WME and the WGA have finally come to terms on a settlement that will allow WME to resume representing writers after a nearly two-year standoff with the guild. WME was the last agency holdout in the WGA’s campaign to reform the rules governing how talent agents represent union writers.
The WGA told members that the deal is in line with previous agreements with CAA, UTA and ICM, which aim to end conflicts of interest in writer representation. The deals preclude the agencies from holding 20% or more of a production company. A side letter agreement requires that WME divest its interest in Endeavor Content to that threshold by a date certain, and appoints a retired judge to oversee the process. The deal also imposes a similar restriction on Silver Lake Partners, Endeavor’s majority owner.
There’s speculation that Endeavor may seek to sell off about 81% of Endeavor Content in multiple slices to financial buyers, such as private equity investors, rather than to another studio or content production business.
If Endeavor becomes a publicly traded company, the deal would bar any owner of more than 5% of the company’s stock from holding a 20% or greater share of a production entity. Consistent with the other agencies’ deals, WME also agreed to phase out packaging fees –whereby the agency collects a fee from a producer for packaging its clients into a project — by June 30, 2022.
Endeavor has a tighter timeline for divesting Endeavor Content. The deadline is believed to about 12 months, which is a nod to the complexity of the company which has numerous overall deals with WGA members, among others, and more than 300 projects in various stages of development. The timetable of the divestiture process was one of the last and toughest hurdles that was overcome. Endeavor is understood to have received significantly more time to conduct the sale process than CAA did for its production because of the size of Endeavor Content.
U.S. District Judge Andre Birotte Jr., who has presided over the litigation sparked by the WGA-talent agency battle, nudged the guild in that direction in December at the most recent hearing in the case. The attorneys for both parties filed a joint motion in federal court on Friday afternoon dismissing their antitrust claims against each other with prejudice. Each side agreed to pay its own attorneys’ fees and costs.
Rick Rosen, WME’s TV chief, led the negotiation on behalf of the agency. He sent a memo to staff Friday afternoon announcing the agreement, which he said “addresses writers’ core concerns while recognizing the unique aspects of WME’s business.”
“For many of us, this has undoubtedly been a painful process, but as we reflect on what led us here, I do feel grateful that it forced us to take a hard look at who we represent and how best to serve them, ensuring that our interests and goals are clearly aligned,” Rosen wrote. “I believe we will be better advocates for writers because of it.”
The guild’s hard-fought campaign promises to end the decades-old industry practice of agents receiving packaging fees from producers. It also establishes strict rules preventing agencies from getting into the production business, by capping their ownership of production or distribution entities. WME fought hard and had the most complicated negotiation with the guild because parent company Endeavor had heavily invested in production and distribution activities through its Endeavor Content unit.
One of the biggest hurdles in separating Endeavor Content from the rest of Endeavor is the fact that the production-distribution unit has upwards of 300 projects in various stages of development. Endeavor Content also has existing contracts with dozens of WGA members, agreements that had been allowed by the guild as Endeavor Content accelerated its development activity in 2017.
The side letter agreement with WME mostly mirrors the one that the WGA struck with CAA in December. The private equity firm TPG owns a majority of CAA. Under the CAA agreement, the 20% ownership restriction is limited to TPG VI, the fund that holds the CAA stake, and does not apply to other TPG funds. Similarly, the WME deal is limited to Silver Lake Partners IV, and does not apply to other Silver Lake funds. Both side letters include a notification requirement, however, mandating that a writer and the WGA must be informed if they are about to do a deal with a production company that is owned by one of the private equity firm’s other funds.
The side letter also provides that WGA may rescind WME’s franchise agreement if the divestment of Endeavor Content is not completed by the agreed upon date.
“The Guild appreciates the efforts of WME and Endeavor in working through the complicated issues involved in this negotiation,” the WGA said in its statement to members. “Congratulations are in order to the entire membership.”
Led by WGA West president David Goodman and WGA West executive director David Young, the guild set its sights on reforming its agency franchise rules in 2018. Concerns about inherent conflict-of-interest issues in packaging had long simmered among some guild members and leaders. The more recent expansion of large talent agencies into production and distribution through Endeavor Content, CAA’s Wiip and investments by UTA had also raised conflict-of-interest alarm bells.
