Hollywood Accounting: A CPA's Journey Into Entertainment

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Kendale King: [00:00:00] Streaming when you're creating, when Netflix is creating its own product and then just put it on this platform, there is no license fee to to obtain after that, you know? Right. Because they're just creating the content and then putting it on their platform and they are, uh, earning their revenue from subscription fees. So I'm paying, let's say, $20 a month for Netflix. How do you allocate that $20 a month to the shows that I watched? You know.

Blake Oliver: [00:00:27] If you'd like to earn CPE credit for listening to this episode, visit earmark Cpcomm, download the app, take a short quiz, and get your CPE certificate. Continuing education has never been so easy. And now on to the episode. Hello everyone, and welcome back to the show. I'm Blake Oliver, CPA. And joining me today is Kendall King, CPA. Kendall, welcome to the show.

Kendale King: [00:00:54] Thank you, thank you, thank you for inviting me.

Blake Oliver: [00:00:57] Kendall has demonstrated strong aptitude and an interest in accounting from a very young age. He obtained his associates degree while still in high school, then continued his education by simultaneously earning his master's degree and CPA. Kendall kick started his career at Deloitte, where he audited major companies seeking more fulfilling work. He transitioned into media and entertainment accounting. He held roles serving prominent clients at a consulting firm and also worked at Netflix. This experience enabled Kendall to ultimately launch his own practice, specializing in media production and crypto assets. And I'm really eager to talk to you today, Kendall, about your practice and your background. So, yeah, great to have you. Uh, what I have to I guess for my first question, I got to say, like, what was your favorite? Um, what's what's been your favorite gig in the entertainment industry so far?

Kendale King: [00:01:47] Man? I mean, just hearing it back like that sounds interesting. I'm like, man, I did all that, huh. Um, uh, I think that. My favorite gig, you know, in the actual, you know, entertainment space, you know, because Netflix was a dream job for me at the time because, you know, obviously, I watched Netflix and I'm just like, oh, I want to, you know, be there and everything. Um, but. Honestly, you know, I'm a guy that really needs a challenge and needs to be stimulated. And Netflix was real, like together, you know, they had already had all their stuff together. So it didn't really lead me to be able to do much at the time. Um, and so I guess my favorite. Oh, man, it's hard to pick a favorite. I'm gonna pick a couple. Let me let me do that. Okay. Um, I think one of the. I worked at a consulting firm where I was able to, you know, when Disney was buying Fox, um, they couldn't get all of the sports networks because Fox, um, you know, Fox Sports Networks, and then Disney already had ESPN, so they weren't able to get those. And so we had to do a like a, you know, a separation of those, you know, um, networks and like create like financial statements for them from scratch. And they had never had financial statements before. So it was like, I think 15 different entities that we needed to create them for so that investors could use it. And I feel like that was just real cool to me because, um, I had like literally just got out of doing auditing, you know, and like auditing financial statements, um, you know, forever. And then it's like, oh, now you got to make them up from scratch, um, with some things that never had it before, you know, last more times than not, you have like, you know, Sally. Right. You can use this thing things from last year. But this we had to do it from scratch. And it was a really interesting experience there. Um, working. Well, yeah.

Blake Oliver: [00:03:35] That does sound fascinating.

Kendale King: [00:03:36] Yeah. It was, it was cool because we had to do them each standalone and then all of them combined, you know, so we had to do different versions of them. The one thing I didn't care for is that, you know, with the with all of the like, 10-K and stuff like that, they get real nitpicky on like the wording. I'm like, all right, you know, that you can miss me on that stuff. Um, but you know, the, you know, putting together the, the numbers and making it happen was pretty cool. And then one thing like, you see the this pillow right here in my background, um, it's a, it's like a, it's a logo of a convention that I work with. Um, I handle all of the finances and the event convention called Dream Con, and it's really a big piece of my heart, honestly. Um, you know, since I started working, um, with them back in 2021, it literally is a in, like, an entertainment convention focused on, you know, the anime, gaming media, you know, just content creators, all of it. And it was really something. And it's really like focused as well on like the, uh, the black, you know, group, um, especially because, you know, more times than not in different places, you know, they dress up as somebody else, as somebody else's favorite character. You know, they kind of get ridiculed and everything. And so it was like creating a space where you could feel like yourself. Um, and I'm a huge comic book fan, as you can see, with the, uh, you know, the things over here. Um, but, you know, so it was really great. You know, it was really great.

Blake Oliver: [00:05:04] Describe for our listeners what you have in the background there.

Kendale King: [00:05:07] Oh, yes. Yes. So like I mentioned, this is the pillow logo for Dream Con. Um, that is a crown because my last name is King. Um, that is a money sign. Um, that is an actual money tree. Um, and then, you know, I had some, some movies here, you know, some of my favorite movies, um, huge Will Smith fan. So a lot of those up there are probably Will Smith. Um, and then I have some of these, um, bobblehead, uh, pops. Yeah. These, um, uh, I got that one actually, from Netflix, you know, that's, uh, from Stranger Things and then, you know, just some of my influences. So, you know, Star Wars and Avatar The Last Airbender. I love Mickey Mouse, you know, from, from a young age, Black Panther. Um, so it's just kind of I'm still adding to it, you know, but it's like a representation of kind of, you know, obviously the money side and everything like that. But also, you know, the media and, you know, the gaming, the, you know, the, the TV, all the stuff that I love.

Blake Oliver: [00:06:11] So tell me about tell me about Deloitte. Like, what was it like to work at Deloitte? Are you are you one of the people who says like it was a great experience. I'm so glad I did it. Um, you know. Or is the big four all it's cracked up to be?

Kendale King: [00:06:26] I mean. I'm not. I don't really get in the habit of badmouthing anything. But I will say, obviously we all know what corporate America is. Um, I, I enjoyed my time at Deloitte, but by the time I was leaving, um, you know, I was happy to go, if that makes sense. Mhm. Um, and it was real more, more so on the line of, you know, I really wanted to do more and like Deloitte had a, had a plan for you. You know it's like you do. And again just Big Four in general you do two years here then you become a senior, then you do another two three years, you become a manager another 2 to 3 years. And like they really wanted you to stay in that box. And it's like for me, I'm just like, how do I get to this? Any, any, any place I come into, I look at the top and I'm looking like, all right, how can I get up there? You know, what's the the best way, fastest way, you know, most rewarding way I can get to the top. And with Deloitte and again, Big Four in general, it was just like, oh well you do this and, you know, sure.

