There’s a fight brewing behind the scenes in Hollywood.
A 40-year agreement is about to come to an end. And the future of writer representation hangs in the balance. The WGA and ATA, are going 12 rounds over the Artists’ Manager Basic Agreement, a document signed into existence in 1976, that outlines the basic tenements of how Agents and Managers should represent writers.
Last year, the WGA decided that based on data and testimony collected, that agreement needed a serious revamp. Hollywood does not look at all like it did in 1976. And the rise of agencies, packaging fees, and digital has created murky waters.
The agency agreement gives agents the authority to negotiate overscale compensation on writers’ behalf. Under federal labor law, the union is the only organization that’s allowed to negotiate compensation for its members, but it can franchise that right to someone else, which is what the agency agreement is all about.
Today we’re going to cover both sides of the story as the negotiations take place. I’ll try to avoid my writer bias, and give you the facts both the WGA and ATA provided to the public.
How Did We Get Here?
A year ago, WGA leadership held a series of general meetings to discuss pulling out of the agency agreement, and on April 6th of 2018, they officially gave notice to the ATA that they would seek to renegotiate this agreement. As per the terms of the agreement, this means that in one year, on April 6th, 2019, the agreement will be null and a new one will have to be created.
Over the past few years, packaging has become the day to day norm for agencies. It’s a way to loop more of their clients into projects and a way to get a kickback for doing so. They don’t want to lose out on this kickback.
Packaging is the selling by a talent agency of the personal services of multiple clients, particularly leading actors, writers, and director, to a studio or independent producer for a project. These projects include feature films, televisions shows, and digital series. For this service, the agencies negotiate a so-called packaging fee; a commission paid directly to the talent agency.
What’s the Problem with Packaging?
In a greatly distilled answer, packaging can mean that agencies put themselves making money before the clients.
Agents and agencies are historically proven to work harder and care more about package deals than representing the interests of individual clients. This would break the fiduciary commitment agents have to represent their clients. It also creates a conflict of interest, where agents are essentially becoming producers of clients’ work for the packaging fee.
What does this mean?
If you’re a staff writer without an idea you want to take to series, it means agencies aren’t interested in representing you. It also means that if you have an idea you want to take to series, but the talent involved is represented at different agencies, your agent or agency may not work as hard for you. Or may have little to no interest in your idea since they won’t get a package kickback.
Let’s dig more into the writer’s side of the story.
The Writer’s Side
The last time the agreement between writers and agents was negotiated was in 1976. It’s outdated and doesn’t come close to covering what a modern writer/agent relationship needs to be.
The current agreement allows agents to package television and movies and take a fee and doesn’t forbid agents from producing. This, as mentioned above, can be seen as a huge conflict of interest. Most important for writers, the current agreement doesn’t have any piece of value. The 1976 agreement is mostly a list of things writers ask agents to do, without a statement of what agents do for writers.
The WGA president, David E. Goodman, stated the writer’s case in his summit speech.
Here’s a stunning fact: 97% of all shows on the air are packaged.
So if you don’t think it’s a conflict of interest, you’re 97% wrong.
In a letter to WGA members, Goodman had these points to make:
“What has gone wrong is that agency income should be directly tied to writer income—the agent should make more only when his client the writer makes more—but that’s not what’s happening anymore. Instead, agencies make their real money from packaging, and now producing, which are conflicts of interest that hurt writers. So our simple goal has two parts—to bring the agencies’ interests back in line with those of writers, and to require that agencies behave as our partners in getting writers paid on time and preventing unpaid work. Currently, they’re not.
Let’s take a look at how the business is doing economically, how the agencies are doing, and how writers are doing. I’ll give you a hint: two of the three are doing great, and the third one is us.
Even with changes in the industry, the entertainment business is experiencing its most profitable period in its history. Every aspect of the business is highly profitable.
This success is mostly a function of two great growth factors. One is the monetization of the Internet. The second is huge growth in the international market. We expect the major studios along with Netflix, which is on its way to becoming a major, to have made around $54 billion in operating profits in 2018, and that’s not counting Amazon or the big players coming into the industry like Apple and Facebook.
How are the big agencies doing? Well, their books are closed to us and the rest of the world. But it is not hard to make a reasonable assessment. CAA and WME are so cash-rich and profitable that they have gotten $3 billion in investment from venture capital to expand their businesses. They are now majority owned by private equity companies that demand profit maximization, not higher salaries for writers. UTA also now has a large venture capital investor.
The companies and the agencies are crushing it; how about writers? We’ve just completed a member survey on overscale income—the money we earn that’s above MBA minimums. Overscale is the one thing we delegate to the agencies to get for writers.
