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 Heir to the Disney Kingdom

The Hollywood Reporter this week details the account of Bob Iger, the CEO of the Walt Disney Company, and his retirement announcement in two years time; bringing up once again the question of succession for one of the Big Six studios. Unlike the Paramount situation, Disney is a thriving company with several franchises, and thus, is able to survive a transition of power, given the right person takes the job. THR provides the setup:

“ronically, the CEO is trapped in the same vise as his predecessor, Michael Eisner, who named Michael Ovitz his No. 2 in 1995, only to fire him a little more than a year later, with a subsequent settlement of more than $140 million”

On potential candidates:

“But by Wall Street consensus, no internal candidate has emerged as a clear heir apparent since Disney jettisoned Iger’s first pick, Tom Staggs, in 2015. While Ben Sherwood, who serves as co-chair of Disney Media Networks and president of Disney/ABC Television, oversees a key profit center, it’s unclear whether Iger favors him. Bob Chapek, who chairs Disney’s parks and resorts, has broad experience and also appears to have Iger’s trust; James Pitaro, the head of consumer products and interactive media, has digital experience, having served as head of Yahoo Media; and CFO Christine McCarthy has been working closely with Iger but lacks operational experience”

On a personal level, Iger needs to pick someone he trusts and understands the needs of the company; which on some level is all of them; from this then Bob Chapek and Christine McCarthy seem to be the best bets for CEO, Chapek because of his park experience and Iger’s trust; and McCarthy because of her close work with Iger. Regardless, the success of a company is not based on the strengths and weaknesses of one individual; it is a collaborative effort one that requires, in the case of Disney, the support of its Board of Directors and the various department heads. It is unlikely that Disney will falter during the transition process, given the company’s history with corporate synergy and their business model, but what happens after 2019 will remain somewhat ambiguous; but it is perhaps an ambiguity that is worth it, for it presents opportunity and new potential directions, including exploring some old avenues worth a second pass.

 

The World’s Most Expensive Episodic TV Show: The Franchise

The Business this week hosted James Mangold, the director and co-screenwriter of Logan, released earlier this month. He discusses one of the many problems that filmmakers face when dealing with studios, specifically, when a filmmaker is called upon to produce a franchise film: a loss of control.

The power of the filmmaker in a studio environment in regards to the franchise is almost nonexistent; and it goes all the way back to the structure of the franchise themselves. This is especially true with the Marvel Cinematic Universe, even more so with properties like X-Men, who are not technically under the umbrella of the MCU, being owned by Fox instead of Disney. Mangold makes the point:

“And I don’t think anybody with a human brain and ears and eyes is not starting to think that more is not more. And that adding more heroes, more characters, more effects, more sound…The fact is that the unspoken feeling is that this is a very weird trajectory we’re on. Less is coming back and the movies aren’t as good”

Of course Mangold is generalizing, he says as much. However this generalization makes a point that speaks to franchise structure.

“This is endemic. I think if you’re just going to use Marvel’s grosses and somehow use their movies to make them free of this kind of criticism that’s not fair….Outside of comic books, I’m talking about tent-pole movies in general, they’re not movies generally, they’re bloated exercises in two hour trailers for another movie they’re going to sell you in two years.”

There is of course a bright side to this, for Mangold does not deny that there are some good movies that emerge from the woodwork, referencing Guardians of the Galaxy  (2014) and Iron Man (2008) as being notable exceptions to the rule. The problem lies in what successful films such as these ultimately produce-repetition.

Mangold and host Kim Masters discuss a bit about the specifics of Logan, involving the desire to include a Marvel comic in the film, something that was ultimately denied by the studio resulting in the production of a fake comic book, and then proceeds to get to the treatment of studios when it comes to creative directors.

“The reality is that all you have to do is experience…what it feels like when you don’t have control of your movie”

This brings up an interesting point and speaks to the current studio system, but at the same time also speaks to Mangold and others like him, showcasing, almost entirely in subtext, the narcissism of filmmakers and creative artists. This narcissism is not entirely their fault nor it is necessary a bad thing (see the work of Spike Jonze’s Adaptation, 2002) as long as it has a direction. In the case of franchises that direction often leads to “soullessness” and repetition. If directors and others in the industry are allowed to be creative in the confines of mainstream Hollywood, the repetition will cease and the quality of franchises will ultimately improve. This will require, in the most extreme cases, a new brand of Hollywood, one that is based on mutual trust and respect between all parties. That day is unfortunately far off, but hopefully, as long as there are creators, there will be films worth seeing, some of them part of a franchise.

The Netflix Ratings System

IndieWire posted an article early today detailing the upcoming changes to Netflix, specifically the rating system, that are set to appear sometime in April. While by no means a perfect analysis, neglecting for the most part the business side of the issue (i.e. why Netflix thought it would be a good idea in the first place), it does however, bring up some interesting points concerning the company and other streaming services like it such as Amazon.