Kendale King: [00:07:28] There are some times when people maybe can skip, you know, or do a little something a little early, but that's not really what we want. We want you to, you know, spend as much time and get the blah, blah, blah. And I'm just like, no, I'm good. I don't want that. Like, give me what I need. You know, um, I want to move, I want to I was looking I was real ambitious. And so, um, it was good to learn a lot of, like, basics, a lot of soft skills, how to manage, um, you know, kind of difficult conversations, how to deal with, you know, people who were, you know, um, in a position that they feel like they were being attacked. Um, and so how to, you know, communicate properly. And so it was just a lot of a lot of different, you know, skills that I've learned. And so I'm definitely grateful for the years I was there. But like I said, by the time I left, I was, you know, I really wasn't looking back.

Blake Oliver: [00:08:18] Um, so you left for media and entertainment and, uh, moved all the way across the country about as far as you can get to LA. Is that right? Like, how did you make that leap? How did you make that transition? Not just physical distance, but also like going from audit to entertainment. That's a big shift.

Kendale King: [00:08:37] It is. It is. Um, but for me, I was already setting myself up to make the change, um, because I was even, like, within Deloitte. I was, I had did a like very, very small stint on like the NBC audit that they had at the time. Um, and I was like and being very and intentional on setting myself up to be able to get into the entertainment industry that way. And honestly, I was actually going to go to New York first. Um, my, the partner on the engagement at the time, you know, had pulled some strings to be able to get me into the, you know, the NBC audit because it was like one I was in Los Angeles and it was one I was in New York and I wanted the one out in LA. But, you know, that was already pulled. But he was able to pull some strings for New York. And so I was like, okay, well, I didn't really want to go to New York per se, but it is still a place where it was like, you know, media, entertainment, all that stuff like that. And so I was like, all right, let me work within the confines that I have. But then a, um, a manager at the time, you know, really great guy, um, that I, you know, worked with he was like, you know, you don't have to work for Deloitte, right? He was like, you know, you can leave. And, um, I was like, oh, yeah, I can go somewhere else. Um, and so that was the thought process. So that's where I, um, took some interviews, um, to go to, you know, different, you know, consulting firm out in, in Los Angeles.

Kendale King: [00:10:03] Number one was really just to make sure I had some income when I got over there. But also, you know, it was a great one because you were able to, you know, get to a project, not know anything, have to figure stuff out, have to provide an answer and like, you know, make it make it go. And so, um, it was really good experience as well to be able to switch, switch gears and be able to help people, um, in their problems. And it's not the same problem like with audit. It was like, you know, it's the audit is the audit. You know, you're going to do the same procedures basically every year. But here was like, all right, you got to do this and now you got to do that. Now you got to do this at this project. And it's totally different. And so it was it helped a lot. So yeah, for me it was I wasn't scared. You know I think my the way I grew up is like you know I was always me and like able to kind of take that leap and go out and you know, um, do things. And so and my brother actually was already out in Los Angeles. So my older brother, he's a choreographer, dancer, um, talent agent, um, and at the time, he was already out in Los Angeles, already had a, you know, a presence there. So it wasn't as hard of a transition either, because, you know, it just went with, you know, went with him at first and then, um, you know, ventured out on my own.

Blake Oliver: [00:11:13] So you mentioned at the top of the episode that you did that carve out project for 21st Century Fox, where you had to pull out 16 entities that had never been reported on separately before your. Linkedin also says that you worked for Caesars, you worked on Caesars Entertainment, you worked on snap. Yeah. Uh. Like what? Yeah. Which one of those do you want to talk about? Because I would love to hear about both. They're both. They both sound fascinating.

Kendale King: [00:11:45] So, I mean, I can do a brief about both of them, but, you know, Caesars was my first one coming out of, um, my first one coming out of audit, and it was in the financial reporting. And so it was like that was where, again, literally I was just auditing these financial statements. And now I'm like, you know, hoping to, you know, create them. And so, you know, it was good to be able to see the other side of it. Um, but it was a real short time engagement. But it was a cool it was cool experience. Um, you know, learned like how the other side of it worked and how financials, like, were, you know, technically put together as far as the financial reporting team, not much accounting was really there. It was just really just helping present, you know, the the financials. Um, and then, you know, so that was the first project. Then I went to the Disney carve out project. Then I did a a brief audit project, um, you know, with, uh, an Embraer. It was like an airplane company. And so that was back to audit, but it was like the reason I did that was purely because of the money they paid, like a bonus, a surplus to, you know, do the audit. So I was like, all right, well I would do that. Um, and then snap. Yeah. So snap. They were looking for some help in the accounting department, and I came in and, um, helped them with that for a few months as well. So that was like one, you know, again, a great one because it wasn't you know, when you think of media entertainment, you don't necessarily think of Snapchat, you think maybe tech and everything. But I'm like also that is kind of, you know, included in media entertainment. You know, they have you know, they're creating productions. And at the time they were just kind of getting into doing those like original snaps productions and stuff. And so it was pretty cool to be able to see that and, um, you know, help with the account and got that point. But yeah, it was cool.

Blake Oliver: [00:13:28] It's amazing how much content is now delivered by and consumed on mobile apps. Right? We've got YouTube has YouTube shorts now. We've got, uh, amazing quantities of content being created and consumed on TikTok and Instagram. Uh, it it's they really are media empires. And I guess that's why this snap in Santa Monica.

Kendale King: [00:13:53] Yes. Snap is in. Yeah, it's in Santa Monica as well.

Blake Oliver: [00:13:57] Yeah, yeah. Well, so we got to talk about Netflix. Um, you you had a role as a content accountant original series. So was this that this was this was a situation where you were assigned to a specific series.

