Writers & Agents Split over Packaging Fees

May 3, 2019

Late in the evening on Friday, April 12th, 2019, an email was sent out by the Writer’s Guild of America to its 13,000 members containing instructions to notify their respective agents that their representation was terminated until the new code of conduct was signed.  Over the course of the following weekend, prominent writers like Stephen King and Patton Oswalt sent out signed letters severing their relationships with their agents.  The newly proposed code of conduct which has prompted this result seeks to eliminate packaging fees, which have become integrated into the regular dealings of agencies and production companies.

The Writer’s Guild of America, the WGA, is the labor union that represents television and movie writers across the United States.  It has made headlines in the past with previous breakdowns in negotiations.  In 2007, the WGA and Alliance of Motion Picture and Television Producers had negotiations fail which prompted a writers’ strike that impacted the industry for years afterward.  The current negotiation dispute is between the WGA and the Association of Talent Agents, the ATA, which is a collective of over 100 talent agencies which represent most of the industry in Hollywood.

The agreement between the WGA and ATA has not been renegotiated since 1976.  Under this current agreement, agents earn a ten percent commission for the work their clients receive from a studio.  Unaccounted for by this agreement, however, are packaging fees, which have become common-place in most Hollywood deals.  Agencies within the ATA represent far more clients than just the writers within the WGA, and packaging fees result when agents provide an entire roster of talent to a film or television project.  With packaging fees, the agents do not receive a commission, instead the agency is paid directly by the studio from the production budget.

Packaging fees are arranged in a structure referred to as 3-3-10, which is how the percentages are distributed.  There is an upfront payment of three percent of the licensing fee from the studio, which typically ranges from $15,000 to $75,000 per episode.  There is also a deferred fee of three percent which is payable when the project has hit a net profit.  Only huge hits achieve net profits, which means that this amount is typically zero.  The final component refers to up to ten percent of the modified adjusted gross receipts, which is also often zero unless the show runs for multiple seasons and is sold into aftermarkets like syndication.  The ATA argues that this arrangement is better for writers, because they avoid paying any commission fee.  Writers and the WGA argue that it is far worse, because agents are not motivated to negotiate for better pay since they receive a profit regardless and the agency’s interests are more aligned with the production company rather than their clients.

Following the negotiation breakdown, the WGA announced it was filing a lawsuit against William Morris Endeavor (WME), Creative Artists Agency (CAA), United Talent Agency (UTA), and ICM, which are collectively known as the Big Four agencies that dominate Hollywood.  The complaint was filed on April 17th, 2019 in the Superior Court of Los Angeles County, with prominent writers David Simon, Barbara Hall, Meredith Stiehm, Patti Carr, Ashley Gable, Deric Hughes, Chip Johannessen, and Deirdre Mangan acting as plaintiffs alongside the Writers Guild of America West and East.

The complaint alleges that packaging fees are unfair and unlawful business practices under California law.  By promoting and pursuing packaging fees, the defendants have breached their fiduciary duties to their clients, as well as violated California’s Unfair Competition Law.  The plaintiffs seek injunctive relief in order to halt the practice of packaging fees, and for the members of ATA to pay restitution in the amount of how much would have been paid to the plaintiffs in the absence of the packaging fees.

While the dispute is ongoing, it means that a number of writers have no agents representing them.  As an alternative, the WGA and prominent writers have launched initiatives to help find work for other writers.  In addition, the WGA has suggested that writers utilize their managers and lawyers to handle their business affairs.  The ATA, however, issued a response that to have managers and lawyers act in this capacity would violate California’s Talent Agency Act and New York’s General Business Law.  The impact from this dispute could be far-reaching should this be true and if the conflict be unresolved.  While smaller agencies have pledges support for the WGA’s new code of conduct, there is no indication that members of the ATA will absent a court ruling.

As of this time, the ATA or the other defendants in the lawsuit have not formally responded to the complaint.

Image Source: REUTERS/Mike Blake

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