Hollywood

The Hollywood Fight That’s Tearing Apart Writers and Agents, Explained

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There is a very big fight going on in Hollywood, but since it’s a standoff built around contract negotiations and entertainment-industry minutiae, you probably haven’t heard about it unless you scour the trades for fun. But this fight affects every person who writes and creates the shows and movies we watch. For the past two months, the labor union representing those writers, the Writers Guild of America, and the people charged with finding them jobs and negotiating their compensation — the agents who comprise the Association of Talent Agents — have been in a standoff to determine the future of their working relationship. They’re fighting, of course, about money, though the particulars of who gets that money and why are pretty complicated. And depending on how a WGA vote swings this week, there could be a mass separation from every Guild-represented writer in Hollywood and the agents who connect them with the studio money to get their stuff made.

So what, exactly, is going on? Here’s everything you need to know.

First of all, who are these people?

The WGA is the labor union that represents writers across America, but they’re most well-known for representing Hollywood writers. Remember that 100-day labor strike in 2007 that resulted in Friday Night Lightshaving a really off second season? The WGA was the group that went on strike over a dispute with the Alliance of Motion Picture and Television Producers.

The ATA is a collective of more than 100 talent agencies, but the most important are known as the Big Four: CAA, WME, UTA, and ICM. Together, these companies dominate the industry. CAA, WME, and UTA alone “account for almost 70 percent of WGA members’ earnings,” according to the Guild.

What do agents do?

In the most basic sense, agents find jobs for writers and negotiate their compensation. They get meetings for their clients with film studios or networks or showrunners, seek out openings on writing staffs, and find available projects in development. Writers then take the meetings and pitch themselves for jobs, and if they get them, the agent negotiates for the most lucrative contract possible and takes a commission of up to 10 percent of the earnings. Remember when Mark Wahlberg got paid $1.5 million for 10 days of reshoots on All The Money in the World and Michelle Williams got paid an $80 per diem? Wahlberg’s payday was said to be the work of his agent, famed Endeavor CEO Ari Emanuel.

Agents and their employers also make a lot of money through a process called “packaging,” which comes with fees from production studios. These are a big part of WGA’s grievances with the ATA, and we will get to those later.

Why is this fight happening now?

The document that dictates the terms of the ATA and WGA relationship is the Artists’ Manager Basic Agreement (AMBA), which has not been renegotiated since 1976. (For comparison, the WGA renegotiates its collective bargaining agreement with film and television producers of the Alliance of Motion Picture and Television Producers every three years.) The entertainment industry has changed a ton over the past decade alone — demand for content is higher than ever, with companies like AmazonNetflix, and Apple spraying fire hoses of money across the industry, while traditional networks race to keep up. But even though production and profits are at record highs, many writers say they are feeling squeezed. In a WGA document that maps out its case for alleged conflicts of interest within agencies, the Guild writes, “In each of the last three years, the companies that dominate the entertainment industry — Disney, Fox, Time Warner, Comcast, CBS, and Viacom — generated more than $50 billion in operating profits. Meanwhile, television writer-producers’ median weekly earnings declined 23 percent between 2014 and 2016.”

Shorter season orders of TV shows and changes to residuals thanks to streaming have contributed to stagnate compensation for writers. (Though WGA president David A. Goodman says wage growth is an issue that far predates season shortening.) Guild members expect their agents to fight for every extra dollar possible over union-mandated minimums, but they say agencies are no longer following through on that duty. Agencies have also sold off big portions of their companies to private equity firms over the past few years, which the Guild alleges has changed their profit motives and prompted them to de-prioritize relationships betweens agents and the writers they represent, focusing instead on owning entertainment properties — whether that means getting a cut of films or shows that clients write, or the agencies themselves buying products like the Ultimate Fighting Championship or the Miss Universe Organization, which are both now owned by Endeavor, which owns WME.

Last April, the WGA gave the ATA the requisite 12 months’ notice for terminating its Artists’ Manager Basic Agreement contract. On April 6, that deadline will be up. Negotiations only really started in February between the groups, and they haven’t been going well. Both sides characterize the other as acting in bad faith: The WGA says the ATA didn’t respond to their termination notice for months; the ATA says that’s a lie. The two groups have met six times since February, and while progress has been made on smaller points, there is no clear path to resolution regarding the Guild’s biggest concerns.