Kendale King: [00:14:11] So I was assigned to a, you know, the way it was broken up back then. Again, I don't know how it is right now, but back then it was broken up basically by genre, essentially. So, um, I had like the drama, um, I did some of the comedy and um, uh, some of the young adult stuff as well. So, you know, that those were and that's actually what I wanted, I wanted to I'm a huge drama, you know, TV guy. And so being able to do the, you know, get in and do the drama stuff, I was like, okay, this is definitely what I want. And honestly, the interview process for Netflix was something totally different. Um, and I actually, you know, um, went in for a different job just because I'm like, all right, I want to get in. I want to make it happen, but ended up in the place I actually wanted to be in. So it was pretty cool. Um, um, and yeah, it was, it was good, like, I mean, and again, accounting, accounting is, you know, at the, you know, you got a corporate level accounting, right, where you're doing the leases and the, um, you know, all the basic accounting stuff for any business. But then content accounting specifically is looking at that asset, you know, and the liability, um, of, you know, of creating content or purchasing content from other, you know, individuals, um, and other businesses. So, um, that's what, you know, I was, you know, responsible for was helping to track the cost, um, make payments to, you know, the vendors as it related to, you know, um, you know, content recognizing the revenue amortizing, you know, the cost over the life of the series and stuff like that. And that was my very, very big first basic, like real in-depth understanding of entertainment accounting. Um, which is interesting because Netflix had rewrote the rules on how to, you know, account for entertainment, um, accounting because the streaming model. So it was an interesting, you know, uh, thing to, to learn.

Blake Oliver: [00:16:14] Tell me more about that, because I don't remember learning about production, accounting or entertainment accounting when I took my accounting courses. What? Uh, well, how was it done in the past? And then how did Netflix change this?

Kendale King: [00:16:29] So, I mean, it's still there. You know, the there's other studios that are still using it. And, you know, Netflix does kind of still use some of the concepts. But the main difference is that, you know, in a regular studio, right? You are creating an asset. Um, so all your development costs that are going into it, um, paying for, you know, actors to act in it, paying for the accountants on the show to do with the crew, cast and crew and everything like that. You know, all those costs are built up. Um, and then the accounting team creates what's called an ultimate that is forecasting out how much revenue this particular product, um, this particular content is, you know, forecasted to essentially make. Right. Um, and you usually, you know, there's several different, you know, um, you know, methods that people use, but usually it's over a period of between like 5 to 10 years, depending on the, the, um, the actual, you know, uh, content. But what that was, that was a pre that was before streaming. Right. So more times than not when you when an asset was created, it was then sold. Right. It was sold to a network. That network would pay a license fee and that would then they would also potentially have, you know, um, syndication and um, and selling it in different, you know, jurisdictions around the world. And so there was all these ways to, you know, points to make money and amortize based off of the, those, those, you know, batches of money. But with streaming, when you're creating, when Netflix is creating its own product and then just putting it on this platform, there is no license fee to to obtain after that, you know? Right. Because they're just creating the content and then putting it on their platform and they are, uh, earning their revenue from subscription fees.

Kendale King: [00:18:18] So I'm paying, let's say, $20 a month for Netflix. How do you allocate that $20 a month to the shows that I watched? You know? Um, yeah, because technically that $20 should be, you know, allocated across like. All right. Well, I'm he can they'll pay for, you know, his, um, you know, his subscription and he watched you know, um, Squid Games. And so that's the only thing he watched, you know, how do we, you know, do we allocate the full 20 to to Squid Games as revenue. Do you know. So I mean, obviously that process could get pretty tiring. Um, and so what happens is, you know, they create, you know, again, sort of like an ultimate for their for their service, for their purposes. But it's a different curve that they, um, you know, use and they base it off of their history of subscriber, you know, you know, um, revenue and growth and. You know, usually, you know, the the metrics that they have inside, you know, that says, you know, actually we should be amortizing this over, you know, a shorter period. I forget what the period is for them. I think it's around three years or five years. But don't quote me on that. Um, but it's a shorter period that they're amortizing, you know, over because their, their data is telling them that, you know, this revenue, um, is, you know, something that is, you know, uh, you know, it's there's a lot of content, a lot of titles. And so putting it over, you know, these specific titles is next to impossible. And so they just kind of do it over their whole library. And that's what the data tells them.

Blake Oliver: [00:19:49] Uh, interesting. Yeah. So in the past studios were creating assets that they would then sell. And it was fairly simple, I suppose, to capitalize that asset and then sell it. Or if you don't sell it at least. Match it up to the income streams from that asset, which, like you said, include the royalties. It could include license deals, that sort of thing. But when Netflix is the platform for distribution and they create these assets, allocating all the subscription revenue to these individual assets becomes a challenge. Because our our subscription, you know, we might watch a bunch of different shows, we might watch no shows. And how could you efficiently, effectively allocate revenue? It seems almost like impossible. So is it is it fair to say they don't even try to allocate the subscription revenue to these individual productions?

Kendale King: [00:20:47] Well, I mean, there are they do have a they have a lot of data, a lot of metrics. They gather that like, you know, this whole separate departments, you know, solely focused on the data piece. And so, um, I don't remember us, you know, actually attributing any revenue to it. But again, they look at watch hours, right? They're looking at how many of all the total hours that are, uh, you know, are being used. Here's how much is being, you know, sent to here. And so while I don't believe that they actually attribute that to the those specific shows, because at that point it's not even really necessary, right? Because at the end of the day, you just need the financials to reflect the revenue that you have overall, not necessarily coded per show, but they use those other metrics to understand the success of the show. Um, you know, and that's where, you know, it's like, oh, this is the a top ten most watched show. And it's always changing. It's always updating because that's a full time job of someone and a team that is looking at these numbers and updating based off of that activity.

Blake Oliver: [00:21:51] Got it. So in a traditional studio, the success of the show would be determined by its, you know, net profit or net income. But in a Netflix situation, it's all these non-financial metrics that determine if the show is successful. And I suppose they probably compare that to the cost to produce the show. Right? There's shows that are super cheap, and then there's shows like, you know, the Queen, which I'm sure cost a fortune. Right. So that's. Yeah, that was so fascinating.

Kendale King: [00:22:19] The crown. Yeah, the big one.

Blake Oliver: [00:22:22] I saw an article recently. Maybe you could shed some light on this for me. It was in The Hollywood Reporter, and it was about how Netflix is shelving Halle Berry's The Mothership. Did you hear about this?

