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WGA, Top Agencies Poised for Bitter Break as Franchise Agreement Expires at Midnight

The WGA and Hollywood’s major talent agencies are moving into a new phase of battle as the guild’s existing agency franchise agreement expires at midnight PT tonight and no negotiations are on the horizon.

On Saturday morning, pessimism about the possibility of an eleventh-hour deal was compounded by the fact that key players from both camps are now away from Los Angeles on long-planned spring break trips, family vacations and other business. Sources close to the situation said there was little hope of discussion taking place on Saturday and that both camps appeared to be ready to run out the clock.

Once the existing franchise agreement expires, the WGA West and WGA East are expected to provide its 15,000 members with instructions on how to terminate their contracts with talent agents who won’t sign the guild’s new Agency Code of Conduct. The guild has vowed for weeks to impose new rules if it could not come to terms on a new franchise agreement with the Association of Talent Agents.

In an email message sent Saturday to WGA members who have volunteered as contract captains, guild officials said an agent termination form that includes a DocuSign electronic signature option will be sent via email to members on Sunday. Captains are asked to encourage members to quickly return the form to the guild, which will then submit them en masse to the relevant agencies. “The faster we collect these forms, the more pressure we’ll be able to put on the agencies,” the message stated. 

The WGA is focused on barring the decades-old practice of talent agencies receiving packaging fees on TV series and films that are paid by the production entities, not the client. The guild is also looking to ban WGA members from being represented by agencies with parent companies that are also active in production. The guild cites both packaging fees and production as a conflict of interest and a breach of the agent’s fiduciary responsibility to clients.

The ATA has responded with proposals to reform packaging protocols, offering clients an explicit choice of whether to have a show packaged — in which case the standard 10% commission is waived for all agency clients on the project — and more transparency about the agency’s earnings from the show.

The WGA battle with Hollywood’s largest talent agencies has been brewing for a year, ever since the guild notified the Association of Talent Agents this time last year that it intended to renegotiate the franchise agreement that had been untouched since 1976.

The sides have blamed each other for the fact that formal sit-down discussions did not begin until February. The ATA has maintained that the guild has not allowed for a negotiation by asserting that packaging fees are inherently illegal. Guild sources maintain the ATA has made it hard to reach compromise by challenging the guild’s authority to determine the rules for agents representing its members.

The threat of litigation flying on both sides as a result of the franchise fight remains strong, sources said. The WGA is known to have circulated among its ranks a draft of a potential lawsuit against ATA member agencies.

The agency battle has inflamed passions at a time when Hollywood writers are feeling the squeezes of a fast-changing marketplace for content. In the past few months, prominent showrunners and TV writers have raked in hundreds of millions of dollars in overall deals and development pacts with the largest studios — a dealmaking rush accelerated by fears of the looming WGA-agency breach.

But the income gap between the A-list and the rest of the guild is growing, leading to dissatisfaction in the ranks.

‘As a writer, being represented by an agent shouldn’t be all about what is best for the agency but what is best for you,” said Mike Scully, a seasoned showrunner who is among the dozens of prominent WGA members who have been vocal in support of the WGA’s agency reform effort. Last week the WGA held a high-turnout membership vote that yielded a 95% margin of approval for the guild’s implementation of the new Code of Conduct.

The long-held practice of talent agencies receiving a 3% share of a packaged TV show’s license fee upfront and another 10% or so on the backend has become a flash point for writers who have offered up anecdotal stories of agents abusing the practice. Many writers are feeling the pinch of changing pay scales in TV and the expectation that scribes work longer periods for lower pay, as most TV series have evolved from a standard of 22 episodes a season to a new normal of anywhere from six to 13 episodes per season.

The ATA has countered that there is no guarantee that production companies will reallocate agency packaging fees back into series budgets. The Big Four agencies — WME, CAA, UTA and ICM Partners — are believed to take in about $150 million a year in packaging fees. The suggestion has been floated by writers trying to nudge the sides back to the table that the agencies devise a formula for contributing a portion of packaging fee income into the guild’s pension and health funds, which are often overtaxed. But the rhetoric of packaging as “illegal” and “corrupt” has left little room for negotiating on this point.

Many top agents who represent TV and film writers are spending the weekend communicating directly with clients. The creative community is anxiously awaiting the fallout from the prospect of business, particularly on the TV side, being conducted as of Sunday without talent agents serving in their traditional role as dealmakers, trouble-shooters and advisors.

Sources in the agency arena say there will be difficult discussions ahead for writers who are also represented by agencies as producers, directors, actors and in other disciplines. “Some people think they can just ‘take a break’ from us as writer clients until this blows over,” said a senior literary agent. “Agencies don’t generally do that.”

The WGA has hoped that agencies smaller than the Big Four would be willing to adhere to the Code of Conduct because packaging is a less significant source of revenue for them. But industry sources say Paradigm, APA, Gersh, Verve and Rothman Brecher Erich Livingston are holding firm with the ATA. The WGA acknowledged this dynamic in the email message to captains, which stressed the need for solidarity among WGA members as the guild’s campaign plays out.

“We do not know how long the large and mid-sized agencies will hold out, but as of now that’s the decision they appear to be sticking with,” the WGA said in the email to captains. “It is therefore incredibly important that WGA members stay united during this interim period.”

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