Divorcing in the Spotlight: Navigating Entertainment Industry Breakups in Los Angeles

Divorce in the entertainment industry comes with unique challenges. Whether you or your spouse works in the business, critical financial questions follow. How do you divide an intangible asset like a production company or calculate income for spousal and child support? The concepts may be simple, but the process is often staggeringly difficult.

WHAT IS THE VALUE OF YOUR BUSINESS?

One of the first questions in an entertainment industry divorce is whether a spouse owns all or part of a business. You may know that a business can be divided in divorce—but how does that actually work?

There are three primary methods to value a small or independent business: the market, asset, and income approaches.

A market approach looks at comparable sales of similar businesses—commonly used when there are frequent, local transactions, such as with restaurants.

An asset approach fits when a business derives its value primarily through its assets. Think real estate entities holding rental properties.

An income approach analyzes earnings potential, often applied to service-based or professional businesses.

So where do entertainment businesses fall? You have probably already guessed, most often the income approach applies. But there are few industries with more variation in pay structures than the entertainment industry. Consider the difference between a producer developing a show for a year versus a staff writer with a steady paycheck. Depending on stability, methods like capitalization of earnings (for stable income) or discounted cash flow (for irregular or future earnings) may be appropriate.

In many cases, you may even need to use multiple approaches. For example, consider a musician or producer creating a song that is streamed 100 million times over several years. They may be paid for their work during the marriage, but their future streaming royalties could be valued as a separate asset component of the business.

Another consideration is goodwill. Some businesses rely on a key individual, like a high-performing agent or director, whose departure would reduce value. Others, like a catering company with brand recognition and many employees, may maintain goodwill even if ownership changes.

By looking at your business, we can help you determine which approach best suits your needs.

DOES THE SIZE OR CONTROL OF THE BUSINESS IMPACT VALUATION?

Ownership structure and business size also impact valuation. Larger entertainment companies often have more stable earnings and clearer forecasts, making valuations more reliable—if the expert knows how to interpret the data.

If the business has multiple owners or investors, as with a multi-member production company, you will need to address the resulting discounts for marketability and control. Discounts for lack of marketability and control act as negative modifiers, reducing the value of the business for the divorce valuation purposes. Depending on the circumstances, these discounts can lower value by 30% or more, significantly reducing the equalization payment due to the other spouse.

WHO RETAINS THE VALUE OF A BUSINESS?

Knowing a business’s value is only half the battle—you must also determine what portion is community property (marital) versus separate property. When was the business started? That question can be complex, especially with entertainment ventures that struggle or evolve over years before becoming profitable. Did it take four years, all spent prior to the marriage, to develop your YouTube channel?

Efforts made before marriage may create a separate property interest. Conversely, income from work done during marriage may be partly community property, even if the product was released after—such as an actor’s role in a TV episode produced during the marriage but aired after separation. The same analysis applies to artist pensions or streaming royalties. If work was done during the marriage but income is received after, that income may be divisible.

WHAT ABOUT SPOUSAL AND CHILD SUPPORT?

Determining income for support purposes can be particularly complex in entertainment cases because entertainment professionals routinely have multiple streams of income. A musician might earn steady studio wages but also receive irregular income from shows and contract work. Add streaming revenue, royalties, residuals, or any other deferred compensation, and it’s difficult to define monthly income. These fact-intensive determinations make all the difference.

But getting it wrong can have long-term consequences. Under- or overestimating income can skew support payments for years. The right attorney doesn’t just understand income, they know how to present it persuasively in court or settlement. An attorney who is unfamiliar with the nuances of business and income may miss opportunities to protect your interests.

WHAT HAS CHANGED IN RECENT YEARS?

The entertainment industry is always shifting—but recent years have brought seismic change. COVID, industry strikes, and the rise of AI have all disrupted traditional entertainment income streams.

These disruptions only increase the need for a detailed, thoughtful analysis of income and business value. In a divorce, the outcome often hinges on who presents the clearer, more convincing argument and evidence. With such volatility, a rigid or myopic approach can sink your case. The best results come from professionals who combine flexibility with broad knowledge and experience.

MAKING THE RIGHT CHOICES.

The ubiquity of entertainment industry in Los Angeles belies its complexity. Missteps in valuing and dividing assets or determining income can cost you hundreds of thousands of dollars, or more. You may know your industry inside and out—but your judge doesn’t.

That’s where we come in. Our firm brings decades of experience guiding entertainment professionals through complex divorces. We tailor our strategy to your goals and present it in a way judges understand. Every step we take is designed to maximize value and minimize risk.

“Simple ain’t easy.” -Thelonious Monk