This 2018 member survey shows modest increases in overscale TV compensation compared with 2016. However, these increases barely match inflation, and they leave writers still well below the levels of income reported in 2013. And experienced TV writers know that the erosion of overscale pay did not begin in 2013, but well before that.
And screenwriters? Screenwriters reported that about 20% are being paid Guild scale; remember, scale is what the Guild gets you in the MBA. Only 38% reported improving their quote. 44% reported being paid less than their quote or their quote staying the same. And screenwriters face an epidemic of demands for free work. Free work is a problem that the Guild can best tackle in partnership with the agencies, but they refuse to help us.
There are more writers at WGA scale, more writers whose quotes have atrophied or dropped, more writers trying to make their year on a short order episodic series, and more screenwriters required to do outrageous amounts of free work than ever before. The agencies are not succeeding in defending writer overscale pay. And (this won’t come as a surprise to many of you) when asked in the survey who helped you get your most recent job, 75% of writers said it wasn’t their agent.
If this is how writers overall are doing during an unprecedented expansion of the entertainment business, how will we be doing when the next recession comes around the corner or Peak TV finally reverses a bit? We need to fix the situation now.”
You can read the full letter here, which details the problems with packaging and other qualms.
The WGA has also gathered a lot of first-person accounts of the problems people have dealing with agents now, thanks to packaging.
Here are a few below, and you can read all of them on the WGA website.
“I put an entire show together, but I didn’t want my agency to get the package. In the end, they held the deal hostage and I had to cave to get the project through. Every network I showed the project to made a bid on my show. I wanted it to go to one network, but my agent thought they’d get a bigger package if they went with another network, so they sold the package to them. My agent told me that there was a bigger penalty with the network they preferred, but I found out later that wasn’t true. Then, a network executive told me that my agency was holding the project hostage with the packaging fee. My agency was not representing my best interest—they were representing theirs.”
“A network challenged the formula for a package fee that an agency was insisting upon. The network wanted to lower it to the level charged by another agency – not do away with it. During a yearlong stalemate the agency withheld series pitches to that network from all their clients. No agency client pitched a series to that network that year. Not because the network said they wouldn’t take the pitches; not because the network wasn’t offering enough compensation to the writers. Solely because the agency put its compensation ahead of its clients’ job opportunities, no writers from that agency sold a series to that network. Series that would have sold didn’t. And the clients never knew why.”
“I had a film project that my agency packaged, and the project had been optioned by a buyer that wasn’t represented by my agency, but worked almost exclusively with them. When the time came to extend the option period, the buyer wanted twice as much time for half the money. My agent said to take the offer, that there wasn’t any other interest in the project, which I knew wasn’t true because I’d gotten interest from multiple other parties. I had my lawyer do the negotiation, and was able to get a much better deal. It was clear that the agency was servicing the buyer, rather than trying to get me the best deal.”
What do the Writers want?
In the simplest of answers, the writers want to negotiate a new deal. One that breaks up this monopoly the agencies have, and one that’s more beneficial to the writer.
They also want the agencies to subscribe to a code of conduct, which the WGA has outlined below. There are details, but it can be summed up in two basic points:
- All agencies and agents are required to behave as proper fiduciaries at all times. A fiduciary is a person, quote, “to whom power is entrusted to act in the benefit of the client, whose interests are always to be put first.” The most fundamental obligation of a fiduciary is to avoid conflicts of interest. Since both packaging and producing are conflicts of interest for agencies, these and any other conflicted practices would be banned as of April 2019. The agencies would return to a 10% model.
- The Guild is responsible for defending both the MBA and the individual deal specifics of all writers. To facilitate this, the Code requires that the agencies provide the Guild with all deal memos, all invoices for payment, and open access to the agencies’ books. Writers and the Guild will have the right to regularly audit all of this information to ensure proper oversight.
While there needs to be a formal agreement – this all sounds reasonable.
If the writers don’t get what they’re asking for, then it seems like many writers, from A-listers down, may completely leave their agencies. That means an agency that commits to the new deal could see an influx of clients or writers may operate without agents and only use managers and lawyers in this new Hollywood hierarchy.
Time will tell. But as of right now, negotiations are going anything but smoothly.
The Agents’ Response
Naturally, the ATA has listened to the WGA and issued a response, delivered by Karen Stuart, the executive director of the ATA. She attacked many of the WGA’s claims head-on. And also accused them of not negotiating in good faith.
“There are many different ways to achieve a successful deal for ATA and the Guild,” she said. “But not being open to negotiating in good faith, and instead ‘going to war’ will not work. It will hurt your members, and it will hurt others in the industry. We remain ready, willing, and able to negotiate an agreement in good faith. Is the same true for you? Because if it’s not, we don’t see any reason to keep meeting. We await your response.”