Kendale King: [00:22:35] No, I missed that one.

Blake Oliver: [00:22:37] So Halle Berry, she she starred in a sci fi movie, The Mothership, that Netflix produced. And The Hollywood Reporter said that Netflix decided that they're just going to shelve the film and not release it, and it has something to do with tax benefits of it. So I suppose like if they if they don't release the film, they can just write off all the costs immediately. They don't have to amortize it or something like that.

Kendale King: [00:23:13] Well, yes. Um, so yeah, if it's a so again, I didn't read the full article. I was kind of just looking right now, but from hearing what you're saying, I can definitely just speculate a bit on that is that, you know, when you're creating a, an asset. Right. Um, those costs should be hitting your, you know, um, your balance sheet first, right? Building up your content asset. And then once you actually, you know, once Netflix actually puts it on air, you know, at that point starts the clock of the amortization. So, um, if they if they're saying that, you know what, we're not even we're not going to be able to we're not going to we're not going to show this, we're not going to put this out there then. And they believe it's a dead project at that point in time. Then all of that should be immediately flushed, um, down into the, you know, to the PNL at the point in time. There's also a three year rule. Yeah, there's also a three year rule that, you know, that says that, you know, if you have an asset that you have been putting in development, um, and those costs that are accrued, um, even if you are trying to still sell it and everything like that, technically you should be pushing those costs, um, down to the, um, you know, to the income statement at that point in time, unless you got a very, very valid reason that you believe that this is about to be, you know, um, you know, um, sold or, you know, put on the market.

Blake Oliver: [00:24:32] It's interesting. Thank you for shedding light on that.

Kendale King: [00:24:34] But yeah, sounds definitely like a tax a tax thing.

Blake Oliver: [00:24:37] Yeah. No, I mean, it makes a lot of sense now. And I was trying to figure it out before, but I guess I didn't understand that these I figured that all of the content that Netflix makes is because they, you know, they're just streaming this on their own platforms, that it would be expensed, but they're actually capitalizing and amortizing. And so this way they can just accelerate that. But it's sad because, you know, I'd love to see this movie. Unfortunately the accounting treatment doesn't I mean the the viewer as well or the fans. Well.

Kendale King: [00:25:09] Yeah. And honestly I was like, you know, if I was on the team or if I was, you know, the regulators on that, I'm like, you're gonna have to give me a better reason as to why you're not going to be, you know, uh, displaying this other than just because you want the write off. Um, and so I'm there has to be, you know, even if it's just on paper, it has to be another reason as to why this isn't being, um, you know, exploited. Um, because if you if you start doing that, then, I mean, what's stopping you? You know, what's stopping studios from doing that at any point in time? Like, that's why there's rules, um, and policies set in place for, you know, how these, these assets are capitalized. And when you're going to write them off, when you're going to keep them on the balance sheet so people won't be able to play with the numbers like that. Um, not saying that people still don't, you know, studios still don't do that, but, you know, at least you got to have some type of rhyme or reason of what you're doing.

Blake Oliver: [00:26:03] Well, I mean, that's where the Terme Hollywood accounting comes from, right?

Kendale King: [00:26:08] Exactly.

Blake Oliver: [00:26:10] So I just.

Kendale King: [00:26:11] Learned. Exactly.

Blake Oliver: [00:26:12] And I just learned about this terme from our, um, from like some articles about Disney in a lawsuit with folks. Could you just, uh, for our listeners who've never encountered this terme before, kind of explain this concept of Hollywood accounting because I, I love it because it shows just how creative we can be as accountants in making that, uh, you know, bottom line number. Look how the studios want it to look.

Kendale King: [00:26:36] Yeah. Um, so Hollywood accounting is a terme. Um, that is generally used for, you know, it's more being used more in like, a deceptive light, um, where studio accountants or studio execs are trying to, even though a film is very successful, um, that they're trying to make it look like it's not on paper so that they don't have to pay out certain participations to individuals or certain residuals to individuals, which are all based on, you know, the accounting. Right? So, for example, if a within every contract that, you know, actors are, you know, going through, you know, they get their residuals based on the SAG negotiations and everything like that. But um, also certain key um, actors and talent are also able to get participations, which is again participating in the back end of the success of the show, essentially. But with that being said, those calculations can be really complex because it's like you can get X percentage on net gross revenue after considering these particular things and who's being who's in charge of saying what's what, like what's in the bucket and everything like that. So, um, a lot of times, again, historically, um, you know, you know, there are some thoughts on how, you know, hey, I forget, I think a big one was like a Harry Potter or something, but where it was just like it was a huge, huge success.

Kendale King: [00:28:06] But, you know, the the actors are like, well, where our money, where our piece of the pie at. Um, but again, they weren't getting. Because, you know, they were including the Hollywood sorry. The executives were including and the accounts were including costs and stuff. That was kind of like borderline, you know, um, you know, can you really do that? Um, in order to reduce the, you know, the end all amount that, you know, uh, that was really owed to the, the talent at the time. So, um, there's plenty of cases on it. Um, and actually, you know, I mentioned to you earlier that I have a podcast now that is called Hollywood Accounting. And in that podcast, it's really just generally just talking about like the accounting in the, you know, um, in the Hollywood industry. So like music, you know, productions and, you know, sports and everything like that. But, you know, I have a like a tangent series specifically looking at, you know, some deceptive, you know, things, some frauds that have happened in the the media industry as well, to kind of go behind the numbers and see that stuff. But, um, yeah, to your point, it definitely is the, you know, kind of the the nod to how intelligent accountants and how tricky they can be in. Well.

Blake Oliver: [00:29:27] We didn't learn about Hollywood accounting in school, but it reminds me of like the allocation of manufacturing overhead where, you know, you take production overhead distribution, overhead marketing and you you push that down into the productions right to. And so that increases your costs and it lowers your profit. And then if all the contracts are written based on profit, you could see how that would upset perhaps some of the lead actors who get a profit share. And then they would accuse the studios of, you know, manipulating the numbers. But my takeaway from all this is if I'm ever a, if I'm ever a participant, you know, if I ever get points on a, on a production, it's to to negotiate on top line revenue. Right. Like don't if you can.