“I’ve said repeatedly no one wanted the agency campaign over more than me, and I’m very pleased that we’ve achieved our goal: the agencies who represent us now have their financial interests aligned with their writer clients, and the agencies problematic business practices such as packaging fees and agency-owned production entities are at an end,” Goodman said in a statement. “As difficult as this battle was, the simple and just clarity of the goal, that a writer’s agent should make more only when his client does, is what helped us succeed.”
At the outset, the WGA seemed to be a facing an uphill battle in trying to bring about major changes to longstanding industry practices. The largest agencies — notably CAA, WME, UTA and ICM Partners — sought to negotiate a new agreement through the Association of Talent Agents bargaining organization. But those talks were fitful and unproductive and by April 2019 the guild directed its members to fire agents who would not agree to the guild’s new rules.
That mass separation of scribes from representatives led to strain and confusion across the industry as suddenly agents weren’t fulfilling their traditional matchmaking function of facilitating film and TV deals for clients. It also sparked a flurry of litigation, with three major agencies — CAA, UTA and WME — suing the WGA on the theory that its boycott was illegal under antitrust law.
The WGA countered with its own antitrust claims, and also accused the agencies of accepting illegal “kickbacks” from production companies. A trial was scheduled for February 2022.
But the agencies found they could not wait that long, as the pandemic wiped out revenue from the live events business. One by one, the agencies came to terms with the guild so they could get back in the business of representing writers. First UTA and then CAA dropped out of the case, leaving WME as the lone holdout.
In December, Birotte in Los Angeles told lawyers for both sides to work harder at reaching a settlement.
“Find a path to try to resolve this,” Birotte said at the time. “Real people are paying a price during this dispute.”
WME had asked the court for an injunction ordering an end to the boycott. The agency continued to argue that the boycott was illegal, and said that its agents and clients were fleeing to management companies or rival agencies. Birotte denied the request.
Here is the full memo from WME TV chief Rick Rosen to agency staff:
We are pleased to inform you that WME and the WGA have agreed to a new franchise deal. This agreement addresses writers’ core concerns while recognizing the unique aspects of WME’s business.
For many of us, this has undoubtedly been a painful process, but as we reflect on what led us here, I do feel grateful that it forced us to take a hard look at who we represent and how best to serve them, ensuring that our interests and goals are clearly aligned. I believe we will be better advocates for writers because of it.
We will be reaching out to our former writer clients in the coming days to discuss the opportunity to represent them again, and, most importantly, to hear what each of them is looking for in their representation moving forward. For all of you who represent writers — and anyone else for that matter — use this as an opportunity to recalibrate and reset your client relationships.
Today’s result should serve as a reminder of the opportunity and privilege it is to represent the best in the industry and provide them something that no one else can – the access, resources, and influence to realize all their creative pursuits. We must re-commit to harnessing that every day for writers with integrity, transparency and passion.
Writers have been a part of this agency since our inception, and they will continue to be a part of the lifeblood of WME. We look forward to once again serving as their advocates during this unprecedented time in our industry.
Let’s get back to work.
Here is WGA West president David Goodman’s full statement:
I’ve said repeatedly no one wanted the agency campaign over more than me, and I’m very pleased that we’ve achieved our goal: the agencies who represent us now have their financial interests aligned with their writer clients, and the agencies problematic business practices such as packaging fees and agency-owned production entities are at an end. As difficult as this battle was, the simple and just clarity of the goal, that a writer’s agent should make more only when his client does, is what helped us succeed.
I could not be more grateful to the negotiating committee, elected leaders and staff whose commitment and tireless work over the last three years won the day. But, as with all the successes in the WGA’s history, such as our pension and health benefits, our residuals in perpetuity, and our jurisdiction over the Internet, this achievement is owed to the members, who understood what we were fighting for, and were willing to make personal sacrifices for the greater good. I’m proud and lucky to be one of them.