Stuart’s letter was signed by the more than 100 agencies repped by the ATA, and opened with, “We write regarding your recent public declarations that the WGA and ATA are ‘at war’ and your public pledge that there is ‘no room for compromise’ with the ATA. Simply stated, your actions run completely afoul of the value and respect we have long held for the Guild…Before we meet again and spend the time and effort to mend the relationship between your Guild and our association that you seem desperately to be trying to break, we need to know that you are actually willing to do so…ATA members will not be divided. And we will not play games with our clients’ livelihoods. Writers — our clients, your members — deserve much better than this. We thus remain ready and willing to meet with you — as often and for however long it takes to reach common ground — but both sides must come in good faith…We are committing to do so. Are you? If so, we need you to confirm, in writing and publicly, that you are prepared to negotiate on all issues in good faith with us.”
That’s a strong opener and definitely sets up most of the Agents’ case. I’m going to include more of Stuart’s open letter because I think it more eloquently explains the ATA’s position moving forward.
“We also want to take the opportunity to address some specific – and factually wrong – claims you have made to your members and the public, in the hopes that this gamesmanship can end and we can start the serious work of coming together to reach a new agreement…You assert that the guild has authority to make a ‘power grab,’ remake Hollywood, and impose sweeping changes affecting not only writers and agents but also actors, directors, producers andeven studios. What you are calling a ‘Code of Conduct’ is not, in fact, about agents’ conduct. Rather, as you have candidly acknowledged, your proposals are a sweeping attempt by the WGA to remake the entire industry, affecting the livelihoods and businesses of all who earn their living in Hollywood. As we told you last week, in telling your members that the guild has unfettered legal authority to unilaterally impose such restrictions, you are sorely misleading them. Equally misguided is your claim that agents and agencies will flock to your ‘Code.’ Our agencies – in their diversity of size, client base, and operations – represent a tremendous range of choice available to your members, our clients. We strongly believe that our clients deserve that choice, and that your proposed ‘Code’ would take it away from them.
Notwithstanding your attempt to divide ATA members by attempting to sign them to your ‘Code’ directly – in violation of section 4(a) of the AMBA – rest assured that all ATA members will continue to advocate for all our clients, including writers, and will reject your self-described ‘power grab,’ which we believe would harm not only writers but also countless others throughout the entire industry for decades to come. And your timing could not be worse, as you have chosen to do so right at the moment that the creative community is more challenged and threatened than ever before by global corporations armed with billions of dollars and new technology being quickly adopted worldwide. ATA members will stand together on this, and accept only a negotiated agreement that we believe is in our clients’ best interests.”
When it comes to packaging, Stuart continued to explain the ATA’s position, “You publicly claim that, for packaging services, agencies are paid ‘3% of the network license fee,’ ‘3% deferred until net profits,’ and ‘10% of the show’s gross profits for the life of the show.’ You further assert that this backend is ‘often far more than the show’s creator earns.’ Again, as you know, these assertions are simply not true.”
To paraphrase her, Stuart said the first “3%” of a package is, in reality, a smaller amount – generally 1.5% or less of a license fee, she continues, “This fee enables agencies to relieve their clients of the burden of paying commission on packaged shows. Even on a successful series, this upfront fee is often less than the agency would make from simply commissioning the talent on the show. Package fees are capped. And fees are often split between agencies, reducing this fee to 0.5% or 0.75%. Shows that go four seasons or less virtually never hit backend, and these front-end fees are all the money the agency makes on the show. The clients keep their full salary and pay no commission to the agents.”
The second “3%,” she wrote, “is illusory. It is formally eliminated in most streaming contracts, and generally is not paid in most other situations, either, because very, very few television programs – even those that run for many seasons – reach the ‘net profits’ stage that would provide such a payment…[Agencies] are never paid 10% of gross profits. We have explained this to you. Rather, they are paid a percentage – sometimes 10%, sometimes 7.5%, and frequently half that or less due to splits between agencies – of modified adjusted gross profits based on the highest-participating client’s definition. What does that mean? It means that agencies don’t participate in profits until their client does. And it is not true that agencies ‘often’ earn ‘far more than their show’s creator.”
Stuart went on to refute several other claims by the WGA.
“Similarly, you claim that the money paid by the studios in package fees ‘could be used to hire more writers and pay writers more money.’ What is that claim possibly based on? This claim defies history and fact – just ask any studio. In fact, writers’ salaries on packaged shows and non-packaged (commissioned) shows are not different. You also claim that the agency’s packaging work “is normally finished before the pilot is shot.” This too is not true. Packaging agencies provide services to shows throughout their entire life cycle. They continue to help the show find talent, they support the show in network negotiations, and they find new homes for canceled shows. They also regularly negotiate new and better compensation packages for the writer clients – who are typically on two-year deals – over the life of the series, while the package fee remains exactly the same.
