Agencies bracing for bumpy ride

Film, TV work makes up 75% of revenues

Even after only 48 hours, the effects of the writers strike are tangible in the agency world, where firms are implementing plans to cut back overtime, travel and expenses.

One senior agent said that if 30 dealmakers there usually head to Sundance, perhaps one-third will make the trip this time. There will be fewer lavish lunches at the Grill, not as many road trips, and more agents flying coach instead of business class.

Brass from CAA, Endeavor, WMA, UTA and ICM all said they will try to avoid going further, hoping to sustain themselves with revenue from divisions that include reality, sports, commercials, music touring and corporate consulting. Actors will likely continue to be booked through the spring. Still, the major agencies rely on film and television work for 75% of their revenues, most of it derived from the scripted projects now in jeopardy.

Literary agents who usually work at a breakneck pace this time of year to book writers for pilots, feature assignments and rewrites are now trying to figure out what to do since they suddenly are unable to shop their scribes or sell specs or pitches.

And agents who sell books say they are unsure whether studios will buy them when they are unable to attach writers.

“Of course we hope that both sides can come to a fair deal very soon,” Paradigm chairman Sam Gores said. “I do believe that in the case of major agencies, when times are good, employers get much of the benefit of the upside, therefore in tough times we need to weather as much of the downside as possible and make sure that no one misses a paycheck or loses their job.”

That hardly means that agents aren’t anxious, even angry, about the strike. For one thing, key sticking points in the negotiations with producers — residuals for new media and homevid sales — is revenue that agents are precluded from commissioning.

UTA was the first agency to institute a program in which dealmakers making six and seven-figure salaries are deferring 20% of their paychecks to build a fund that will prevent layoffs. Though the program was slated to begin Nov. 1, UTA has now targeted January as the date paychecks will be affected. ICM held back a week’s paycheck from staffers for the same purposes. Other agencies say they will keep their options open.

Riding it out

While major agencies have reason to hope their diversified revenue streams get them through a rough patch, boutique lit agencies are more vulnerable. Several of those independent agents said they have little choice but to wait it out.

“You can’t solicit work or sell ideas, but we also represent director clients and have gotten more into representing films for distribution, books, graphic novels, setting up film properties for remakes,” said Jordan Bayer, who with co-owner Matt Leipzig operates Original Artists, a 14-year-old boutique that reps about 50 writers and directors. “You shift your focus a bit by necessity, and you continue to represent and bolster your writers. And you have to be mindful of expenses. But our volume was up this year, and we tried to plan well for this possibility.”

Several lit agents describe their days since the strike as almost surreal as they search for ways to keep busy.

UTA sent its agent trainees around with 60 dozen baked cookies for strikers on picket lines. Some lit agents will be encouraged to fill spare time getting involved in new media and reality divisions, which have small staffs and have become suddenly busy.

Others are being encouraged to spend their downtime watching movies and courting new clients.

Adding to the confusion of the past few days is the conflicting correspondence reps are receiving from the WGA and studios. After a volley of stern studio notices warning them of breach-of-contract violations for writers submitting their work to the WGA’s Script Validation Program, agents are now getting letters from studios warning that director clients will breach their contracts if they refuse to cross WGA picket lines or if hyphenates refuse to veer from existing scripts, as the WGA has instructed them not to do.

Studios are indemnifying the hyphenates from any guild fines, but talent is understandably concerned with how their standing will be affected.

“I’m telling the directors to meet their commitments,” one dealmaker said. “As for the writers, if they’ve got a script that’s a year or two old, go ahead and send it. But if you are working on a fresh project with a reveal to it, don’t you dare.”

From the sound of things, all the agencies will test their pain thresholds.

Of the majors, CAA is surprisingly listed as most vulnerable because of its sheer size, and the costs of its new headquarters and sports business.

Despite rumors, the agency said it has no plans for layoffs or to cut back on bonuses. The real pain, say agents, will be felt next year. One senior lit agent said Warner Bros. recently brought in 42 script drafts in a two-day period, and every studio was that busy trying to hone scripts.

No matter how quickly the WGA strike is settled or whether the DGA and SAG make deals without rancor, studios that blew through fiscal year budgets to line 2008 and 2009 slates will spend less next year.

That reality has some agents resentful as they watch millionaire writers on picket lines.

“Not one of my big writer clients was in favor of this strike, and yet the media doesn’t challenge the WGA’s claim that 90% of its membership wanted a strike,” said a veteran dealmaker. “You feel like there’s a mob mentality here that can be likened to how people felt going into the war in Iraq.”

Another senior agent estimated that current studio residual payouts are around $55 million, and that if the studios upped that by 20%, the writers would be overjoyed.

“Even if they doubled that figure, when you share that cost between signatory companies, it would be less than they spend on a G-4 jet or even what they spend to redecorate the offices of top executives,” the agent said. “Studios are being piggish, and when you look at the spillover effect, and how many businesses from messengers to florists will be decimated, the cost just doesn’t justify the pain.”

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