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Hollywood Writers Bring Suit Against Their Agents: Packaging Deals Breach Agents' Fiduciary Dutiy
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The Writers Guild of America (WGA), the union to which all Hollywood (television and movies) writers belong, has filed suit against the four biggest Hollywood talent agencies: William Morris, Creative Artists, United Talent Agency, and ICM partners.  The plaintiffs in the suit include David Simon, the creator of HBO's The Wire and The Deuce. and Meredith Stiehm, the creator of CBS's Cold Case. The WGA has been objecting to a new way the agents are doing business that results in more compensation for the agencies and less for the writers.

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The agents do what is known as package deals with studios.  Packaging deals have been permitted under the WGA franchise agreement since 1976, but the usual way of doing business was that the agencies represented individual writers, creators, and on-screen talent and negotiated separate deals with each from the studios and obtained 10% of their clients' compensation.   In package deals, the agents pull together writers, stars, and other clients into proposals for studios.  The studios then pay the agents a packaging fee instead of he usual 10% commission that the agency would receive for bringing one of its clients to the table.  In recent years, the bulk of the deals the agencies negotiate are not for their individual clients, but are package deals in which writers, creators, and talents are all part of one big deal that the agencies then sell to the studios. The WGA maintains through its suit that the end result is that writers are always paid less if the package is accepted than they would be if they were brought into the project independently.  The studio pays less because of the amount it has to pay to the agent for the efforts in pulling together the project. 

 

The WGA had adopted a code of conduct to replace the franchise agreement that had governed the relationships between writers and their agents since 1976.  None of the top four talent agencies agreed with or signed on to the new code.  The WGA not only has the suit, but the possibility of a strike as a means of exercising their rights. The WGA says that 92% of its members have signed on to the code of conduct. 

 

The suit calls the packaging practice a breach of the agent's fiduciary duty to their clients, the writers.  When putting together the packages and negotiating for them, the agents are opting for a higher level of compensation for themselves from the studios (the fee), as opposed to the 10% commission that they would earn from their writer clients in obtaining them a writing deal on a studio project.  There was a suit on packaging deals against the William Morris agency earlier, a suit that was settled with the WGA as a means of curbing the practice of package deals.

 

The agencies argue that the packages are the way studios do business now because there are so many more outlets.  About 91% of all agreements agents make are package deals. The old Hollywood-generated projects have gone by the wayside as Netflix and other streaming video companies are pulling together their own ideas and talents.  Those independent sort of companies are no longer relying on the old agent-client negotiation model. The agents argue that it is the way to get work for their clients.  With the face of the industry changing, the agents say they have had to undertake a different role in finding opportunities for their clients. The agents also note that with packaging, the agencies are really tied to the profits and losses of the project.  Under the 10% commission arrangements, the agents collected their 10% commission from their clients even when the series or projects were canceled.  Under package deals, everyone is tied to the success of the project and compensation is tied to profits and losses.  The agencies say that they are incentivized to be sure that the projects (shows and movies) are successful and believe that best represents the writers over the long term. David Robb, "WGA Sues Big Four Agencies Over Packaging Fees,"  Deadline, April 17, 2019. 

 

The agents' counterproposal to the WGA code was to offer writers 1% of their packaging fees.  The WGA called it "not a serious proposal."  David Stein said that he had done 134 shows on a series before he realized that his agency, through a packaging deal with the studio, was earning 94 cents of every dollar that he made on the series,  In an interesting twist, several large law firms have offered to represent WGA members in studio negotiations on a straight commission basis as an alternative to the franchise agreement with the talent agencies.  

 

The suit also alleges that the packaging deals violate the provisions of the anti-kickback provisions of the Labor Management Relations Act (Taft-Hartley) because it the agents have created a relationship with management in an attempt to circumvent union agreements with management. 

Discussion Starters

 

Explain the relationship between the talent agencies and the writers.

How do package deals affect writers' compensation?

Is the code of conduct a collective bargaining agreement?

 

The suit also alleges that the packaging deals violate the provisions of the anti-kickback provisions of the Labor Management Relations Act (Taft-Hartley) because it the agents have created a relationship with management in an attempt to circumvent union agreements with management.