Finally, you claim that agencies force writers into working on packages against their wishes. This is not true. Our clients often ask for – no, demand – packages, because they understand when agencies package shows, clients benefit. The work we do alongside and in alignment with our clients gives the written word the best chance of being seen. And, in the rare circumstance, our clients don’t want a package, we accommodate that. Indeed, the current AMBA, to which we voluntarily agreed 43 years ago, requires the same.”
Stuart claims the WGA is wrong in its understanding of production as well. “You also claim that agencies are ‘moving to become our employers by becoming producers and owning content. Again, that is flatly false. No ATA member agency employs writers. None. Rather, some agencies have affiliates – legally separate businesses with separate management and separate operations, housed in separate offices and with separate employees – who perform content-related services. These entities are legally and operationally separate businesses from agencies. Controls are strictly in place to ensure that all transactions are arms’ length and no agency client is ever coerced into working with an affiliate. That said, as we have told you, we are willing to listen to your concerns and discuss formalizing some rules of the road to assure clients that their interests never will be compromised. While you claim that ‘a few writers will get a great deal’ from these affiliate companies but ‘most writers will get screwed,’ that claim is baseless. Endeavor Content, WIIP, and Civic Center Media offer better deals to talent than the major studios and in fact were launched to provide writers with more opportunities, better terms, and more creative control. Indeed, one of your own board members has described his ‘terrific’ experience working with one of these separate companies. They are simply another important creative option – in a climate of ever-shrinking options – available to writers – one of the many choices offered to them through our diverse agencies.”
“And you know these things,” she told guild leaders. “We’ve discussed them. Yet you continue to misstate the facts and confuse the issues. Misinformation serves no one, and it makes it harder for all of us to work together to create a meaningful new agreement. Hard work, not rhetoric, is what is needed.”
And in the area of film financing, she wrote: “You claim several unnamed ‘independent – mostly film – producers’ believe that agencies helping find financing or distribution for films somehow hurts the independent film business. We don’t know with whom you spoke, but as we explained to you in our meeting last Tuesday, we strongly disagree. So do most in independent film. Just ask them. In fact, agencies helped secure financing and distribution of more than 1,000 independent films over the past five years – films like La La Land; Manchester by the Sea; Book Club; Whiplash; I, Tonya; Call Me by Your Name; Hidden Figures; Room; I Feel Pretty; Loving; Brooklyn; Nocturnal Animals; Ben is Back; Three Billboards Outside Ebbing, Missouri; I Am Not Your Negro; Destroyer; and Foxtrot. The agencies’ work in financing and distributing these films didn’t hurt them – it made those films a reality,” she wrote. “Our agencies have departments with dozens of people working to make these projects happen. Assisting in film financing generally is not a highly profitable area for agencies – rather, it is more often a loss leader service we provide for our clients. We do it because our clients value these projects, because independent producers generally do not do this type of work, and because studios largely have abandoned producing these types of film and are not willing to invest in these kinds of passion projects. These films are the vehicles that oftentimes move artists’ careers forward and enabling their agents to negotiate better terms and more controls on subsequent work. Whatever your unnamed sources might be telling you, the truth is that, had agencies not stepped into this gap, many of these important, diverse, and groundbreaking works simply would not have been made and released. Simply commissioning these low-budget passion projects does not come close to covering even a small percentage of the investment agencies make in these departments, nor the additional resources needed to find independent financing for our clients’ films. If you don’t want agencies to perform these services for your members, who do you expect to step into the gap?”
There’s a lot to unpack here, but in her terms, Stuart thinks the ATA has been accommodating in getting movies and televisions shows made via packaging. While she did stress there is a divide; it looks as if the ATA is willing to negotiate.
We know there have already been two sitdowns between the WGA and ATA – though things have not moved forward substantially.
Where Are We Now With The WGA and ATA Negotiations?
Right now, both sides are focusing on gathering information and finding solid ground. The WGA has not budged from its request for a Code of Conduct to be instilled, and Goodman mentioned he would ask the membership to vote March 25 on a mandatory Code of Conduct for agents that would uproot large talent agencies’ current business models by prohibiting the packaging of films and television series and prohibiting production-type activities.
Meanwhile, agencies like CAA, WME, UTA, and ICM are all holding meet and greats as well as calling their writer clients to explain their side of the story and to find common ground.
It appears as the WGA vote will truly be a determinate factor in how serious the agencies take this stand. In the past, the WGA has stood together, and if they deliver another 90% unified vote on the code of conduct, agencies will have to honor it, or at least take the idea of a strike or mass exit from their companies seriously.
We’ll work to keep you informed as things happen.
What’s your take on the argument?
Let us know in the comments and stay tuned for more.