UPDATED: CAA has reached an agreement with the Writers Guild of America that will allow the agency to resume representing writers after a 20-month standoff with the union.
“CAA and the WGA have concluded and signed a franchise agreement confirming CAA can resume representing writers and continue the important work of helping them realize their ambitions,” the agency said in a statement issued Wednesday. “We end this year of unprecedented global challenges with the optimism and energy that today’s news brings, starting now, and for the years ahead.”
The WGA sent out a statement of their own to its membership later in the afternoon, which reads, in part:
“The WGA and Creative Artists Agency (CAA) have reached a deal on a franchise agreement. Therefore, effective immediately, CAA may once again represent Guild members for covered writing services. WGA and CAA have also agreed to withdraw the legal claims each has brought against the other in federal court.”
“The Guild appreciates the hard work of both CAA and TPG in working through the complicated issues involved in this negotiation,” the WGA statement concluded.
CAA’s detente with the union leaves WME as the last talent agency at odds with the WGA over the franchise rules implemented in April 2019. The guild has barred agencies from receiving packaging fees on TV series and from having ownership interests of more than 20% in production and distribution assets. The move sparked an exchange of lawsuits among CAA, WME, UTA and the WGA last year. UTA dropped its litigation and signed with WGA in July.
WME indicated that it too may have a deal within sight.
“We have reached out to the Guild to learn more about the specific terms of their agreement with CAA, but we think today’s news is a positive development and suggests a path forward for WME to reach an agreement as well,” WME said in a statement.
The franchise agreement (posted below) includes a side letter that addresses the thorniest issue in the CAA-WGA negotiation: the fate of Wiip, CAA’s affiliated production company. CAA held a majority stake in the company, but in hopes of expediting a deal agreed to transfer its ownership to a blind trust. Under the side letter agreement, the trust must divest the stake to conform to the 20% ownership cap by a date certain. (The date is to be kept secret in order to protect the marketability of the asset.)
The agreement specifies that if the asset is not sold by that date, the WGA can suspend CAA’s franchise until it is sold. The side letter also addresses another sticking point: how to treat TPG, the sprawling private equity firm that holds a majority stake in CAA. The agreement specifies that the 20% ownership threshold applies only to TPG VI, the 2008-era fund that holds the CAA stake, and not to other TPG funds. However, in order to address the potential conflict of interest, CAA clients must be informed if they are about to sign a deal with a production entity owned by one of TPG’s other funds.
CAA and WME had been preparing to push their case on Friday at a hearing in Los Angeles federal court on the agencies’ request for an injunction against what they termed an “illegal boycott” mounted by the guild.
The agreement marks a hard-fought victory for the guild, which had set out two years ago to end the practice of producers paying agencies to package writers into deals. The guild argued that the practice — which has been standard for decades — gave agencies an incentive to suppress their clients’ wages. If a similar deal can be reached with WME, the victory will be complete.
CAA had been publicly squabbling with the guild over the endgame of their dispute since September, after the agency announced that it would agree to give up packaging fees and accept the limits on affiliated production. The sides continued to battle over the divestiture and ownership rules applied to CAA’s investors. CAA has minority interests in a handful of companies that run afoul of the guild’s new rules. It’s still unclear what broke the logjam.
Hollywood agencies have been hit hard by the coronavirus pandemic, with furloughs, layoffs, and reduced salaries being seen across the board. With production and live events mostly shut down and writers being virtually the only segment of the entertainment industry still able to work during quarantine, the agencies found themselves without access to the one group of clients who could potentially bring in cash when they needed it most.
The agencies have likewise seen a number of high-profile departures, as numerous agents have either shifted over to existing management companies or started their own in search of greener pastures. Peter Micelli, a former CAA agent who recently stepped down as chief strategy officer of Entertainment One, has launched Range Media Partners along with several defectors from a number of top agencies. Elsewhere, WME partner Phillip Sun partnered with Charles D. King of Macro to found a new venture called M88. It has already attracted a number of big-name clients like Michael B. Jordan, Idris Elba and Donald Glover.
Early in the dispute, the agencies appeared to hold a strong hand in court. They argued that the WGA was abusing its power in violation of antitrust laws, and won a ruling denying the guild’s motion to throw out their suit. But a trial is not scheduled to take place until next August, at the earliest, and could easily be delayed due to the backlog of cases caused by the pandemic.
With business fleeing elsewhere, CAA did not have time to wait. Last month, the agency asked Judge Andre Birotte to intervene, arguing that the guild was not negotiating in good faith and asking for an order that would call an end to the boycott. The true purpose of the motion appears to have been to pressure the WGA to come to an agreement quickly. The WGA faced the risk that Birotte would rule against it, which would eliminate its leverage.
WME is still asking for such an injunction, and the hearing will remain on the schedule for Friday unless WME and the WGA can strike a deal before then.