by Jonathan Handel
The Hollywood Reporter
July 17, 2020
More than a year after 7,000 scribes left their agents, WME, CAA and ICM Partners are holdouts on making a deal with the union and the WGA's long game remains unclear.
Perseverance, member solidarity and a major assist from the coronavirus-fueled recession brought the Writers Guild of America a victory on July 15 in its battle with the major talent agencies, signing UTA to a modified version of its franchise agreement. But the deal itself is somewhat less than it appears, having been watered down with each iteration as at least nine significant agencies signed on over the last year. And ultimately, UTA extracted enough concessions to make the agreement a win for both sides. “At a time when good news is in demand, we have some,” said UTA co-president Jay Sures in a letter to writer clients.
“In demand” is putting it mildly. The COVID-19 pandemic has wrought havoc on the representation business, driving cracks into the marble fortresses that line the streets in and around Beverly Hills. In the last four months, UTA has instituted pay cuts and furloughs, while Endeavor imposed layoffs, cut pay and suffered a credit downgrade driven by its debt load and a live events exposure that’s incompatible with pandemic restrictions. CAA, too, has slashed salaries, while ICM Partners laid off 40 support staffers. Paradigm cut pay and staff, sold a stake to an investor, and is now eying a partial spinoff as well. Another midsize shop, APA, made similar cuts, in two separate waves.
Meanwhile, about the only talent still at work in filmed entertainment are writers. That’s been good news for the WGA, which not only represents them, but depends on working writers for dues income. The union certainly needs the dues money, as it remains locked into — and so far is on the losing side of — a costly, high-stakes battle with WME and CAA (and formerly UTA) that continues to play out in federal court. The two agencies seem to be on a winning path in the bidirectional fight over antitrust arcana, which (combined with the scent of treble damages for the talent firms if they prevail) may cool any ardor they have to reach a UTA-style agreement with the guild.
And while a source tells The Hollywood Reporter that ICM Partners is actively reviewing the WGA-UTA deal, that may mean little. After all, everybody interested in the matter has been actively reviewing the deal since it was disclosed. In fact, the answer to the question on many minds — who will sign next? — could turn out to be: nobody. The answer to another key question — what’s the long game? — is even murkier.
The Central Fight: Packaging Fees and Affiliate Production
Understanding all this requires assaying several key provisions of the pact UTA reached with the union. Start with packaging fees, which are also the subject of what remains of the WGA’s case against the two largest agencies. Huge swaths of the guild’s case were dismissed by Judge André Birotte on April 27, and a key portion of the remainder came under attack in a July 10 hearing, with a decision likely by September, according to a source.
That makes contractual provisions against packaging fees all the more important to the guild, and so the UTA agreement includes an anti-packaging provision that prohibits new packaging. But what one hand gives, the other takes: The provision doesn’t kick in until June 30, 2022, and even then only if another “Named Agency” (WME, CAA or ICM) also signs on (or goes out of business), or if the WGA wins in court — or gins up enough legislative interest in the whole tangled matter that it gets a statutory prohibition against packaging, which seems unlikely.
All of that gives UTA at least two years to evaluate whether packaging is still financially valuable enough going forward that it’s worth a renewed fight. Another possibility is that the litigation might by then have resulted in a victory for the agencies. But existing deals are grandfathered in regardless of what happens, meaning that legacy revenue is protected unless the WGA wins a court decision to the contrary. As for new deals, if UTA would rather return to the battlefield and once again fight for packaging, a termination provision allows the agency to exit the deal on 45 days’ notice at any time.
But that fight, which the WGA kicked off with a 2018 notice to terminate its prior (1976) franchise agreement, may be even less interesting by the time 2022 arrives. Profit participations are on the wane with the rise of lengthy all-rights streamer deals, making backend-dependent packaging less attractive to agencies than in glory times past. And yet the commission-based model, too, is less exciting than 20 years ago, as the power of star actors has dimmed (a trend that hits star-heavy CAA more than UTA).
