(Published Feb. 19, 2019, Updated April 4, 2019)
The WGA’s current agreement with agencies expires on April 6, 2019. The WGA’s goals for a new contract include eliminating practices that constitute a conflict of interest, and requiring the agencies to work with the Guild to enforce contracts and protect writers’ interests. Agencies should be paid 10% of the compensation they negotiate for writers, not get paid by the studios that employ those writers. Achieving these goals will require a united membership.
Below are answers to questions members have raised. Have a question we haven’t answered? Email: Agency Agreement.
THE GUILD'S AGENCY FRANCHISE AGREEMENT
What is the agency agreement?
The Artists’ Manager Basic Agreement of 1976 (AMBA) is an agreement between the WGAW and WGAE (jointly, WGA or Guild) and the Association of Talent Agents (ATA). The provisions of the AMBA regulate how agencies represent writers in career development, procuring employment, enforcing agreements, and negotiating their individual overscale deals (the amount writers get above MBA minimums).
What gives agencies the right to represent writers?
Under federal labor law, talent agencies can only represent writers with the consent of the Guild. The AMBA is the “franchise” agreement agencies must sign to represent Guild members. The Guild has a rule—Working Rule 23—providing that members can only be represented by agencies that sign an appropriate franchise agreement with the WGA.
Why is the Guild renegotiating the AMBA after 43 years?
The transformation of the entertainment industry over the last 43 years has made the AMBA outdated and largely irrelevant. It is a different industry. Since 1976, the major agencies have become an oligopoly of four. Most recently, the three largest agencies have sold equity stakes to private equity funds. These investors seek higher than usual returns on their investments, increasing the agencies’ focus on their own bottom line. This undercuts their focus on the client’s interest.
There is widespread consensus among WGA members that, despite the diligent efforts of some individual agents, the agencies are failing to adequately represent writers with respect to overscale compensation and other individual contract terms.
When will the current AMBA expire?
The current AMBA requires a 12-month notice before the termination takes effect. The WGA gave notice to the ATA on April 6, 2018, which means the terms and conditions of the current agreement will terminate on April 6, 2019.
Who will negotiate the new agreement?
The WGAW Board and WGAE Council appointed a negotiating committee: co-chairs former WGAW President Chris Keyser, former WGAW Board member David Shore, and current WGAW Board member Meredith Stiehm, as well as committee members Lucy Alibar, John August, Angelina Burnett, Zoanne Clack, Kate Erickson, Jonathan Fernandez, Travon Free, Ashley Gable, Deric A. Hughes, Chip Johannessen, Michele Mulroney, Michael Schur, Tracey Scott Wilson, Betsy Thomas, Patric M. Verrone, Nicole Yorkin, WGAW President David A. Goodman (ex-officio[MOU1] ), WGAW Vice President Marjorie David (ex-officio), WGAW Secretary-Treasurer Aaron Mendelsohn (ex-officio), WGAE President Beau Willimon (ex-officio), WGAE Vice President Jeremy Pikser (ex-officio), and WGAE Secretary-Treasurer Bob Schneider (ex-officio).
When will negotiations take place?
The Guild sent opening proposals to the ATA in April 2018. The WGA and ATA negotiators held in-person meetings in February and March. Members will be updated when there are any significant developments.
THE GUILD'S OBJECTIVES
What are the goals of negotiating a new AMBA?
Our overall goal is to properly align agency incentives with those of writers. The key objectives are:
- To ensure that agencies represent writers free of the conflicts of interest inherent in current practices, such as producing and packaging.
- To require agencies to work with the Guild to enforce writers’ contractual rights under both the MBA and the terms of writers’ individual agreements.
What is in our list of proposals?
The opening proposals were developed through discussions with the membership and elected leaders, as well as research and analysis of the agencies, their practices, writer compensation, and industry finances and trends. The proposals focus on the elimination of conflicts of interest; the requirement that agencies work with the Guild to enforce a writer’s contractual rights; and accountability to ensure that agencies support anti-harassment and inclusion and equity goals. The opening proposals were modified during February and March as a result of discussions with the ATA, agencies, and writers. Those modifications are now incorporated in the WGA Code of Conduct.