Kendale King: [00:30:15] Well you're more likely not going to get that. Um, you know it's just not standard to do that. But I think the, the main thing really is to that point is and sometimes obviously depending on the deal, you might not even have that much negotiating power or more times than not, a lot of actors want to see it on the front end instead of the back end. Um, and I think that's just a mindset thing, honestly. But the the main thing I would say, though, you know, is just getting another accountant, you know, having your accountant, you know, or financial manager, you know, audit these because they, they're open for audits, you know, and so more times than not, you know, you can kind of get your, you know, your own representative, your own creative accountant, um, you know, to go in there and say, hey, you know what? Why are you guys including X, Y, and Z? You know, why is this being done? And let's take that out. That doesn't that doesn't fit this, you know, um, this definition. And so a lot of times they people don't have, you know, um, an accountant to do that or don't, don't even know that they have audit rights. You know, a lot of times they just take what, you know, what is given to them. And so there's a whole business out there for people who audit these, you know, type of contracts and participation statements and everything like that. Um, just to make sure that the studios aren't, you know, kind of gaming them.

Blake Oliver: [00:31:32] Get yourself an accountant, audit those financials. You have a right to do it. That's great to know. We gotta push that message to all the, uh, all the content creators, all the all the creatives out there. They need you need a good accountant.

Kendale King: [00:31:46] Look, that's my whole mission, man. That's the whole mission is, you know, you don't like, um, a lot of the content creators and talent that I've, like, um, worked with or talked to is like, they don't, you know, certain things that we went through, um, as you know, just going through the business courses and accounting courses, it's like second nature. It's like, oh, yeah, of course. Why aren't you asking about, you know, these particular points in the contract? Why aren't you questioning, you know, X, Y, and Z? Why aren't you looking over, you know, certain things. It's like it's just not second nature to them. They just, you know, it's like, all right, let's just get the deal done, you know? Let's just move on. Let's just do this. Let's do that. Um, and more times than not, a lot of people, a lot of, you know, talent in general, just a lot of businesses in general. Just look at accountants or the accounting function as a like a cost center. It's like, ah, I don't really need to do that right now or, you know, I just need them for taxes. That's it. But my whole thing of how I, you know, provide services and provide value to my clients is I am a, I'm a, I'm a revenue generating, uh, like, you know, center for me. You know, I'm like, I'm helping you make sure you're maximizing your revenue to, to the, to the most and reducing your costs. You know, as much as possible beyond just tax savings. You know, um, I was able to look into a client's, um, contracts, um, that was, you know, they had with the platform that they were partnered with, um, and I was just like, these numbers just seem a little.

Kendale King: [00:33:12] Hi to me. You know, I'm just like, again, I didn't know it was wrong. I just like it just feels wrong to me. And so I just asked him like, let me, can you give me how you got these numbers? And they were on auto like debit. So they were just taking the money out. And just to be again fair, the front is not like they were doing this deceptively, but you know, but these things happen where, you know, I looked at the numbers and I started questioning. I was like, well, this looks like you're getting, you know, this much and this much. And then looking at the contracts like you're only supposed to get that much and it saved, you know, the company, like $25,000. Um, you know, just from doing that one, just by asking the question, like, did he do these numbers look right, checking the contracts and making sure. And so if I was brought in on the front end on that, um, you know, it would have been we wouldn't even had that problem. But it's always, you know, it's never too late, you know, especially if you have a good relationship with the vendor and they, you know, again, are no, they're not actually doing anything wrong, like intentionally, you know, getting that remedy, you know, on the, on the back end and having the audit, you know, um, you know, ability is great because people get taken advantage of, especially in, in the media and entertainment space, content creators, you know, uh, they're not they're not business people. They're content creators, you know.

Blake Oliver: [00:34:25] Yeah. And and you've got their back now with your own firm. You founded, K.K., CPA. You've been doing that for coming up on two years.

Kendale King: [00:34:36] So technically, like the actual organization of the of the thing. Yes. But I've been doing like this basic this work since I moved out here to LA, honestly, a little bit before LA because, you know, again, my brother was a choreographer, um, and he was in the talent space as well. And so, you know, in him and his friends were in it. And so, you know, on, you know, in between time and, you know, when I wasn't working on my full time job, I was doing things like that. Um, and so it just got to a point where it was like, all right, now, you know, I have enough clients, um, to kind of just do this full time. And so that's where, you know, a few years ago, um, you know, did it full time, um, you know, going forward.

Blake Oliver: [00:35:18] So tell me about your firm. Uh, I understand it's it's a small team. It's boutique. Is that a fair word to use? Boutique? It's.

Kendale King: [00:35:29] I mean, that's cool. It's.

Blake Oliver: [00:35:32] Well, you're focused, right? And you offer a high level of service, like, uh, what kind of what kind of services do you offer to your clients? How do you package up what you are doing for them?

Kendale King: [00:35:44] Yeah. Um, so again, initially started with account by K and J k J Strategic Financial, which is um, a firm that me and my wife at the time had like created. Um, and she's also a CPA and you know, so but it was really me kind of like pushing like, hey, I want to start a firm, let's do this together and everything like that. So honestly, I kind of, you know, pushed her into it. But, um, you know, we started it there and it was to help, you know, small businesses at first. Um, so we were just looking at small businesses. But then as I kind of more went into it, I just knew that, you know, people were telling me all the time, it's like you need to niche down, you know, uh, you need to find your market and do that. And, you know, when you first start a business, you know, you want to just get as much as possible, right? You want to just let me get all this stuff, let me secure the bag, you know, let me do all this. And so that was the that was the, the main thing at the beginning. But over time, as I started, you know, um, you know, really getting further into the industry, you know, Casey Kcpa was again crafted to be able to do that focus. You know, I realized, like, you know what? Okay. Um, I really, truly have a passion and, you know, um, and a a mindset to do this. Right. And this is what's provided me the most value because the other one is like, you know, the doing the, you know, bookkeeping and taxes and stuff like that.