That’s a key reason the three largest agencies sought new business models and now have affiliate production entities like Endeavor Content (WME), wiip (CAA) and Civic Center Media (UTA), all of which the WGA decries as a conflict of interest even as it has signed the entities (or their subsidiaries) to its collective bargaining agreements and even as several top guild leaders have actually done deals at the production affiliates, savoring better terms than the studios offer.
A WGA West spokesperson previously defended the apparent inconsistency — which some writers called “indefensible” or “hypocrisy” — by saying that the guild supported such companies so long as they weren’t conjoined with agencies. “We want Endeavor Content to be in business,” a WGA spokesman told THR in April 2019, “we just want it to spin off its agency and eliminate the inherent conflicts of interest that now exist in its business practices.”
That doesn’t explain why the WGA and its leaders are willing to do business with affiliates now, with nothing spun off from anything. The WGA has, however, tried to limit such cross-ownership through contract provisions in the variously named codes of conduct and franchise agreements it’s been signing with various agencies since April 2019, when over 7,000 writers fired their agents on orders from the guild.
An Evolving Clause
The initial version of the new agreement, issued April 13, 2019, prohibited cross-ownership altogether, as did the modified versions signed over the months by Verve, Kaplan Stahler, Buchwald and A3 Artists Agency (formerly known as Abrams). But then Rothman Brecher negotiated language permitting up to a 5 percent cross-ownership interest. Gersh and APA signed on to that ceiling as well, which Paradigm then got upped to 10 percent and UTA to 20 percent. (Another firm, Culture Creative Entertainment, signed after Kaplan Stahler, but its agreement remains undisclosed.)
Notably, each of the agreements contains a favored nations clause — first negotiated by Loeb & Loeb’s Ivy Kagan Bierman on behalf of Verve — meaning that all who went before get the benefit of later concessions by the WGA. In essence, as the guild climbed the ladder, signing up ever larger agencies, it has had to water down its agreement each time. That’s true with regard to various provisions of the document, not just the ownership cap, and the favored nations clause applies to all of the compromises and all of the nine signatories past and present. (Numerous other agencies are also signatory, but have no significant base of writer clients.)
Thus, although WGA West president David A. Goodman had declared in a February 2019 opening salvo that “there is no meaningful compromise where conflict of interest is concerned,” apparently there is. Similarly, the union is permitting packaging fees to continue during a potentially indefinite sunset period despite assailing the practice as not just a conflict of interest but also (in claims later rejected by the federal court) as bribery, kickbacks and racketeering.
In any case, the latest ceiling suits UTA just fine, according to an agency source, because the firm had kept its ownership stake in Civic Center Media below 20 percent to stay in compliance with the AFTRA franchise agreement, which also sports a 20 percent limit. (Disclosure: THR parent company Valence Media has a partnership with UTA through Civic Center.)
But what about the three holdouts? ICM presumably doesn’t care much about the matter, as it has no affiliate production entity and is not known to have any plans for one. But Endeavor Content is wholly owned by its parent, Endeavor, and appears to be tightly integrated into Endeavor CEO Ariel Emanuel’s ambitious plans for media moguldom, a heavily leveraged strategy which led to an ill-fated IPO — touting content creation — that collapsed last September in the face of market skepticism.
In contrast, CAA’s wiip holds a more modest place in its agency’s firmament — and, notably, the talent firm is not the affiliate’s sole owner. Although CAA declined to reveal its ownership in wiip, a source close to the agency told THR that wiip CEO Paul Lee holds a “significant stake” in the enterprise. Meanwhile, another knowledgeable source disclosed that CAA’s share is greater than 20 percent. And even in nomenclature, Endeavor Content is more tightly bound to Endeavor and WME than is wiip to CAA.