Consider if you will, for your approval, the following excerpts:

“Five stars feels very yesterday now,” said Netflix VP of product Todd Yellin in a press briefing. He went on to suggest that star ratings hurt its business investments in catalogs of titles, noting that “bubbling up the stuff people actually want to watch is super important.”

“It{the new system} suggests that there’s no value in divisive material…By depriving viewers of the opportunity to broaden their range, Netflix denies an essential aspect of the maturation process for the critically engaged viewer”

The new rating system, which will be a thumbs up-thumbs down system reduces film selection on Netflix to the quality of a Facebook post or Twitter tweet and frankly, films regardless of overall quality, deserve better critical review than that- even from their audiences. Such an action is insulting to the viewer and belittles their intelligence to a four year old who doesn’t know any better. Netflix should treat their audiences as if they were their business partners (because they are) and let them decide for themselves what is good and bad and to what degree. Furthermore, to beat an already dead point into the ground, this rating system is especially insulting to the filmmakers, whose work has been reduced, for the sake of convenience to 50-50 chance.

“The thumbs up/down system has been a negative force in the critical landscape ever since Gene Siskel and Roger Ebert first applied it from the couch of their television show nearly 40 years ago…Over the years, however, this binary approach has encouraged reductive assessments that depressed the value of nuanced opinion. It’s that same impulse that has led to our current age of Rotten/Fresh polarities determining a movie’s fate with the ease of a flipped coin. By judging any culture through the limited range of binary possibilities, it’s always one step away from outright dismissal.”

This kind of behavior is not surprising from a company such as Netflix, or Amazon, or any of the streaming services. Through no fault of their own. These companies were brought up, as real competitors in the film industry, in an age when films began to mean less and less to the general audience. If it sounds cynical it’s because it is; if it sounds insulting, it is, but only because of its small nugget of truth at the time. It is not to say that film audiences today do not care about films, they most certainly do- but the companies, like Netflix and Amazon, seem to have temporarily forgotten that.

Hopefully, the rating system is just a fad that will eventually fade itself out; and if by some chance it doesn’t then it can only be hoped that audiences in April will be able to tell for themselves what makes a good film.

The New Paramount Decision: Michael De Luca

Variety this week reports that Michael De Luca, a producer at Universal, has turned down Paramount’s offer to be the studio’s 2nd after the new CEO, presumably Jim Ginaopulos. If one considers De Luca’s record, it makes sense as to why Paramount would want him on board:

“He is considered one of the most prolific and respected producers working with the studio, guiding key projects like the “Fifty Shades of Grey” films. Universal was particularly intent on keep De Luca in the fold because another key producer, Scott Stuber, is reportedly mulling an opportunity to run the feature film unit at Netflix”

Paramount, which has been consistently ranked last place among the major studios for the past five years, seeks to hire Ginapulous, in the hopes of revitalizing the company. Deadline reports:

“The development ratchets up the importance of finding a way to make things work with Gianopulos. He had a stellar track record at Fox, but his expertise isn’t as a creative executive as much as in areas like global distribution”

Ginaopulos’ experience in global distribution is not a bad thing for Paramount if he accepts the position for it allows the company to tap into the international market and gain international arbitrage through business deals (eventually, for Paramount, in its current state, is in no position to make such deals). Of course, if the opposite occurs Paramount will be back at square one and without Michael De Luca or Ginaopulos, they will be hard-pressed to find anyone capable of fixing and turning around the company’s hardships.

 

 

 

The Failed Management Practices of Paramount and Why Disney, Universal, and Warner Bros. Succeed

The Business, this week, released their podcast focusing on the issue of pay-to-play auditions as well as taking some time for the Oscars. But what is even more interesting from a business perspective, is not the pay-to-play audition practice (illegal) or the endless machination that has become the Academy Awards, but their brief discussion on Brad Grey, as head of Viacom. Kim Masters makes the point:

“What we’re looking at is sort of a cultural thing…to many people nowadays these jobs of running studios are not about having a tremendous vision that you really want to bring and green lighting these movies, it’s about managing up.”

Matt Belloni of The Hollywood Reporter chimes in:

“If you look at the way Paramount was managed they weren’t  releasing a lot of films which can juice the numbers for a year…they weren’t creating these franchises that can move on to the next level. If you’re just doing another Star Trek, you’re not making enough movies to have that hit that generates a franchise; and they didn’t have the investment from the parent company to really invest in the top tier talent that can do that stuff. I think it’s an example of how you’re seeing the movie business bifurcate into this have and have-not system.”