Kendale King: [00:37:06] It's like, you know, that's just real, you know, commonplace. So I'm like, all right, you know, you don't need, you know, me to do that. Honestly. Um, you know, and so for me, I was like, let me figure out a way where I can provide true value. And that's where, again, Casey Kcpa, um, providing business management, financial management services for those in the media space. Um, I also have studio clients as well, um, helping them with their accounting. Um, but I negotiate contracts for people I make sure to, um, you know, uh, strategize. I'll also call myself, like, a financial architect of sorts. And that's a connection back to, you know, when I first started, um, you know, in architecture, um, so I can't draw, but I can definitely create, you know, streams of revenue. Um, but, um. Uh, yeah. So I help with, you know, talent to see the bigger picture, um, and be able to monetize and, you know, take advantage of opportunities that come up, um, strategize some. A huge strategist when it comes to, you know, a lot of the people that I work with. Um, and, you know, just kind of taking like, and I understand the media industry, I have a creative mind, but I'm also, you know, very much grounded and rooted in financial literacy and management. And so, you know, I, I really like to think of myself with Kxpa is, you know, I'm not necessary even though I can I'm not the person who's, you know, creating your business.

Kendale King: [00:38:41] Like, I'm not creating your LLC. You know, I'm not, you know, um, again, I'm not necessarily just following your, you know, you're not just kind of stopping with me at one once, one time a year with taxes and everything like that. Like, honestly, you might as well just find somebody else to do that stuff. Um, but if you want to have to, to really elevate and scale your business and scale what you're doing and, um, you know, take it to that very next level and continue to grow and to figure out how do you squeeze every last drop of, you know, lemon juice out the lemon type thing? It's just like, that's where I come in. Um, and help get that to that next level. And obviously, you know, if I'm doing that for you, then I'll do the taxes and I'll make sure my team, I have a team that again, will help with, you know, putting together LLCs and stuff like that. But if that's if you're just starting, I'm probably not the best for you. Um, you need to, you know, again, I can give you some advice and help you out, but I'm more of the person you come to. And it's like, look, I've done very well or I'm doing really good on my own. Now I'm getting to a point where I feel like I'm missing out on stuff, or it's getting too hard to do this alone. And, you know, I really need help getting to that next level. Um.

Blake Oliver: [00:39:52] It sounds like you've got it really figured out. Like exactly the kind of client that you want to serve. And I'm curious, how do you how do you price the these kind of engagements? Because it sounds like there could be a lot going on with these clients who are, like, doing well. They've got more than they can handle. Um, and, and I know for a lot of CPAs that ends up being like the reason that they struggle to do fixed pricing and they revert to hourly pricing, how are you pricing your services? Are you are you doing it hourly or are you doing fixed fees? Are you doing value? Pricing is something else.

Kendale King: [00:40:32] It's it's a combination of everything. Because that's a good point, is that when I first, you know, started in it, I didn't really like the thought of the hourly pricing because I didn't want my clients to feel like they on the clock. You know, they can't, like, ask me questions because this isn't, you know, um, accruing some more money. But I now after, you know, years of doing it, um, just want a flat fee. I understand that the hourly pricing helps. You know, me, the professional, um, to be able to manage time properly, um, especially as we scale. So, um, it's honestly a mix. Um, I think now, you know, I charge hourly for certain engagements, like studios and stuff like that, um, that make that make make more sense for them. Um, but then for, you know, some creators again and some, you know, other, you know, clients, you know, I do more of a flat fee, but this flat fee is a little, a lot higher than the other, like in the past, where, um, to basically incorporate, you know, a lot more stuff in some cases. Also percentages, um, you know, again, if I'm bringing in deals, um, and I'm landing them and, you know, same way as any other talent manager or business manager would, you know, get percentages on, um, um, and so I'm not gonna lie, I'm not the, you know, I'm not the price guru.

Kendale King: [00:41:53] And honestly, more times than not, I try to provide value first before I'm like, oh yeah, is this much, you know? And that's a, you know, you know, not the most sustainable business model. Um, but it's just like, for me, it's just like, I really just want to prove to you, like, look, I got your back. We in this. And so, like, it don't matter how much I charge, you're going to want me on the team because I'm bringing you in more money, um, at the end of the day. And so for me, it's been from, you know, very low, uh, flat fees to hourly fees to, um, you know, how much I can bring back for your percentage of that. So it's just it varies honestly on, um, different, different types of services, you know what I'm saying? I don't know if that was the best answer, but, you know, there's a range.

Blake Oliver: [00:42:41] I think that's great. I mean, there is no one answer, right? Um. That's what I've found. And it's often a mix. I, you know, I did fixed fees with my practice, but we also had some hourly clients too, so I think that's fair. Um. So for our listeners who are interested in specializing in like the kind of work that you do, entertainment media. We talked about how you don't really learn that in school. Do you have any recommendations for how they could get this knowledge or areas they should focus on in accounting while they're students? Yeah.

Kendale King: [00:43:21] So, I mean, if you're a student, I think that if you truly understand, like cost accounting, inventory, accounting, then it'll be a pretty easy, you know, transfer over into, you know, um, media entertainment accounting. Um, because again, like you mentioned again, it's all about like allocations and um, and build up of an asset and, you know, everything like that. So I say if again, if you're a student and you're just trying to kind of learn what's in, you know, what they have, then that's one thing I am actually on a mission to, uh. To bring more entertainment and more, you know, newer alternative ways of accounting into college curriculums as well. Um, so I'm on the board of, of Cao, CPA, um, out here, and I'm also the president of NABBa, the NABBa chapter of the Los Angeles. And so I'm trying I'm not saying it's easy, but I'm trying to trying to make some change, um, in how that is, you know, you know, done. But I also, you know, um, among me and some other people too, you know, other sources out there, you can just, you know, if you're a continuing professional, you know, you want cpi-e, um, or even if you're just, again, you're just eager. There's programs out there that teaches you how to do, um, production, accounting. There's not as many out there that do like corporate entertainment, ultimate accounting, but there's quite a few out there that does like production accounting, which is, you know, when you're an accountant on the set, um, of a particular show. Um, and so, you know, there's again, different things out there that you can learn from.

