What is so astonishing about the recent upheaval brought by the Writers Guild of America’s challenges to the status quo of how business is conducted in Hollywood, is that so many people took it for granted for so long. All it takes for radical change is a much-needed shift of perspective. As the television world’s staffing season looms, Hollywood waits to see what happens next as the agreement expires between the disgruntled WGA and the embattled Association of Talent Agents representing the powerhouse agencies who wield so much control over the lives of the writing professionals who drive the entertainment we consume.
The recent heated debates about how agents should represent writers has pulled back the curtain on what giant agencies like WME and CAA have become and the influence Wall Street exerts on their business.
Here are 12 things you need to understand the WGA-ATA battle: How we got here, where it’s headed, and what it means for Hollywood.
1. What Is the Artists’ Managers Basic Agreement (AMBA)?: The AMBA is the agreement between the ATA and the WGA. It regulates the terms of how agents represent writers, stating that agents can charge upwards of 10 percent of a writers’ earnings for their services. To represent a WGA member, based on the guild’s own bylaws, agencies must sign the AMBA. The current AMBA has not been altered since 1976.
2. What Prompted WGA to Renegotiate the AMBA after 43 years?: In the year following the WGA’s new three-year contract with producers (AMPTP) in 2017, the guild leadership reached out to writers, via survey and group meetings, to find out what professional issues and concerns they faced. According to WGA sources, leadership was surprised to discover that writers — ranging from top showrunners to those fighting for staff jobs – overwhelmingly pointed to the “Big 4” agency (CAA, WME, UTA, ICM) practice of packaging as negatively affecting their careers.
One year ago, the WGA notified the ATA that it wanted to renegotiate the AMBA. That notification put a one-year expiration clock on the current AMBA. The original deadline was April 6 (last Saturday), but was extended to April 12.
3. History of Packaging: The business of packaging – agencies bundling a project/script with talent from its ranks to sell a movie or TV show – has been around for decades. CAA became the dominant Hollywood power player in the 1990s when, led by Michael Ovitz, its packaging prowess played a key role in dictating what shows and movies got bought and made.
When agencies once relied almost entirely on their 10 percent commission as its source of revenue, packaging served as way for top agencies to leverage their A-list talent to maximize that 10 percent, both in terms of getting top dollar, but also by how many its clients (actors, writers, directors) were attached to the project.
4. How Packaging Evolved: While some in Hollywood see problems with agencies packaging their clients, it is the rise of “packaging fees” that has spurred the current backlash. These are fees being charged to producers, networks and studios in addition to earning the clients’ 10 percent.
In particular, the industry standard of “packaging fees” during the rise of the “peak TV” boom has led to the loudest cries of conflict of interest. The WGA estimates that close to 90 percent of scripted series in the 2016–2017 television season were packaged, with WME or CAA involved in 80 percent of those packaged series.
According to the WGA, the standard packaging fee for TV consists of three parts: an upfront fee of approximately $30,000 to $75,000 per episode that is paid out of the production budget; an additional $30,000 to $75,000 per episode that is deferred until the series achieves “net” profits, and a percentage (usually 10 percent) of the “modified gross” a show can make down the road. All told, a successful TV show can result in tens of millions in pure profit for a big agency.
5. A Conflict of Interest: Reasonably, agencies are more financially motivated to negotiate their own lucrative packaging fees than they are to fight for their clients receiving a higher salary, both of which come from the same source. The WGA has collected a number of horror stories, including cases where deals were held up, from the “Big 4” leveraging shows created by clients in order to earn packaging fees.
This comes on the heels of five years of writer salaries stagnating – staff positions often receiving the guild minimum – while the value of the big agencies grows significantly, in part as the direct result of packaging their clients’ shows.
The credit rating agency S&P wrote about CAA four months ago: “The explosion of content from over-the-top (OTT) players such as Netflix, Amazon, and Hulu has favorably affected the company’s television revenue, particularly its TV packaging revenue…The packaging of talent, along with the massive increase in TV content production, has driven most of the growth in the company’s TV segment.”
6. Negotiation Deadline and the New Code of Conduct: Leading up to last Saturday’s deadline (April 6), the WGA took a hardline that a new AMBA eliminate these conflicts of interest, and hence packaging, altogether. Today, the WGA, unimpressed with the ATA’s proposal, announced it would let the agreement expire at midnight and replace it with a Code of Conduct — which, if agencies didn’t sign, they would not be granted permission by the guild to represent its members.
In the lead up to the deadline, writers voted to authorize the WGA Board to implement an Agency Code of Conduct by an overwhelming majority: 7,882 writers voted yes, with 392 voting no. While union solidarity (95.2 percent voting “yes”) during negotiations was expected, that volume of WGA members who voted indicates writers, as a whole, are engaged in this battle. Even more surprising was that over 800 writers publicly announced their intention to back the guild ahead of the vote.
Likely what was most troubling for the agencies was that a majority of marquee showrunners and TV creators – names like Shonda Rhimes, Mike Schur, Greg Berlanti, Jenji Kohan, Joss Whedon, David Simon, Kenya Barris, Amy Sherman-Palladino Matthew Weiner, and Noah Hawley – whose shows are what agencies are making a fortune packaging, were so visible in their support.
