Two Hollywood institutions, the Writers Guild of America (WGA) and the Association of Talent Agents (ATA), are now in an all out battle with one another. Consequently, the way in which business is conducted in the entertainment world may never be the same.
A dispute between the two organizations arose over the 43 year-old Artists’ Managers Basic Agreement (AMBA), a pact between the WGA and the ATA, which regulates the terms of how agents represent writers.
The WGA by-laws stipulate that an agency must sign the AMBA in order to represent one of its members.
Questions about the AMBA arose after a survey of WGA members found that Hollywood writers felt as if the major agencies' practice of “packaging” was a detriment to their careers.
Packaging refers to an activity in which agents engage whereby there is a combining together of creative clients to benefit film studios, producers, and television networks.
Talent agencies used to rely primarily on a 10 percent commission rate as a revenue source. However, the practice of packaging provided a means in which larger agencies would be able to earn substantial additional revenue.
So-called packaging fees are charged separately and comprise an additional revenue source that is over and above the 10 percent commission; this additional amount of income is earned in exchange for bringing to a particular entertainment project a group of artists, e.g., writers, directors, and actors.
Additionally, the three biggest agencies, William Morris Endeavor (WME), Creative Artists Agency (CAA), and United Talent Agency (UTA), have spawned affiliate companies that participate in the ownership of content.
Writers contend that agents who package and gain an ownership stake have a conflict of interest, and they further assert that this conflict has caused writers' earnings to decline.
The pursuit of packaging revenue places agents in a position of seeking deals that produce lucrative packaging fees rather than pushing for their clients to receive greater compensation.
When an agency owns and/or produces content, it places the agent in the dubious position of being an employer who is supposed to be representing the interests of an employee. This is a textbook case of a conflict of interest.
The growth of revenue streams for large talent agencies has attracted private equity investors and has even spurred some of the larger agencies to reportedly pursue the idea of going public. This has added more pressure as well as additional incentive to continue packaging and content ownership.
The agents that engage in such practices have actually made things worse through a lack of transparency, which has bred mistrust with their clients.
Creators often had no knowledge that the content they had created was being packaged, with their agency generating a substantial amount of additional revenue off of their work. The agencies have acknowledged this error and have indicated that in the future they will be transparent.
The problem is that the damage has been done. Because the WGA and the ATA have come to an impasse in their negotiations, a tough-minded new talent agent code of conduct has been implemented by the writers union to end packaging and content ownership by agencies.
The new code disallows any agent who represents a WGA member from receiving packaging fees and/or from working with agency-affiliated production companies.
WGA members have been instructed to disassociate from agents who do not comply with the new code of conduct. To this end, the union has provided members a DocuSign link with which they can send formal termination letters to agents.
These letters are now being sent out. Krista Vernoff, the showrunner on ABC's "Grey's Anatomy," wrote an article for the Hollywood Reporter, which is titled "Why I Left My Agent, Despite the Sales Pitch."
A sizable number of writers have taken to Twitter to announce their solidarity with the union by changing their profile pictures to icons that say “I Stand With the WGA.”
More than 800 writers have signed a statement of support and indicated that they "will only be represented as writers by agencies franchised by the Guild." Most of the notable showrunners and TV creators that agencies desire to package have been visibly in support of the union.
The union has decided to play hardball with a new database for showrunners, where position openings are posted and writers may directly apply for work.
It has put forth a plan for writers to be represented by managers and lawyers, as opposed to agents, although the ATA contends that the plan violates the law in California and New York.
Reportedly, the union has already drafted a lawsuit against the ATA and its member agencies, which would bring the battle to a courtroom on the East Coast or the West.
The lawsuit will likely claim a breach of fiduciary duty by the agents who accepted fees from studios and allegedly failed to negotiate in good faith on behalf of their clients' interests.
The outcome of this conflict will likely result in an entertainment industry realignment, whereby writers are represented by smaller agencies that agree to collect commissions, minus the packaging or content participation.
In a letter to members, the WGA described the significance of the big agencies firing in the following manner, "We know that, together, we are about to enter uncharted waters."
James Hirsen, J.D., M.A., in media psychology, is a New York Times best-selling author, media analyst, and law professor. Visit questsin TV Hollywood. Read more reports from James Hirsen — Click Here Now.