Kendale King: [00:44:59] And obviously, the best thing, in my opinion, is to get in the experience. Um, but I have courses, um, I'm, I'm certified with, um, a CPA sponsor with Nasba to be able to give out CPAs for the courses that I create. Um, and so I have a course as it relates to, you know, ultimate accounting, um, you know, a course on, you know, do crypto as well. Um, it was important to know about crypto, um, you know, to be the best, you know, advocate for the client since, in my opinion, crypto blockchain, uh, NFTs, they're very closely associated with, you know, the entertainment space with artists, you know, royalties and, um, gaming, um, you know, and open world universes and everything like that. Um, and so I teach, um, those type of courses, uh, where, again, you can also get CPE if you're a professional and you want that as well. But there's literally you can just I would always say Google it. You know, you can Google um out there and see what, what things exist. Um, you know, stick to listening to, you know, sources and podcasts like this that opens up your mind and allows you to, you know, see the different areas. Um, you can obviously just go into the, into the FASB itself and look at the accounting, um, and how it's done. You know, you could do that. Or again, you can just have guys like me who explain it to you. Um, so either one is, you know, just really depends on, you know, what your avenue is. How did you get.

Blake Oliver: [00:46:26] Into the into the crypto accounting space? I know there's crossover with NFTs and entertainment and crypto. Uh, what was your entree into that whole space?

Kendale King: [00:46:38] Like the sad, sad, sad moment? I tell you, it's, um, back in 2014, I had went to a bitcoin like, crypto, like seminar. Um, and I was like, oh, I knew at that time, like, this is the future, this is what's going to happen. Um, but again, that was when Bitcoin was nothing. You know, it was one wasn't worth much of anything. Um, but you know, the guy was giving out like .1.01 of Bitcoin at the time, um, you know, just for free, just for participating. So I was like, yeah I'll take that. Thanks. And so, you know, set up a wallet and did all that stuff and got the Bitcoin at that point in time. And you know life happens. And so you just kind of forget, you know, and it wasn't the big thing on the, on the mind. And again I had a one track focus of like getting through school and getting into, you know, doing CPA all this good stuff. So I forgot about it until like 2017, 2018 when it made that first jump, that first huge jump. And I was like, I know I got some Bitcoin around here somewhere, and I found the account got in there, and that .01 ended up being like 200 and like $80 at the time. And I was floored because in my mind, I'm just like thinking of all the amount of money that I had had, um, where I could have just put a dollar here, a thousand, you know, at one thing and doing that.

Kendale King: [00:48:00] And I'd have been set. Um, and so it was a very sick moment for me at that point in time. And I was just like, all right, I can't let that happen again. I don't want to be left in the in the background anymore. Um, and so that's when I really went hard into, you know, understanding crypto, um, and the blockchain and everything like that. And so as I, you know, continued to grow and then I really made that step like that jump to do full time, um, my own, you know, businesses. Um, that's where again, I even went even deeper and heavier into, you know, crypto, where I was even working with the FASB and still do now, um, on, you know, the pronouncements that are coming out. So the fair value, um, you know, uh, announcement that that recently just took effect, you know, I helped in that process of getting it to the finish line. So, um, so, yeah, that's my initial foray into the space. But yeah, I was in, you know, I was in the community, I was, I got rubbed, I got, you know, um, you know, I went to the, you know, the Alpha sessions. I was in it. I was like, let me be a participant of this, you know, really understand. So. Yeah, well.

Blake Oliver: [00:49:08] That's so cool that you've been working with Phatsby. What is that like? Phatsby seems like this mysterious, you know, Wizard of Oz kind of organization. Like. Like what is what is it? Who are these people? How do you get things done?

Kendale King: [00:49:22] Look, I honestly, you know, at the time when I was like, really getting into the crypto really heavy and I knew that they were when I first had like I saw like, oh, where it's on the agenda now we're going to talk about, you know, doing some accounting for crypto. I had literally went on to the Farsi website and like saw all the people and, and who was working on the project and send them an email. I was like, hey, I do this. Let me know I'm in the community I want, I want, I would love to be a part of this because in my mind I'm like, this is history. You know? This is like, you know, you know, it's this is an accounting moment. You know, uh, that, you know, for CPAs to look back and in the future to be like, yeah, you know, you know, I can say, like, I was on that one back in the day, you know, that was me and my little rocking chair. That's right. Um, and so, um, I had reached out and I reached out several times because at first they were ignoring me. Um, or maybe they just didn't see it, I don't know, but, um. Nick, um, Cappiello actually reached out to me, um, and he was like, hey, you know, we're always interested to hear from stakeholders and stuff like that. So at first he sent me like a, a scope test essentially of like, what are how to how to how to scope what crypto assets, you know, what blockchain technology should be included in this first round of like, you know, of of a regulation.

Kendale King: [00:50:45] And so, you know, going through that process with him, talking with to him about that, giving him my opinion, I'm like, well, yeah, if you're going to go by this definition and these things need to be pushed to the side, we shouldn't be talking about this just yet. Um, I helped, you know, um, organize, you know, the FASB, him and his team, um, talk with people like companies that existed in the space, um, to, you know, connected them with their accountants or their teams to be able to have that conversation. Because, again, the FASB, like you said, is this Wizard of Oz. Um, you know, they weren't necessarily on the ground. And so, you know, I was able to say, all right, look, I'm on the ground out here. You know, let me connect you guys with these stakeholders who this accounting is going to eventually affect. Um, and then in those meetings, you know, some of those companies don't know, they just given, you know, what the actual accounting treatment should be. They just know what they do. And so it was just like, you know, having FASB on one side, them on the other side, and then me in the middle to just kind of be able to, you know, um, help that conversation along. It's like, all right, well, yeah, that makes sense here. That makes sense over here. Here's in my opinion where we should kind of really be going. And so just doing conversations like that with them. Um, and again, the, the accounting, you know, the pronouncement that came out is great, you know, fair value.

Kendale King: [00:52:02] But honestly, that was like the low hanging fruit of, you know, crypto, honest to be real. It's like there's so many other complex, you know, situations to consider that, um, hasn't even been touched. Um, as far as you know, um, I know some of the conversations are happening, but I was even talking to Nick, I'm like, yeah, man, we got some. We got some work to do. We got a lot of a lot of stuff to talk about. Like what happens when, you know, you create your own token? Is that inventory is that, you know, uh, should you not like, right now, people don't even show it on their balance sheet sometimes because it's like, well, it's in the it's in the contract. You don't own it. It's in the smart contract. It's like, well, but you control the contract, don't you. Like, you created it, you know, so that's technically yours. And like you should be valuing what that crypto is worth based on how much money you put into it. And that should show on your balance sheet, because if not, it's just going to be like it's off balance sheet right now until it's used and it's just like, I don't. I feel like, in my personal opinion, that it should be shown, um, and, you know, you should recognize that you have the ability to flood the market if you wanted to with these, with these, with these assets, you know, something like that, you know. So it's just but people have different opinions on different things. And so it's healthy to have those conversations to get those different point of views.