Masters and Belloni make an excellent point. The reason why Paramount is falling behind in terms of the other major studios, and why Grey ultimately left the company, is because of poor management technique and the inability to make a franchise. The issue involves much of what Guy Kawasaki (The Art of the Start), Eric Reis (The Lean Start-Up) and most entrepreneurs caution in the corporate world. Management techniques are often very by-the-book and focus more on getting results fast and profit margins than on efficiency  and doing things right. They also do not address corporate synergy and fail to adhere to their mission and vision statements, which should be like their Bible in terms of operations. Poor management techniques are what drove companies like Big Idea Entertainment (the makers of the popular children’s show VeggieTales) into bankruptcy in 2006. While more information is needed in regards to the future of Paramount and the direction they follow, it would be wise for the new managers to focus on the lessons of Reis and Kawasaki- take things slow, develop corporate synergy, focus on efficiency instead of mass production, listen to your audience, and step back from previous projects to find the flaws and improve on them. That is the some of the steps of the learning process and explains the success of Disney, Warner Bros., and Universal; not because they made better films( which they did) but because they were able, and willing, to go back to square one and learn.

The WGA Negotiations: The Setup

This week John August and Craig Mazin of Scriptnotes talk about the Writer’s Guild of America (WGA) negotiations. It is important to understand that the WGA is a union, which is a collective specialized entity organized to benefit the members providing minimums, pensions, and healthcare. While the debate about the relevancy of unions, given the numerous government regulations that exist, is a topic for another day, the issue of negotiation is something that is worth investigating.

“In order to work as a WGA screenwriter you have to work for one of these companies. And these are the companies who we negotiate with every 3 years to figure out the contract and what those rates are going to be. So, the rates for residuals, how money is going for health and pension, how we are going to schedule the minimums for the kinds of work we do. Together, all these signatories are the AMPTP (The Association of Motion Picture Television Producers)” – John August

Depending on the contract that is drawn up, the WGA could look different in the future. While drastic changes are unlikely, and many of the issues will simply be revised and renewed, what happens with the WGA is important because it determines the working environment of screenwriters. Of course, more research will have to do be done in order to fully understand the negotiations, but looking at the business side, particularly the activities of the various unions involved is a skill that many film students could stand to learn; especially if they have any hope of taking film with any degree of seriousness.

This is especially true because of the breath of jobs that screenwriters perform depending on where they are and the kind of things they write. The contract will most certainly deal with finding a uniform solution to longstanding problems such as work hours, content providers (Netflix, Amazon), and the ability to collectively bargain in an environment that is constantly changing coming up with new ideas and heading in different directions. As Craig Mazin notes:

“… all of this is putting enormous pressure on whatever the old models were; and our bargaining and our contract, it is all steeped deeply in the tradition of the time of which it was first convinced which was post World War II America.”

 

A New Dark Knight: Matt Reeves, Batman, and Lego

This week, the Hollywood Reporter states that Matt Reeves, the director of War for the Planet of the Apes (2017), and Cloverfield (2008), is slated for the next Batman film. Given his resume, this could mean a new direction for The Caped Crusader, who since Nolan took over in 2005, has been “grounded” in reality. The Hollywood Reporter had this to say: “It only makes sense to have a more fantastic big screen Batman now; as part of the expanded Justice League universe…wouldn’t going back to fighting non-super-powered psychopaths, no matter how ambitious they might be, feel just a little bit too much like a downgrade?”

The Hollywood Reporter, on Matt Reeves’ direction: “The addition of Reeves to the franchise… can be seen, then, as a positive sign at widening the idea of what a Batman movie can be once again.”

In terms of what this ultimately means, one only needs to look at this weekend’s box-office, specifically, the success of The Lego Batman Movie. It serves as evidence that people do not necessarily want, or even need, the gritty world of Nolan’s The Dark Knight; that what they crave are good stories peppered with the right amounts of humor, action, and the fantastical. Does it mean that grit and grim are no longer welcome? Of course not. But there is a time and a place for such things; sometimes, it’s nice to kick back, relax and delve into a fantasy- not be reminded of the world and its problems.

How to Save Hollywood: The Other Side of the Aisle

The Vanity Fair article discussed earlier: “Why Hollywood As We Know It Is Already Over” has gotten a lot of traffic this week. While I have already discussed the article in general, Scriptnotes’ response (John August and Craig Mazin) is interesting view at the other side of the discussion: Is Hollywood Dead? Their response is largely based on statistics, economics, and the idea that the business people involved with the industry have two motives: to make money and to make culture (in this case films). This distinction is incredibly important and is one of the main topics of this blog. It is the merging of business practices and art that makes Hollywood efficient, it is the idea that profit and entertainment can go hand in hand; and tandem with this is the point that for most business people in the film industry money is a secondary component.

It all comes back to the point I made originally. It is the content that is intriguing, it is the films that matter. What I will acknowledge Bilton’s claim to the newspaper and radio industries, I will disagree when it comes to the fate that Hollywood is dying because of Silicon Valley. Film studios, especially the Big Five, need to understand that companies like Amazon and Netflix are not the enemy, they are allies. As a distribution system, Amazon and Netflix allow more content to be seen by any person anywhere in the world; as a content creator, it is even more compelling. Where do you think they get the equipment to make shows like Stranger Things? Sure, they have their own funding and pools of talent to choose from, but some of it, from a logical and realistic standpoint, has to come from Hollywood itself, or at the very least, the stores and engines that make Hollywood work.

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.