“Clients are often coming last in the pecking order of priorities. Yet, by law, we are supposed to be their only priority,” she wrote of agents. “Starting to feel sticky yet? Because I haven’t even gotten started,” she said in the tweets, which have collectively drawn nearly 10,000 likes and zipped around Hollywood offices with a mix of urgency and fear.
Berg is part of a growing labor movement by Hollywood writers — the people primarily responsible for on-screen drama, jokes, stories and suspense — pushing back against a fundamental change in the entertainment business.
The writers are upset by the evolution of the major Hollywood agencies, particularly the “Big Four" of CAA, WME, UTA and ICM. These firms have over the years gone from a business model based heavily on collecting 10 percent commissions on jobs booked for clients to collecting fees from studios for the larger role of putting together the creative elements of a TV show or movie, a process known as packaging. In some cases, the agencies have also recently launched separate production-like divisions themselves.
The writers say these practices create a conflict of interest that badly harms their bottom lines and often leads to the agents putting their own interests first.
The agencies counter that they are merely looking for the greatest number of revenue streams, the attainment of which only enhances opportunities for the very clients objecting to them.
At issue are essential questions of how Hollywood should operate in a world of massive global entertainment conglomerates. Are the middlemen who unite the creative and business communities increasingly central to the birthing of ideas, and should they thus be allowed — even encouraged — to expand their role?
Or does such expansion amount to profiteering in contradiction of their purpose, and tasks should be limited to the specific goal of landing clients jobs?
In a way, this might seem like a strange time for labor unrest. There are more television-content providers than at any time in the history of Hollywood. Several of them, such as Netflix and Apple, pay well above market averages. But the writers say agencies are sharing revenue in a highly inequitable way, leaving many creative people to fight for scraps.
It has added up to an unusual labor battle, one not between management and workers but between two parties ostensibly on the same side — a brewing civil war that could radically alter how Hollywood puts together shows and movies.
The writers are represented by the Writers Guild of America, the WGA West and WGA East. The agencies are represented by the Association of Talent Agents, or ATA. The parties must negotiate what’s known as a new Artists’ Manager Basic Agreement, or franchise agreement, which governs terms of their fee-sharing. If the two sides cannot agree on a deal by the time the current agreement expires on April 6, it could result in a mass firing of agents and unprecedented levels of chaos and confusion.
Unlike the most recent Hollywood labor showdown in 2007-2008, in which writers walked off the job for more than three months because they could not reach a deal with producers, there would be no strike, and thus — probably — no immediate interruption of new shows on the air.
But the lack of a deal would create a set of seismic and surreal consequences: a world of writers with no agents and agents with no one to represent.
“War, that’s what it would mean,” said one prominent film executive, speaking on the condition of anonymity so as not to appear to be taking sides, when asked what a mass firing of agents would lead to.
Asked to elaborate, he said: “Nobody knows. But war, I think.”
The situation is coming to a head. In the last week of March, the WGA’s members — nearly 15,000 in its West Coast branch, based in Los Angeles, and some 5,000 in its East Coast wing in New York — will vote on whether to require a new “code of conduct” for agents that would dramatically curtail agents’ ability to collect revenue off activities not strictly related to booking client jobs.
If the code is adopted, that means members could be asked to fire any agent who does not sign it when the deal expires April 6 as a condition of remaining in the guild. It is highly unlikely any of the big agencies would sign the code as it is currently conceived.
On Tuesday, the sides will meet for only the third time since the conflict emerged. Representatives from the WGA will sit across a table from ATA leaders and principals of the major agencies in a Los Angeles conference room. The first two meetings were considered non-substantive, with the WGA simply listing its positions. Whether significant negotiations will happen before the vote in late March is iffy at best.
The meeting between the two sides follows a telephone news conference the WGA held earlier in the day in which it made leaders and writers available for questions in a bid to rally media support. It also released a white paper outlining what the group says are key conflicts of interest.
The WGA has two main objections. The most prominent is the creation in the past few years of quasi-production entities by the agencies — like Endeavor Content, part of the same holding company as the talent agency WME (William Morris Endeavor), or Wiip, supported by CAA (Creative Artists Agency). The creation of these units, the WGA says, means that writers are basically working for their agents, a situation rife with potential conflicts.
As a unit that matches creators with networks, studios and financiers, Endeavor Content, the biggest of the bunch, doesn’t function as a studio, per se. But it does often take stakes in projects, a hallmark of a studio. Among its projects are “Killing Eve,” the award-winning spy thriller starring Sandra Oh.
“As agencies get into production, it creates a very large problem,” David Goodman, WGA West president said in an interview, “because it means a writer would be working for their agent. Now an agent has an interest in controlling the budget, for instance.” That, he noted, runs directly against a writer’s interest in increasing a show’s budget to up their paycheck.
The WGA also says it resists the much more established practice of so-called packaging fees, in which agencies take money, both upfront from a show’s budget as well as from back-end revenue, for bringing to a writer’s project other agency clients such as actors, producers and directors and then presenting the whole package to distributors and financiers.
Packaging fees have become more central to agencies’ business model. And that, the WGA says, runs counter to clients’ well-being.
“The budgets have gone up, in some cases way up. And yet the mid-level quotes on TV shows have been stagnant with 20 years ago. That’s a really important data point,” Goodman said. A veteran creator and current showrunner of Fox’s sci-fi comedy “The Orville,” Goodman was head writer on “Family Guy” and has written on such shows as “The Golden Girls” and “Star Trek: Enterprise.” He noted the budget for “Orville” is “more than twice it was on ‘Star Trek: Enterprise.’ ”
Goodman said packaging fees were directly responsible for the stagnation, in part because agents collect 10 percent from the studio, reducing the pool writers draw from, in part because those fees discourage agents from fighting for higher client payments because they’re already collecting such a large slice.