What does the Writers Guild want?

When the Guild first contacted the ATA last April, they presented a list of more than 20 points for negotiation, including protections against discrimination and unpaid work. (Writers do a lot for free, like developing spec scripts, before they can even get jobs.) But the current deadlock comes down to two issues: a standard industry practice called packaging, and the trend of agencies working with production companies, called affiliate producers, in which they have a financial stake. The Guild’s desired changes to those practices would dramatically affect how agencies do business in Hollywood.

In a February address to Guild members, Goodman laid out his concerns. “Make no mistake: Fairness is an issue here, but the fundamental reason that the leadership is recommending these changes is money,” he said. “If writer pay were steadily rising as agencies continue to package, we wouldn’t be sitting here. If writer pay were rising as agencies move into production and become our employers as well as our representatives, we wouldn’t be here. But as writers we share a common knowledge that writers overall are not doing better, we’re doing worse.”

In short, that means the WGA is calling for an end to packaging fees, and for agencies to stay away from producing.

Let’s break these terms down. What’s packaging and why does it have fees?

Historically, packaging refers to the process through which agencies bundle talent to bring a project together. Say, for example, that a writer comes up with an idea for a TV show. That writer’s agent will then bring in a director or an actor to join the show — often one represented by the same agency as the writer — and call it a package. In practice, however, agents who represent well-established showrunners (or actors and directors) are able to claim packaging rights simply because they represent said talent. The process of assembling packages has become so commonplace in Hollywood that 87 percent of all shows that aired during the 2016–17 season were packaged, according to the WGA, with WME and CAA responsible for 79 percent of that. (Movies can be packaged, too, and often are.)

The Guild wants to eliminate the fees that studios pay agencies for delivering those packaged bundles. In the case of TV, a fee typically amounts to $30,000 to $100,000 per episode, according to the Guild. The money for the fee is taken from a production’s budget for the project and then given directly to the agency — they are not part of a writer’s pay. The producer, director, and former agent Gavin Palone has been speaking out against packaging for years (including in New York Magazine), and this is how he broke down what’s known as the “3-3-10” structure for The Hollywood Reporter:

“The production company pays the agency a fixed percentage (usually 3 percent) of the network base license fee after each episode is produced, an equal amount deferred out of profits (if any) and a percentage of the profits (usually 10 percent).”

If a series becomes profitable, that 10 percent figure applies to the show’s gross profits for the life of the program, even if all of an agency’s clients leave the show before it’s over. In the case of very successful shows, like Friends,that could amount to millions of dollars. (ICM has reportedly madehundreds of millions from Friends over the years.) Because there’s so much money to be made in packaging, the Guild is worried that agents aren’t fighting hard for individual client compensation.

What does the ATA say about this?

ATA executive director Karen Stuart, however, says the conditions for the full “3-3-10” fee are rarely met, because so few shows hit a profit level that would lead to additional payouts. Deals with streamers like Netflix also don’t include back-end profits. (Ever the disruptor, Netflix has even changed the packaging model for agencies, further prompting the companies to look for alternate revenue streams and increased chunks of ownership in entertainment properties.) The ATA asserts that the packaging fees model is better because it allows writers to forgo paying the 10 percent commission they would otherwise have to pay their agents. A new report from the ATA says packaging saved writers from paying $49 million in commission fees last year, and UTA released its own study saying writers actually made more from shows the agency packaged than they would have on non-packaged programs.

Goodman counters that the UTA’s study was based on a “false premise.” “There is no way to compare what writers would make in a world with agency packaging and without agency packaging. Agency packaging is so dominant that it controls the whole market for writers in television,” he says.

Guild writers contend that if agents can get packaging money for themselves, they should be able to negotiate equivalent compensation on behalf of their clients, too. It’s a sentiment that The Wire creator David Simon expressed in a charactersitically heated way: “If you can only leverage profit for yourself, but not for me, what the fuck do I need you for? Why are you on this ride at all? At the point that he can only achieve benefit for himself and not for his client, what the fuck good is an agent?”

