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WGA, Agents Face Tough Issues on New Franchise Pact (Column)

The Writers Guild of America and the major talent agencies are seven weeks away from a deadline that could force film and TV writers to choose between their agents and their union. This is a battle that has been brewing for a year but few in the industry saw coming until a few weeks ago.

The source of the conflict lies in the changing nature of how everyone in Hollywood gets paid. The WGA has exercised its right to renegotiate its 42-year-old franchise agreement with talent agencies to adjust the rules of engagement on long-standing industry practices that threaten to cost the largest agencies tens of millions of dollars in revenue. The sides were set to hold their second negotiating session on Feb. 19.

Agency leaders feel the WGA is picking the wrong fight at the wrong time. The guild maintains it is responding to the concerns of its members by taking aim at three issues: packaging fees, the growing production activity by agency-affiliated entities and how much of a writer’s income is subject to the traditional 10% commission fee.

These are complicated issues to analyze under the best of circumstances. Now the clock is ticking down to the April 6 expiration of the franchise agreement. If the agreement lapses without the sides coming to terms, the WGA could ask its members to part ways with their agencies — at least temporarily. Such a move would be a shock to the creative community’s system given how ingrained talent reps are in negotiating deals and troubleshooting on behalf of clients.

The first negotiating meeting, on Feb. 5, between the WGA and the Assn. of Talent Agents, the trade group representing dozens of agencies, went about as well as the first meetings of the triennial master contract talks between the WGA and the Alliance of Motion Picture and Television Producers. By multiple accounts, the agents in the room at the SLS Hotel in Beverly Hills were surprised when WGA representatives read the guild’s previously published proposals verbatim. There was little discussion, let alone give-and-take on any of the issues. Agents who are accustomed to wrestling matches and hammering out the broad strokes of big-money deals on cloth napkins were disheartened by what one participant described as the “Kabuki theater” aspect of the meeting.

Packaging fees that agencies sometimes earn on TV series they help assemble have been a lightning rod in the industry on and off for decades. Some showrunners and studios see it as agents taking money off the table simply for doing their job — setting up work for clients.

Agents counter that packaging fees help cover the costs of all the effort they expend on nurturing young talent and offering
myriad resources to clients. Since the 1950s, the trade-off has been that if an agency collects a packaging fee on a series, the
agency waives the 10% commission fee for any clients employed by the show. Packaging fees are a bet that a show has the goods to generate big back-end profits in syndication and international sales. But big changes in the programming market — and the advent of outlets such as Netflix that retain the traditional syndication rights for years and years — have made the packaging-fee home runs fewer and farther between. Reps at numerous agencies are crunching the numbers and finding that taking those 10% commissions rather than a packaging fee might be more lucrative in this business environment.

The question of whether production entities affiliated with agencies present an inherent conflict of interest for talent agents has sparked debate as the parent companies of WME, CAA and UTA diversify into content ownership. This is the kind of industry issue that will require sober analysis and debate — a dynamic that’s not likely to emerge in negotiations under time pressure.

The third issue is the guild’s efforts to bar agents from commissioning writer clients unless the writer is earning more than WGA scale fees, as spelled out in the guild’s master contract agreements with the studios. Agents counter that such a
move amounts to them working for free to handle less experienced writers. The “overscale” matter is also a byproduct of a changing content marketplace. The production time frame for many high-end shows can be a year or more, which forces writers to stretch salaries calculated on a per-episode basis over a longer period of time than in years past.

The WGA has a hard-won reputation as the toughest of the industry guilds when it comes to representing the financial and creative rights of its members. The best agents are those who are savvy in finding a patch of common ground that works for all sides. Amid rumors that a breach of fiduciary duty lawsuit against the ATA may be in the offing from the guild, leaders at the negotiating table need to start engaging, rather than orating or snarking, if both sides hope to continue on as intrepid advocates for their mutual clients.  

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