The WGA’s historic reshaping of the talent agency business will take full effect at the end of business today, after which agency packaging fees will no longer be permitted under the guild’s franchise agreement.
“The agency campaign was founded on the simple truth that agents are our fiduciaries,” said WGA West president Meredith Stiehm, who was one of the named plaintiffs in the guild’s long-running anti-trust lawsuit against the “Big 3” talent agencies. “The interests and priorities of agencies and their writer clients must be aligned. Our campaign had three main goals: end the collection of packaging fees, put a halt to the conflict of interest of agency-owned studios, and for the agencies to share information, which the WGA uses to fight late pay and free work. Thanks to the resolve and unity of the membership, we’ve achieved those goals. Today, as we mark the beginning of the end of packaging fees, we move forward with our agency partners to improve writers’ compensation and conditions.”
The end of packaging fees on new projects marks a seismic shift in the landscape of TV production deals. In a review of the 2016-17 television season, the WGA found that 87% of the more than 300 series produced that year were packaged by the agencies, and that “packaging is dominated by WME and CAA,” which together accounted for 79% of all packaged series.
Packaging – what the guild calls “small ‘p’ packaging” – will still be allowed, meaning that an agency can still put together deals that bring its clients – writers, actors, directors, producers and others – together in a project. But instead of receiving packaging fees directly from the studios, as had been the case for decades, the agencies, going forward, will now be limited to charging 10% commissions on the earnings of their clients. Deals that contained packaging fees before today, however, will remain in effect.
The guild’s franchise agreement with the agencies was the culmination of a two-year legal battle and a pressure campaign that in April of 2019 saw more than 7,000 writers – on orders from the guild – fire their agents en masse who refused to sign the guild’s code of conduct. One after the other, the agencies bowed to the guild’s demands – first the mid-sized and smaller agencies, and then the big ones. The signings came slowly at first, and then in a torrent. The Verve agency was the first to sign in May of 2019, and WME was the last, in February 2021, which ended the court battle.
As part of the deal, the agencies were given a “sunset period,” which expires today, to come into compliance with the terms of the agreement, which has three basic components: a ban on package fees; limits on agency ownership of production companies, and far greater access to agency data on deal memos and contract terms so the guild can better track employment trends and over-scale salaries.
In making agreements directly with the individual agencies, the WGA cut out the middleman – the Association of Talent Agents – which represents all the major agencies and had been their chief bargainer in negotiations for terms governing franchised talent agents. That contract, known as the Artists’ Manager Basic Agreement (AMBA), governed the relationship between the WGA’s members and the agents who represent them, and had been in effect since 1976 until it expired in 2019.
The WGA’s new franchise agreement, which replaced the AMBA, is already paying dividends for writers and the guild. Per the agreement, CAA and WME have both sold off the 80% stakes in the production entities they owned: CAA sold its majority stake in wiip, the producer behind HBO’s Mare of Easttown, to Korean company JTBC Studios, and earlier this year WME sold 80% of Endeavor Content to Korean company CJ ENM. UTA was already in compliance when it reached its agreement with the guild in July of 2020, owning less than 20% of Civic Center Media.
The guild had argued throughout its campaign that agencies owning production entities violated their fiduciary duty by making agencies the employers of the writers they represent.
Packaging fees got most of the media attention during the protracted fight. In its anti-trust suit against WME, CAA and UTA (the Big 3 in terms of packaging and production company ownership), the WGA West and the WGA East (with the West taking the lead all the way) accused them of breach of fiduciary duty and price-fixing.
The guild argued that they were engaged in price-fixing because just about every packaged deal was based on the same model: in return for not taking 10% commissions from their clients on deals they packaged, the agencies got a standardized packaging fee from the studios that gave them a share of a TV series’ licensing fee, and a share of the profits, if any.
It was known as the 3-3-10% deal – 3% of a show’s licensing fee at the beginning, another 3% of the licensing fee payable if the show hits “net profits,” and 10% of the “back-end” – a model they’d been using for decades.
The guild said such deals breached the agencies’ fiduciary duty to their clients because it put them in the position of making more back-end money and net profits when their clients were paid less. The agencies denied it, but now that commissions have been returned to a flat 10% model, agencies will definitely make more when their writers make more.