The Guild’s concern, ultimately, is that agents are not incentivized to aggressively negotiate for their clients when their financial success is divorced from commission. The union’s position is that agencies forego their fiduciary responsibilities by prioritizing profit-participation deals with studios over chasing the highest possible compensation for their writers. Or, as Goodman puts it, “Agency income should be directly tied to writer income.” That would mean reverting to a commission-only model that has not been in practice for a long time.

So what are “affiliate producers” and how are they related to this fight?

While packaging has been around for decades, agencies opening up affiliated production companies is a relatively new phenomenon of the past three years. As Variety reported recently, “WME, CAA, and UTA in recent years have taken steps into content production and distribution, raising conflict of interest red flags in the view of many industry insiders.” WME’s parent company, Endeavor, owns a production shingle called Endeavor Content, while CAA has a hand in WIIP, and UTA has partial ownership of Civic Center Media. According to a source familiar with the agency side who did not want to be named, these companies are beneficial to writers because they increase the number of competitive buyers for projects, and because they’re willing to pay creatives more on the back end than other studios. This source also insists that agency clients are never pressured to go with an affiliate producer, only encouraged to pursue the best deal.

Screenwriter and WGA member John Gary says companies like Endeavor Content and Civic Center Media are not bad actors overall, citing projects of his own currently in development with WIIP. But these affiliate producers are a problem, Gary says, because the talent agencies have ownership stakes in them. “We know that company structure can eventually take advantage of employees in really bad ways,” Gary tells Vulture. “And so we need to eliminate that incentive for them to take advantage of us. They’re great companies with great people working there. They just can’t be owned by the same people who own the agencies. You cannot be both a judge and a prosecutor at the same time.”

Stuart, the ATA executive director, describes affiliates as “legally separate businesses with separate management and separate operations, housed in separate offices and with separate employees,” but their profits do still go to the same parent companies. The WGA charges that affiliate producers effectively turn the agencies into their bosses, creating an ethically dubious situation where agents are tasked with getting the best contracts for writing clients and the most cost-effective deals for studios owned by the same parent company as their agencies.

How will this whole mess get sorted out?

We’re about to find out. Starting on Wednesday, March 27, Guild members will have four days to vote on a code of conduct that, if approved, will be presented to the agencies. The agencies will have to sign the code in order for Guild writers to keep working with them. The ones that don’t will be out of compliance with Guild rules, which state, “No writer shall enter into a representation agreement whether oral or written, with any agent who has not entered into an agreement with the Guild covering minimum terms and conditions between agents and their writer clients.” The code stipulates that agencies must revert back to the commission-only model — which means no more packaging fees — and that compliant agencies must sever ties with affiliate production entities. Companies like WIIP and Endeavor Content can still exist, but agencies would have to forfeit their ownership stakes to avoid conflicts of interest.

It’s been reported that some high-profile showrunners have anonymously expressed concern about the Guild’s hard-line “no compromise” language, but the WGA released a statement of support earlier this week signed by more than 700 union members pledging to vote yes on the code. A-listers like Shonda Rhimes, Jenji Kohan, Mike Schur, Oliver Stone, and Tina Fey are among the signatories.

The ATA countered the WGA’s demands about packaging and producing with a proposal that calls for transparency and increased communication measures around both practices. But that’s been a nonstarter with the Guild, since the WGA is a union lobbying for changes on behalf of a collective body, and the ATA’s “Statement of Choice” proposal operates on case-by-case terms with individual clients.

Goodman, the WGA president, has been clear about the Guild’s unwillingness to bend on the issues of packaging and producing, saying, “There are negotiations where there is no middle ground, where there are basic principles that are not subject to compromise …  But it is crucial for us to understand there is no meaningful compromise where conflict of interest is concerned. It’s a binary choice. Either agencies put our interest first, and make their money from our success, or, like now, they will continue in the business of maximizing their own success while writers suffer.”

So what happens if agencies don’t sign this code of conduct?

