Alterations will allow media companies to invest indirectly in agencies

Sweeping aside decades of rigidity and signaling a major financial realignment of show business, the ruling body of the Screen Actors Guild approved 25 of 28 proposed changes Tuesday for a two-year waiver granting talent agents expanded powers.

The only obstacle left is for SAG’s executive board to give a final OK to the three remaining proposed changes, which still need to be negotiated with the Assn. of Talent Agents.

Assuming the agreement is finalized at SAG’s exec board meeting March 7, agents will be able to go into partnerships with media giants, studios and production companies.

The two-year waiver will change long-standing union prohibitions on agency ownership by motion picture producers and distributors. The alterations, which could go into effect in less than a month, will allow media companies to invest indirectly in agencies — and vice versa.

“From an investment perspective, acquiring an interest in a talent agency fits into the strategy of controlling content — for those who want to make the case that actors are part of content delivery,” said Barry Hyman, chief strategist at New York-based Ehrenkrantz King Nussbaum. “Closer relations with talent agencies could be a very effective way for media companies to extend their grasp.”

Investment banker Steven Cesinger of Greif & Co. said agents are likely to be mulling swapping parts of their agencies in exchange for media company stocks. “They probably want to participate in the upside of this stock market,” he added.

The agreement will allow agents to own noncontrolling interests in production companies. They will not be able to invest at the operational level and they will not be allowed to produce films and television shows.

In exchange for the increased opportunities, agents have agreed to safeguards, such as full disclosure to clients of any indirect financial interest in potential employers of clients and setting up funds larger than the current $10,000 bond to cover actors’ fees if an agent defaults.

Agents began negotiating with SAG last year to update its charter, partly due to defections from their ranks into the less-regulated field of personal managers, and the union agreed in December to fast-track a series of ATA proposals.

“I’m pleased that the SAG national board has acknowledged the deep need for changes,” ATA executive director Karen Stuart said.

Seen as a positive

Sam Gores, president of the Paradigm agency, noted agents have also contended that loosening the restrictions will help agents do a better job for clients. “It’s important that everyone view these changes as being positive, rather than clients believing that an agent having a financial interest will lead to a lesser deal,” Gores said. “I think it’s going to lead to clients getting deals that they would not have normally.”

The Eastern section of SAG’s national board approved a motion to grant the waiver early Tuesday and authorized the national executive committee to negotiate the remaining items. Tuesday’s vote came a week after the Western section of the board reviewed the proposals and sent the matter to the East (Daily Variety, Feb. 9).

SAG executive director Ken Orsatti said the board has imposed confidentiality regarding the specifics of the agreement until it is completed. ATA’s strategic planning committee is scheduled to meet this week to review the unresolved proposals.

Conversion therapy?

The rule changes could spur management firms to convert to agencies, a rumor that has swirled around and been denied by AMG co-founder Michael Ovitz.

An executive with a leading management company welcomed the deregulation of agencies, saying it could create investment opportunities for producers with established track records.

“We’re sorting out exactly what this new landscape will look like and aggressively nurturing the opportunities that will arise,” said Jonathan Liebman, vice chairman of Basic Entertainment, which owns Brillstein-Grey Management and Brad Grey Television.

But another manager who recently left agenting expressed skepticism about the long-term implications of the agreement for actors.

“Once the agencies have a financial interest on the production side, to some extent the artist loses that last bastion of otherwise disinterested authority,” said David Kanter, who departed UTA to join 8 Management. “You need to have somebody who’ll defend you from the studio in the rough and tumble of development. Now the question is ‘Whose side is my agent on, anyway?’ “

Attorney Bert Fields, who represents both agents and managers, said: “Established managers should have no objection to agents being allowed to acquire interests in production companies. The fact that a few agencies may join the army of competitors should not be considered a serious threat to managers who also produce.”

(Claude Brodesser and Janet Shprintz contributed to this report.)

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