The WGA’s agency campaign also showed the clout of the guild to get what it wants, and that it has the will, the support of its members, and the wherewithal to stand firm and win a protracted battle with industry giants. That alone will make the WGA a formidable presence when it arrives to the bargaining table early next year to negotiate a new film and TV contract with the Alliance of Motion Picture & Television Producers.
Here’s a Q&A with Ellen Stutzman, assistant executive director of the WGA West, conducted by phone earlier this week about the franchise agreement.
DEADLINE: Where do things stand now with respect to the talent agencies?
ELLEN STUTZMAN: We had 43 years with an agency agreement that ultimately didn’t effectively protect writers, and then two years of a pretty intense campaign to change that, and now we’re a year-and-a-half into a new period where all agencies are franchised under an agreement that made real gains in three critical areas, one of which is packaging. But first, information sharing on writer deals, commencements, deliveries and other data so that the guild can have timely access to employment information, monitor trends, pursue late pay and address free work pressures.
The agreement limited ownership of production entities to 20% and realigned agency interests with those of their writer clients by sun-setting packaging, which begins this week. And we’ve made real progress in a relatively short period of time, particularly with respect to WME and CAA, which have divested in their production entities to come into compliance with 20% limit. All the agencies are sharing information required by the franchise agreement. And now we’re looking towards the packaging sunset and the return of the agencies to a commission model, where when their clients are paid more, the agencies will make more. This is the beginning of that phase, because there are packaged shows that will remain on the air. So we expect to see the benefits of the realignment, the return to the commission model, play out over a number of years.
DEADLINE: Going forward, there aren’t going to be any more packaging fees, correct?
STUTZMAN: Going forward, it’s the end of new packages on guild-covered projects. There are packages that exist now. The agreement doesn’t unwind them. It’s a going-forward provision. It prohibits the agencies from receiving packaging fees on WGA-covered projects. So it’s not limited to receiving packaging fees for just representing writers. So any agency franchise with the guild, which includes all the major agencies, as well as many others – they can’t negotiate and receive packaging fees on guild-covered projects, which is scripted programming, by virtue of representing other talent.
DEADLINE: So they can’t package around a director if it’s a WGA-covered project?
DEADLINE: When WME became the last of the agencies to agree to the agreement, were there champagne corks popping?
STUTZMAN: (Laughs) There weren’t champagne corks popping. There were positive feelings about having brought all these agencies under an agreement that really protects writers. But we were all in our homes in the midst of the pandemic.
DEADLINE: Who’s going to do what the agencies use to do as far as packaging goes?
STUTZMAN: I would suspect that the agencies are still interested in what we call ‘small ‘p’ packaging’ because they represent talent – writers, actors, directors and producers that they want to get on projects. The key difference now is that it’s a commission model, versus a model of receiving compensation directly from the employers of their clients. So I would expect that they will continue to do that ‘small ‘p’ packaging’ work.
DEADLINE: Where will the money go that was going to the agencies in the form of packaging fees?
STUTZMAN: Well, the studios get to keep it in the first instance, and then our view is that agents, properly incentivized to drive up their clients’ pay, because what their clients make is now what the agent’s make (their commissions on), we’re hoping that those proper incentives leads agents to demand that that money come back to writers and others working on all these projects. We’ve been clear that there is a guarantee that the elimination of packaging fees will necessarily result in the rise of writer income, but the alignment of agency and writer interests is a necessary precondition for writers to get the fair value for their writing services. And in an industry where the guild sets the floor, through bargaining the MBA, and agents handle over-scale bargaining, it’s just an absolute necessity that writers have true fiduciary figures when pursuing writers’ interests. Otherwise, any gains the guild makes at the bargaining table are offset by losses in over-scale.
DEADLINE: Will packaging fees be allowed on new projects involving writers under pre-existing overall deals that have packaging clauses in them?
DEADLINE: What is the WGA’s position on packaging around other talent, like actors and directors, if they opt for their agencies taking a package instead of them paying a commission? Would the WGA allow its members to work on a project that has any element of packaging, even if it’s not writer-based?