In a divide that’s pretty indicative of this whole fight, even the language used to describe what might happen after the Guild vote is under debate. Here’s what we know: If the vote passes and the current operating agreement expires without a new one on April 6, any ATA member agencies that don’t agree to the code — not just the Big Four, but the hundreds of agencies in Hollywood — will not be allowed to represent Guild writers. The WGA frames this as a decision made by the agencies: If one doesn’t sign the code, it’s choosing to cut off client relationships due to a failure of compliance. The ATA, however, describes this scenario as writers firing their agents because of a new collective rule, framing union action as the Guild demanding its members dismiss their agents. (For instance, UTA CEO Jeremy Zimmer says, “The WGA is trying to make a decision for everyone by eliminating everyone’s choice.”) The point is, neither side can even agree on who is doing the walking, which shows you just how far apart the WGA and ATA are in this negotiation.

If the code is enacted but the Big Four agencies don’t sign it, how will writers get jobs?

In his February address to Guild members, Goodman said 75 percent of respondents in a recent WGA survey said they got themselves their most recent jobs, not their agents. Multiple television executives told Vulture that the staffing pipeline might not run as smoothly, but they weren’t worried about writers rooms getting filled. “Will it hold up production realistically? Probably not,” said one TV exec, who added that lesser-known writers would have the hardest time getting connected with showrunners and in-development projects without agents to facilitate on their behalf.

In response to this concern, the WGA’s Gary told Vulture, “There are a couple of systems that the Guild is building out right now and we’ll be rolling out shortly” to serve as a stopgap measure and help “the most vulnerable Guild members” find work until the WGA and ATA can come to terms. An attempted peer-to-peer solution — which Gary said he could not disclose yet — would likely have to fill in for agents until, hopefully, new terms can be reached. “The system right now is going to be heavily reliant on showrunners, and I think it will be at least sort of incumbent upon the showrunners to work together, communicate well, and help each other seek out writers that they need for their rooms,” he says.

What are people in Hollywood saying about this?

Across Hollywood, the battle is a hot topic. One of the most powerful agents in the land, WME President* Ari Greenburg, said in a negotiation round last week that the Guild was “there for theatrics, not progress.” Another agency source told Deadline that a recent modified proposal from the WGA amounted to putting “lipstick on a pig.” Meanwhile, one studio executive who spoke to Vulture called packaging “fucking evil.”

Film producer Keith Calder (BlindspottingAnomalisa) drew an unfavorable analogy between representation in Hollywood and sports.

David Simon was even more unsparing in his criticism. In an essay detailinghis earliest Hollywood experiences, Simon wrote, “Packaging is a lie. It is theft. It is fraud. In the hands of the right U.S. Attorney, it might even be prima facie evidence of decades of racketeering. It’s that fucking ugly,” adding later on, “Only the end of packaging will restore a market in which writers are paid competitively for writing. And only an agent whose priority is having his client paid competitively is a means to achieving that result.”

On the WGA’s website you can read a list of horror stories from anonymous Guild members detailing ways they say they’ve been harmed by packaging. Some describe shows that were “held hostage” after writers turned down packages; others say their agents aren’t interested in finding them work as staff writers because their singular concern is packaging. Some say they’ve had shows sold as packages without even being informed. Gary serves as a Team Captain in the WGA, meaning he’s a point person who functions as a kind of peer organizer for other Guild members, and he says most of the concerns he fields are not about individual agents, but their employers: “What I hear from the people I’ve talked to most — again and again and again — is that everyone is scared that their agents, as much as they like them, aren’t working as best they can for them. And not because they don’t want to, but because the system doesn’t reward them for it.”

Have any agencies sided with the Guild?

The fifth-largest agency, Paradigm, has indicated they will not sign the code, because they say “the agency business has become far more overhead intensive” and packaging revenue is necessary for operations. And in a FAQ doc available for clients, WME states its position clearly: “WME is not signing the code.”

So far, only one of the ATA’s member agencies, Pantheon Talent Agency, has said they will sign the code. According to the Guild, 23 non-ATA agencieshave also signaled they will sign. The WGA also hopes that some franchised agents will leave their employers if they don’t sign the code, taking their client lists and operating independently in compliance with the Guild. In a statement that caused much hand-wringing, Goodman said: “I am saying that our collective power here is the power of divide and conquer. The agencies and agents all compete for talent, and when we make clear that we are leaving those who will not change, the change will come.”

*This article previously identified Ari Greenburg incorrectly as the CEO of WME, and stated that WME has an ownership stake in Endeavor Content. In fact, Greenburg is the president of WME, and both entities are owned by Endeavor. It has been corrected throughout.

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