It all means that, for both strategic and economic reasons, CAA might more readily agree to cap its affiliate ownership at or around 20 percent than WME would. And the packaging restriction would also be a harder hit to WME, with its stronger roster of top showrunners. But even so, for CAA to sign the WGA agreement, the agency would have to balance the eventual loss of packaging against the freedom to openly sign writers.
That “openly” is a key qualifier. Multiple showrunners and writer-producers are still working with their agents at WME, CAA and ICM, according to numerous sources close to the agencies, sometimes in outright violation of the WGA prohibition and other times ostensibly only in their capacity as producers. Nominally, under the WGA stricture an agent can only negotiate the producing part of a writer-producer deal, which often happens in conjunction with an entertainment lawyer, while the writer portion of the selfsame deal has to be negotiated solely by the lawyer. But obviously that’s a distinction that can easily fall by the wayside.
Meanwhile, the writers who may be affected most by the WGA ban are more junior staff scribes, who aren’t writer-producers and therefore had to cut their agency ties entirely. Non-producing feature writers are in the same boat and, to add insult to injury, don’t even have a dog in the fight over TV packaging and affiliate production.
Packaging fees and affiliate production have always been the headliners, but there were two other noteworthy roadblocks that UTA got the WGA to dismantle. One relates to information sharing. The WGA has demanded that agencies provide the guild with copies of writer contracts and deal memos, ostensibly so the union can better enforce its collective bargaining agreement. That rationale is true as far as it goes, but left unsaid is that the guild also wanted to better enforce the calculation and collection of dues, which are based in large part on writer earnings.
Indeed, members have long been obligated to supply such documents themselves, but often don’t, either for reasons of competitive privacy or, indeed, to fudge on their dues. The agencies objected to sharing confidential documents with the union without client consent, citing potential liability for doing so, and the solution reached was the obvious one: UTA will share such documents unless the client opts out. Once again, a win for both sides.
A final issue was seemingly innocuous background language near the beginning of the agreement that all of the agencies since Verve signed onto: “Consistent with its role as exclusive bargaining representative, the Guild is authorized by law to specify the terms set forth herein under which an agent may perform certain representational duties.”
The language had been even more explicit in the version the union promulgated publicly when it terminated the 1976 agreement: “The basis of the Guild’s authority to establish and enforce this Code is its status, conferred by federal labor law, as the exclusive bargaining representative of all Writers working in fields covered by a Guild CBA,” the so-called Code of Conduct declared, using the abbreviation for collective bargaining agreement. “Consistent with its role as exclusive bargaining representative, the Guild is authorized by law to specify the terms under which an Agent may be delegated to perform certain representational duties.”
In plain English, that text says that the WGA is the exclusive representative of its members and gets to dictate terms to the agencies — and that the entire agency business of representing writers, directors, actors and key crew exists at the sufferance of the unions and guilds. An agency’s right to represent its clients is just a power delegated by the labor organization.
As surprising as that language seems, many labor lawyers agree with the conclusion and even consider it mundane and indisputable. Agencies disagree, of course, and the law is more nuanced: while the National Labor Relations Act is clear that unions are the exclusive collective bargaining representative of their members, the key cases extending that principle to individual bargaining (which is what agents generally do) arose in contexts where an employer was trying to circumvent the union and its collective bargaining process (which is not what agents do).
That’s a key distinction. Federal law just doesn’t explicitly address the coexistence of agents and unions, a phenomenon found only in entertainment and sports, and no court has ruled on the matter beyond holding that unions do have the right to regulate agents, as the various Codes of Conduct and Franchise Agreements do. The limits of that regulatory power are exactly what’s being tested by the claims that WME and CAA are pressing against the WGA in federal court, and UTA, nominally still a plaintiff until it files its agreed dismissal, was not going to concede blanket authority to the WGA.