STUTZMAN: The franchised agencies can’t receive packaging fees for representing other talent on WGA-covered projects.
DEADLINE: What happens if a WGA member asks for packaging on a project of theirs?
STUTZMAN: The franchise agreement prohibits agencies from receiving packaging fees, but they can still service their clients by helping to put projects together.
DEADLINE: With respect to agency ownership of affiliated production entities, WME and CAA are in compliance, right?
DEADLINE: And UTA was already in compliance?
STUTZMAN: Yes. Their ownership stake was under 20%.
DEADLINE: With regards to information sharing, what kind of trends is the guild seeing?
STUTZMAN: What we’re getting is deal memos, contracts, information about commencements, deliveries, when writers are paid – all of that. It does a couple of things. It helps us with deal trends – what’s actually going on with how writers are being paid. And it gives us unprecedented and timely access to this information. So that helps us know how writers are doing overall, because obviously there’s a minimum and over-scale component to how writers are paid. It gives us a sense of where agents can do work to push up writer pay, and where a collective bargaining solution may be necessary. We’ve also done quite a bit of work to share aggregate compensation information with writers and reps. The guild has on its website a thing we call the Writers Deal Hub, and we’ve been regularly posting different guides on compensation, including episodic rates, weekly rates, screen deal terms, bonus terms for screen, what the streamers are paying for features, and we regularly push those things out to writers and their reps.
In terms of the MBA (Minimum Basic Agreement), there’s a couple of things we’ve been focused on; using the information for enforcement, specifically for late pay, which is a pernicious problem for a lot of writers. So the agencies are working with us closely to deal with when studios pay writers late. We’re getting large data sources from the agencies that tell us when people are paid and when it’s late, and that’s allowed us to make late pay into a collective action rather than an individual project-by-project thing. And we’re also trying to deal with free work, so equipped with deal information and invoices, we’ve been able to ratchet up our efforts to help screenwriters resist demands from producers and studios for free work.
DEADLINE: That sounds like an important part of the deal.
STUTZMAN: Yes. And it’s something the guild has always said, that there were three pieces. Obviously, packaging and production got more play, but just getting the agencies to share all the employment information in real time – some of them do it on a weekly basis – gets the guild really close to what are the conditions happening right now and allows us to take quicker action.
DEADLINE: This information will be closely held, right?
STUTZMAN: Yes. The information is secured and protected by the guild, and what we’ve done is aggregate things. Writers are very interested to know what are going rates for a screenplay or a co-EP position. So we’ve used it in that aggregate fashion, and that’s been helpful to both writers and reps.
DEADLINE: How does the agreement affect independent films?
STUTZMAN: There is a provision that allows agencies to continue to provide financing, distribution and sales services on independent films, and what the franchise agreement requires is the agent to disclose the terms of their deal, and have the writer consent. And then if the project is budgeted at over $50 million, the agencies have agreed to seek the guild’s consent to provide those services. And they’re required to provide regular reporting on the films that they are providing independent services on.
DEADLINE: How do you see this new alignment affecting the industry as a whole, and other talent like actors and directors?
STUTZMAN: I would think, similarly, in an overall realignment – the return to the commission model – I think agencies should be incentivized to increase the pay of all their clients.
DEADLINE: Have most writers who fired their agents returned to the agencies they left?
STUTZMAN: I don’t have the numbers, but a large number returned, and obviously, some moved around.
DEADLINE: Were any members disciplined for not firing their agents?
DEADLINE: I don’t think we have a comment on that.
DEADLINE: There’s been a lot of talk that personal managers could be next. Is the guild looking at that?
STUTZMAN: I would say we’re monitoring the situation and the guild would take appropriate action if it becomes necessary to protect writers from any conflicts of interest with managers. But at present, we don’t currently believe action on managers is necessary.
DEADLINE: One last question. What does this portend for the upcoming MBA negotiations? It seems that writers may be in the strongest position they’ve ever been in after this campaign.
STUTZMAN: (Laughs) Let’s just keep this about the agencies. I’m sure we’ll have more to talk about in the future.