Blake Oliver: [00:53:17] You're giving me Enron flashbacks with this off balance sheet discussion. I'm just actually reading the book. Finally, the smartest guys in the room. Finally. I'm reading that. Never read it before. And it's it's it's like the exact same problem that you're talking about where they had control over these other entities, but they didn't consolidate them on the balance sheet because they had, you know, some reason not to. And if we don't solve this in crypto, maybe we could have that happen again.

Kendale King: [00:53:43] And honestly, in this kind of happened already, you know, and it's happening right. Like when you see FTX and the problem with FTX is that they just didn't have proper accounting. You know, they didn't have a proper like person who really understood. And a lot of people like to say like, um, you know, the regulation, it doesn't exist. So people, you know, how can you blame people? But it's just like, yeah, sure, there isn't an abundance of regulation, but there are things, like any reasonable accountant, you know, who understands the the technology and understands the business, you can you know that. All right. This is something I should be disclosing or this is something this is a treatment that maybe we should be doing. Um, but I think more times than not, you know, um, in the startup space in general, a lot of times it's always just showing the best numbers you can to get the next investment right. You know, it's doing what you can to show, to make the look, to make it look like it's working, um, so that you can get the next round so that you can, you know, put more money in it to make it actually work. And I think that, you know, with crypto being in the startup space, you know, in general, um, it's just perpetuated that problem as well. Um, and more times than not, again, the accounting, accounting and the smart startup space, you know, for any new businesses are always lacking. Um, and, you know, uh, that's the that's the biggest thing in my opinion. But yes, it's definitely possible, um, because it's like, well, there's no strict requirement to do it, so we don't have to do it. Either you're saving money or you're trying to you're trying to mislead some people. Um, and so, um, you know, those are different ways that, you know, it has happened and can still continue to happen if, you know, we don't really make this a priority.

Blake Oliver: [00:55:26] Kendall, I just want to do a quick time check. I know we're over. Um. Are you is there anything else you wanted to touch on before I wrap things up?

Kendale King: [00:55:36] Um, for me, I think that, um. Oh, I at I so obviously I is a big one. And again, I'm on that too. Um, I actually created I don't know if I'm so I don't know if this is the actual truth or not, but I created the first CPA, GPT, um, and so, you know, uh, definitely if you guys are interested in hearing, you know, getting to a chatbot on ChatGPT that teaches you, like, just answers your questions about, um, you know, basic accounting or it's more than basic accounting because you can train it up to, like, really know certain things. So I actually created a CPA one and a CFO one. So CPA one is more client facing, you know, you know, asking questions and everything. Then CFO one is more professional facing. And I was like, you know, I trained the CFO one to um, to know the the phatsby inside and out, right? And the IRS inside and out. So, like, they're pulling from those sources to be able to answer your questions and everything. And it's just a real cool way. Again, I think that we should be utilizing AI to, um, to help us as much as possible. We shouldn't be afraid of it. Um, it's just like Excel at the end of the day, you know, Excel made everybody's jobs easier. Um, and it's just how you if you are very great at Excel, then you'll be able to, um, you know, be, you know, be leagues ahead of other, um, people, professionals. And so I think the same thing works with AI. And, you know, the GPT is just scratched the surface of what you can really do.

Blake Oliver: [00:57:06] So I'm in, uh ChatGPT right now, and I'm on the explore GPT tab. And if I type in Kendale King, I see the three GPT you've created here CFO, GPT and CPA GPT. Yeah. All right. That's so cool. So yeah, if you, uh, have a chat, GPT, uh, subscription, which you should. Honestly, if you're listening to this show, you should spend the 20 bucks. It's worth it. Way worth it. Go check out that, uh, GPT that Kendall created. That's awesome. Well, hey, Kendall, thank you so much for your time today. It's it's been so just fascinating hearing your story and learning about Hollywood accounting. And everybody go subscribe to is the podcast called Hollywood Accounting? Is that right?

Kendale King: [00:57:53] It's called it is called Hollywood Accounting. Yes.

Blake Oliver: [00:57:56] Okay. Go find it on your podcast player Spotify, Apple Podcasts. Right. And, uh, subscribe. And, um, Kendall, where do you like to connect with people online? Where should they go if they want to follow you?

Kendale King: [00:58:10] Um, LinkedIn is great again for, you know, for, you know, professionals. Um, and then I, I have a YouTube kcpa as well as far as, you know, just like regular content just to consume that. Um, and then I have, uh, Instagram is probably the next best one to like for direct, you know, contact back and forth.

Blake Oliver: [00:58:33] Cool. So check out the show notes for links to Kendall's social profiles and website. I've been speaking with Kendall King, CPA, and uh, thanks for joining me. It's been great talk, chatting with you, and I hope to see you around.

Kendale King: [00:58:47] All right. Thank you.

Blake Oliver: [00:58:50] Thanks for listening. I hope you enjoyed this episode and that you learned something new. And if you did, wouldn't it be nice to get some CPE credit for it? Well, I've got great news. My new app, earmark CPE, offers free Naspa approved CPE credits for listening to podcasts, including this one. Visit earmark Cpcomm to download the app, take a short quiz, and get your CPE certificate. That's earmark Cpcomm.

Creators and Guests

Kendale King, CPA
Kendale King, CPA
As a Certified Public Accountant (CPA) specializing in the entertainment industry, I bring a unique blend of financial management, strategic planning, and advisory services to actors, musicians, content creators, writers, gamers, and others in the creative field. My expertise also extends into the dynamic world of digital assets & blockchain technology, offering cutting-edge financial strategies that embrace digital finance innovations.
Hollywood Accounting: A CPA's Journey Into Entertainment
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