits their film division in the process then it might be a change for the better.