Todd Williamson/January Images/REX/Shutterstock
7. The Influence of Private Equity and IPO Dreams: One of the important backdrops to the WGA-ATA standoff is the over $3 billion in private equity that WME, CAA, and UTA have taken in the last 10 years. Instead of being partner-owned, the WGA argues “the top three agencies now operate under the pressure of private-equity-level profit expectations. This has caused a seismic shift away from an agency’s core mission of serving clients over all else, fulfilling its fiduciary obligation to always act solely in the best interests of clients and to avoid conflicts of interest.”
In other words, these private equity-backed agencies have aggressively looked for ways to use their access to top Hollywood creative talent to grow their business beyond the 10 percent commission of talent representation. In addition to packaging fees, both CAA and WME have made aggressive steps toward owning and producing content, which leads to the ultimate conflict interest: How can you be both the employer and represent the best financial interests of the employee?
The open secret in Hollywood is private equity was only the first step of CAA and WME becoming publicly owned companies. News leaking of WME’s impending IPO and estimates of CAA partner agents profits from private equity investments (over $250 million for the top four at CAA) has only fueled resentment and spurred the belief agencies have fundamentally moved away from the principles of the talent representation business.
8. The Agency POV: The one thing packaging agencies have apologized for, and promised to change, is the lack of transparency when it comes to packaging fees. As illustrated in “The Wire” creator David Simon’s scathing post detailing his own experience with CAA packaging, creators were often unaware that their shows were being packaged and their agency profiting off what is essentially their IP.
While WME and CAA recognize that lack of transparency has bred mistrust that they must earn back, they insist that upending the way Hollywood has done business for decades is not only unnecessary, but would inevitably hurt writers. Agencies believe that the WGA is not taking into account how the “Big 4” leverage their power and influence to help their clients.
The ATA has also argued that the elimination of packaging fees would likely not result in writers’ pay going up. Agencies believe that the WGA is not taking into account how the landscape has changed for writers: Studios are making far fewer movies and paying far less to talent at the same time that TV has moved away from the well-paying, 24-episode a year network model.
9. The State of Negotiations: Prior to last Saturday’s deadline, both sides had taken a hard line, with the WGA preparing to have its members fire their agents. That changed late in the day Saturday, when the ATA adjusted its stance for the first time, and the WGA granted a six-day extension in order for the agents to present a proposal addressing writers’ concerns.
Today the WGA made it clear it was deeply unimpressed with the ATA’s proposal, which amounted to offering the guild one-percent of the agencies’ packaging fees. The ATA further enraged the WGA by taking a “wait and see” approach in addressing the writers’ concern regarding the big agencies’ move into producing content, which CAA and WME argue is separate from its talent agency business and therefore not a conflict of interest.
While not closing the door on negotiations, the WGA returned to its hardline of implementing its Code of Conduct and calling on writers to fire their agents.
10. Will Writers Fire Their Agents?: While the WGA assembled a murderers row of writers to vocally back the Code of Conduct vote, it is unclear if those same big name guild members are prepared to quickly pull the trigger on firing their agent. Although many writers despise WME and CAA’s practices, many consider their personal agent a close professional partner and, in many cases, a friend.
Yet when tonight’s deadline passes, the WGA will need writers to fire their agents, and quickly, if they wish to maintain leverage in talks. The WGA has supplied an online form for writers to fire their agent, avoiding the painful personal call and accelerating the rate of firing.
11. How Will This Standoff Impact TV?: It’s important to note the writers will not strike if an agreement is not reached. There will be no labor stoppage, but it is TV staffing season and agencies promise chaos without them helping writers to navigate a world of 500 scripted series. The counter argument is that some believe there’s an opportunity for an agent-less meritocracy.
“There’s something exhilarating about a TV staffing season without agencies,” tweeted “How I Met Your Mother” co-creator Carter Bays. “Writers being judged by the content of their material, and not the color of their script cover, is a good thing for the writing business.”
Also on twitter, producer-writer LaToya Morgan started the hashtag #WGAStaffingBoost, which has become a popular way for prominent writers to build awareness of lesser-known writers, especially writers of color.
Scribes! If you’re a writer looking to staff this season, I want to help you out. Reply with a few sentences about what kind of writer you are & why showrunners should give you a shot, and I’ll give you a #WGAStaffingBoost.
— LaToya Morgan (@MorganicInk) April 10, 2019
The WGA has also setup a staffing submission system to help connect writers with shows that are hiring. The guild will also empower managers and lawyers to negotiate, in place of agents, should a deal not be reached.
12. Possible Outcomes: Will the WGA come off the hard line of forcing the “Big 4” to change their ways? If they stick to their guns, that could force a major realignment of Hollywood as writers move to smaller agencies that are happy to live off a ten percent commission.
If there is a deal to be struck, when and if negotiations resume, new rules may have to be written regarding packaging that the WGA believes eliminates, or at least lessens, the conflict-of-interest. Possibly a more likely outcome is that the agencies share a piece of their packaging fees with the WGA, but it will have to be a significantly higher amount than the one-percent the ATA offered this week. The dilemma the ATA faces is this: Even if it were willing to significantly increase the percentage of fees it shares with the WGA, it’s safe to assume that the actors’ (SAG) and directors’ (DGA) guilds would then also demand a piece of the packages that include its members.
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