“The system works against mid-level and lower-level writers,” he said.
Goodman also noted a creatively limited consequence of high packaging fees: Agents are reluctant to find clients from another agency to work on a writer’s project because it would mean splitting the packaging fees.
In its white paper, the WGA called the major agencies a “cartel” that uses its “control of talent primarily to enrich themselves.” Subtitled “How the Major Hollywood Talent Agencies Put Their Interests Ahead of Their Clients’ Interests,” the 20-page document marshaled examples of creators whose take-home revenues it said was unfairly cut into by agencies, dating back to the 1980s sitcom “Head of the Class” to the current-era cable sensation “The Walking Dead.”
The franchise agreement has not been updated since 1976. But the WGA says this is the moment to reevaluate it, with the expansion of agencies that, while still private, have become well-capitalized corporate entities with thousands of employees, ultramodern complexes, heavy outside investment and a strong pressure for profits. (Endeavor, WME’s parent company, was in the news last week for returning a $400 million investment from Saudi Arabia in the wake of the killing of journalist Jamal Khashoggi.)
But the agencies maintain that they are simply looking out for their clients’ interests while also protecting their bottom line, and that both can be done simultaneously.
In a conversation with The Washington Post, Karen Stuart, executive director of the ATA, declined to comment about any of the WGA claims on the record. She sent a prepared statement after the conversation that read, “Our clients want their agents to work collaboratively with the guild on a reasonable and fair solution that puts writers in position to earn the best compensation in a world of vertical integration. While we are not on the same page as the WGA today, our goal is to find common ground through a constructive dialogue that leads to realistic solutions to the challenges of our new media environment."
Whether the WGA would actually ask clients to fire their agents or whether this is simply negotiating brinkmanship remains to be seen. But, realizing they may be falling behind in the public-relations war, the agencies have begun firing back.
Late Monday, a letter that UTA’s (United Talent Agency’s) chief executive wrote to clients surfaced. It contained a mix of conciliation and combativeness.
“We aren’t saints. We are tough businessmen and businesswomen who happen to love artists,” said the leader, Jeremy Zimmer. “There is true nobility in fighting for the people we represent and sometimes that gets lost.”
But he also said that “the solution to the problems that our clients have with their agents is not to eliminate the choices they have around packaging or affiliate agencies. It is not to fire their agents and hope that the guild, or a yet unidentified agency, is the right partner to help them navigate the world of media consolidation, streaming and globalization.”
The letter follows a note last week from WME president Ari Greenburg to writer clients after the company held several town halls with them.
“We heard that there is fear, anxiety, and uncertainty about the future,” he wrote. “Despite 1000 television shows, and the megadeals we read about in the trades, this is a challenging time for some writers having to adjust to new economics created by market forces including massive media consolidation and changing television models. We are aligned with you and your guild in finding solutions to this issue. However, we do not believe the answer is getting rid of packaging fees and affiliate production, which brings jobs and opportunities to writers. “
The WGA has been active on the PR front, aiming to rally both media and members to its side. The news conference featured a number of showrunners describing their experiences, in which they said agents were profiting unfairly at their expense.
“They’ve co-opted our work for their own financial gain,” said Chris Keyser, creator of “Party of Five” and a past WGA West president, adding, “In an era of unprecedented prosperity of media companies … writers’ salaries should not be going down.”
And last week it began posting writers’ horror stories of agents more concerned with packaging fees than their clients’ interests.
“I put an entire show together, but I didn’t want my agency to get the package,” said one. “In the end, they held the deal hostage and I had to cave to get the project through. Every network I showed the project to made a bid on my show. I wanted it to go to one network, but my agent thought they’d get a bigger package if they went with another network, so they sold the package to them."
The posts did not focus on the production entities. But Goodman said that those will become a greater concern as agencies build them out.
In her Twitter thread, Berg cited antitrust law as prohibiting talent agencies from owning studios. “What is the ATA’s argument when it’s pointed out that what they’re doing is illegal? Oh, those? They’re just ‘affiliate companies’ housed in ‘separate buildings’ so don’t worry about it. Cool, cool. Nothing to see here, guys.”
The legality of the agencies’ moves into quasi-production roles is an open question. The issue has not been tested in the courts in the modern era and, apart from general antitrust laws, there are not a lot of specific provisions governing these situations.
The WGA could rely on an archaic clause in California labor code that does not allow agencies to refer people with whom the agent has a “direct or indirect financial interest.” It has also leaned on agencies’ status as fiduciaries, which require them to act loyally to a client. But a judge has yet to weigh in on whether a production arm violates that duty.
One historical precedent, at least, does favor the writers. In the early 1960s, the courts forced MCA, a growing music-and-representation company, to sell its agency business after buying a movie studio, Universal Pictures.
A mass firing on April 6 could test the fundamental theory of whether top-tier agents are adding or subtracting value. By removing them, even temporarily, from the equation, it would reveal whether deals become more or less lucrative for writers. The writers would still have managers and lawyers, who are governed by different rules, while some would potentially sign with any smaller agencies willing to sign the code of conduct.
“I really hope it doesn’t get to that,” said the film executive worried about a bloody battle. “Because who knows how any of us will do business.”