The dispute between Hollywood writers and the talent agencies who represent them is heating up with less than two weeks between now and a vote that could create chaos in the entertainment industry.
On Tuesday, the Writers Guild of America West, the union that represents TV and screenwriters, amplified its invective against Hollywood talent agencies during a telephone press conference that it held just hours before it was scheduled to resume contract negotiations with the Association of Talent Agents. The deal, which governs the code of conduct between agents and writers and has not been updated in 43 years, is set to expire on April 7.
“A few powerful agencies have come to dominate and institute business practices that . . . violate the law,” said Ellen Stutzman, the WGA’s assistant executive director. They have “taken power from their clients and leveraged it for their own financial gain.”
The guild’s primary issue relates to the “packaging” of movies and TV shows. This practice began several decades ago as agencies would sell a studio on not just a writer but also the director and stars of particular projects. In return, the agency would receive a receive a portion of profits and fees from shows rather than its traditional 10% for each client. WGA West’s argument is that these deals, which have become more pervasive and applied to almost any deal–even if there is only one showrunner that’s a client–serve the interest of the agent, not the writer, and they are ultimately lining agencies’ pockets while writers’ salaries decline. In addition, it’s charging that the agencies are further motivated to put their business priorities ahead of their clients with the advent of the new content production arms that three of the four major talent agencies have recently established, arguing that agents do not have their clients’ best interests at heart if they are also their employer.
This dispute comes amid the significant disruption being caused by the incursion of Netflix, Amazon, and other tech giants into entertainment, and the traditional players’ efforts to remain relevant in a new direct-to-consumer landscape. Among rank-and-file workers in the entertainment industry, the tumult has led to a rising sense of inequality and an erosion of the industry’s middle class. For agencies, they have responded by diversifying well beyond representation and reveling in the opportunities that can come from leveraging their talent relationships in everything from live events to global rights deals. As I wrote in a 2016 profile of WME, “One of [co-CEO Ari] Emanuel’s favorite things to say is that WME-IMG is ‘going from a B-to-B business to a B-to-B-to-C-to-D business,’ which means going from idea to screen with, increasingly, no other middlemen involved.”
With that in mind, the WGA press conference outlined a new report, titled “No Conflict, No Interest,” which states, “While the major agencies have pursued growth through conflicts of interest, these practices contravene how agents are required to act under state and federal law. By maximizing their own profits and now the profits of outside investors, these agencies have strayed from their core purpose of representing the interests of their clients.” It details how the four major talent agencies–CAA, WME, UTA, and ICM Partners–account for 75% of the transactions involving the 12,000 members of the WGA, and as those agencies have diversified into multimedia companies backed by billions of dollars in venture capital and private equity, they are serving their backers rather than writers. (Ironically, CAA cofounder Mike Ovitz, who is known as being the godfather of packaging, frequently used the slogan “No conflict, no interest” as a point of pride.)
The report also seeks to amplify how despite the current era of “peak TV” and “peak profitability,” the WGA claims that the median weekly pay for TV writers declined 20% between 2014 and 2016. The guild also referred to three lawsuits involving TV shows and agencies’ alleged breach of fiduciary duty–the shows are The Walking Dead, Head of the Class, and Who Wants to be a Millionaire–in which writers say they were shortchanged on profits because of fees that went to agencies.
In its effort to rally the troops and win public support, the WGA is relying heavily on personal anecdotes of horror stories of writers being victim to modern-day packaging practices. Although most have been anonymous out of fear of retribution, on the call one show creator spoke up and told her story.
“In 2003, I created Cold Case, a drama on CBS,” said Meredith Stiehm. “At the time I was represented by CAA.” Stiehm, who’s now an executive producer of Homeland, said she was unaware that CAA negotiated a packaging fee for itself until six years after the show debuted, when she was forced to cut $500,000 from the show’s budget in order to extend into a seventh season.
“I cut music in half, I gave up shooting in Philadelphia, I cut three actors from 22 episodes down to seven,” she said. “All those changes adversely affected the production”
She then came to a line item that said that CAA was receiving $75,000 per episode. When she suggested reducing that, she was told: No. “Why in the world should my agency make $75,000 an episode on my show?” Stiehm said. “Agents don’t work on a TV show. They make the deal in the beginning, that’s it.” When she investigated further into what CAA was making from Cold Case, she says she discovered that the agency was earning 94 cents for every dollar she earned.
“That is indefensible,” she said. “The traditional model for (an agent’s) commission is 10%. That’s fair and appropriate.”
For their part, the agencies argue that packaging has been around for decades and that the idea that, were packaging eliminated, those fees would go back to writers’ budgets–and not back to studios–is erroneous. They also say that by allowing clients to produce their own content through arms like Endeavor Content helps clients own their own content and participate in back-end profits, as well as have another buyer to make projects that might not get made elsewhere.
On Monday, UTA CEO Jeremy Zimmer sent out a letter to clients saying, “Agencies have made a lot of money when shows are successful, and in some cases they have lost money when shows haven’t worked. How do we lose money? We lose money because we waive our commission on every actor, writer, director, and in fact anyone we represent, who is working in the show. In some cases that cumulative commission is significantly more than the packaging fee that is collected on a per episode basis.”
Referring a video posted by the WGA, he went on, that video “will tell you that the per episode packaging fee more than covers our waived commission on the shows we package. That simply isn’t true.”
Though Zimmer also noted, “We aren’t saints. We are tough businessmen and businesswomen who happen to love artists.”
A vote is scheduled for March 25 to approve a new Code of Conduct to replace the existing agreement between the WGA and the agencies. If the new code is not approved by what the WGA will only say needs to be an “overwhelming” majority, then members are being instructed to fire their agents. There has been little negotiation between the WGA and the ATA. The two sides have only met twice in advance of Tuesday’s meeting. Agency sources claim that the WGA has spent more time drumming up public fervor than making a real effort to sit down at the table and talk.
If the deal falls through, the WGA appears willing to pursue even more significant measures to break the agencies’ oligopoly. During the call, the WGA referred to the federal antitrust lawsuit against MCA back in 1962, after that then fabled talent agency bought Universal Pictures. In the end, MCA was forced to end its agency business on the grounds that simultaneously representing talent and producing movies that starred that same talent was a conflict of interest. “WME, CAA, and UTA are positioning themselves to become the next MCA unless something is done about this,” said Laura Blum-Smith, director of research and public policy at WGA West. “That is why the WGA is taking on the fight for our members. Writers deserve representatives who act as proper fiduciaries.”
When asked if the WGA was considering a lawsuit, Stutzman would not elaborate.
Disclosure: Fast Company editorial staff is in the process of unionizing and is represented by the Writers Guild of America-East.