Hence, in UTA’s version of the franchise agreement, the background language sidesteps the issue altogether and reads, “The Guild, consistent with its role as exclusive collective bargaining representative for Writers, and Agent negotiated in good faith the Agreement, which is a mutual agreement between the parties.”
That’s quite a comedown from a campaign that WGA West president Goodman had labeled a “justified” “power grab” to be achieved by a “divide and conquer” strategy. Goodman — who was overwhelmingly reelected in September — and the WGA West’s tenacious executive director David Young largely maintained member solidarity and did indeed divide the agencies and the Association of Talent Agents. But the favored nations clause and the fact that each iteration of the agreement built on the immediately preceding draft meant that even though the agencies were nominally divided, a victory for one talent firm was a victory for all.
So who will sign next? None of the holdout agencies would comment; nor would the WGA. If anyone, it seems that ICM or perhaps CAA would be next, with WME the last to put pen to paper. But meanwhile, the litigation continues, and maybe the guild’s string of signatories has ended for now. Said attorney Bierman, “I could see the other agencies waiting it out.”
The Big Picture
The UTA pact is not the only compromised agreement the WGA signed recently. The other was a triennial revision to its collective bargaining agreement with the studios, which is now out for expected ratification, with balloting ending July 29 at 10:00 a.m. In its big-ticket items — wages, benefits and residuals — that deal follows the pattern set by the Directors Guild of America’s agreement reached March 4 (as does SAG-AFTRA’s recent deal, also out for expected ratification, with votes due by 5 p.m. July 22). The WGA achieved incremental gains on a couple of other key matters, but conceded that “the ongoing global pandemic and economic uncertainty limited our ability to exercise real collective power to achieve many other important and necessary contract goals.”
Will the Writers Guild continue to follow the leader as the DGA sets contract patterns? Observers have wondered whether the agency battle is part of a larger fight to elevate the WGA’s power vis a vis its sister guilds and the studios’ fraying confederation, the Alliance of Motion Picture and Television Producers. After all, the rise of writer-centric streamers, the correlative weakening of the director-dominated motion picture business, and the long-term fading of stars is shifting the industry’s center of gravity towards scribes, and away from movie directors and high-profile actors.
But whether that will translate into a corresponding increase in stature for the WGA is at best unclear. The agency campaign doesn’t seem to have brought the guild any closer to that nirvana. Then, too, the WGA’s efforts at glory aren’t helped by its division into two independent unions, West and East, with the latter more focused on organizing digital news shops (and quite successfully) than on Hollywood goings-on.
Real power for entertainment labor would require the unions to achieve a united front in their demands, but the AMPTP is so confident that won’t happen that it agreed starting in 2008 to let all three above-the-line guild contracts expire almost concurrently (May 1 for the WGA and June 30 for the DGA and SAG-AFTRA). Twelve years on, that bet that concurrent strikes are unlikely still seems like a good wager.
Indeed, tensions between the unions remain significant, even though SAG-AFTRA has deepened ties with the DGA in the last several years. The DGA, SAG-AFTRA, IATSE and Teamsters — but not the WGA — recently united to propose detailed anti-coronavirus production safety guidelines. That was a follow-up to an earlier effort that also included the AMPTP and additional unions but again saw the writers ultimately absent, although the WGA East had been on a press call related to the earlier effort.
Meanwhile, with near-concurrent contract expiration among the guilds, the WGA’s preference for negotiating close to the eleventh hour puts it by definition months after the DGA, which likes to seal a deal about a half-year before its pact expires. That will likely keep the directors union in pole position, with the writers and fractious actors then enduring a triennial Groundhog Day, accepting the same key terms the DGA achieves and obtaining incremental improvements on issues specific to scribes and/or performers.
The WGA has long contended that writers ought to have significantly more influence in how the entertainment industry operates, but so far, at least, the agency campaign has brought the guild only compromises, carveouts and notional victories, along with the looming threat of treble damages. Is there a grander strategy or global objective? If so, it still remains unclear.