What does the law say about conflict of interest for agencies?
Agents are fiduciaries under the law in California, New York, and virtually all other states. A fiduciary is a person to whom power is entrusted for the benefit of another—a client—whose interests are to be put first. Agency law prohibits fiduciaries from having any conflict of interest adverse to their client's, unless the conflict is fully disclosed and the client chooses to waive it.
What laws are the agencies breaking when they receive a packaging fee from the studios who employ their clients?
The Guild is preparing a lawsuit that challenges the practice of packaging. The legal theory is twofold: first, that packaging violates state conflict of interest law applicable to all fiduciaries; second, that packaging fees represent illegal kickbacks to an employee representative under federal labor law. The Guild is also evaluating legal claims targeting other types of agency conflict of interest, such as producing.
Why don't we just rely on litigation to solve this?
If we cannot reach an agreement, the Guild will bring legal challenges to the agencies’ conflicts of interest. However, the legal process is slow and can never take the place of the Guild’s greatest strength: the ability of a united membership, through collective action, to enforce the Guild’s right to regulate agencies. The best outcome is a solution that not only bans agency conflicts of interest, but also addresses other important problems with the current AMBA.
What happens if the WGA does not make a deal with my agency before the current AMBA expires?
The Guild has the option of unilaterally implementing a Code of Conduct that any agency would be required to follow as a condition of representing WGA members. In the 1990s, the National Basketball Players Association (NBPA) imposed just such a code, which was upheld in federal court in the face of a legal challenge. Codes of conduct are the dominant method of agency regulation in all professional sports. In late March, WGA members voted overwhelmingly—7,882 voted YES (95.3%) and 392 voted NO (4.7%)—to authorize the WGA West Board and WGA East Council to implement an Agency Code of Conduct, if and when it becomes advisable to do so, upon expiration of the current AMBA on April 6, 2019.
WHY IS CONFLICT OF INTEREST A PROBLEM?
Why do we care if our agencies produce? Won't we get a better deal as writers?
If your agency is also your employer, you don’t have an agency. It is impossible for said agency to fairly represent your interests. It is the clearest imaginable conflict of interest. Just as it would be a bad idea to have studio business affairs negotiate a deal with itself on your behalf, it is an equally bad idea to allow agencies to be producers, owners of content, and the employer of writers, yet still represent you.
While a few writers have received beneficial deals with the new producing entities connected to the agencies, offering a better deal to some creators is a common approach of new entrants—like Netflix, Amazon, and Apple—who must do so to attract talent to their new studio or service. As new competitors mature and focus on maximizing their profits, however, they end up operating just like our traditional employers by trying to keep talent costs low. The same will be true for agency producers, and you won’t even have proper representation to push back against unfair deals.
Paying for a manager (10%) and lawyer (5%) to police your agency’s conflicts is not an acceptable solution.
The franchise agreement between SAG and the agencies effectively banned agencies from producing until 2002. Since that time, the biggest agencies, bolstered by private equity investments, have begun to move into production, with the pace of that change accelerating markedly in the last few years. The time has come to end this practice for the good of all talent.
What are packaging fees in TV?
Packaging is when an agency demands to be paid directly by the studio employing its client. In television, packaging replaces the agent’s traditional 10% commission on writer earnings, with payments that come directly from the studio. The big agencies now insist on packaging virtually every scripted TV show.
Here’s why: For representing the show creator (and sometimes other elements), the agency is paid through a formula referred to as “3%-3%-10%.” The first 3% is from the network license fee (an amount which may be negotiated or imputed) and is paid directly out of the series budget. This 3% is $30,000 to $75,000 per episode and is often more than the agency would get from 10% of the earnings of its clients. Packaging fees mean less can be spent on hiring more writers and giving them more money. With more than 300 scripted series packaged each season, this is more than $150 million that flows to the agencies. This 3% out of the budget also rebuts the argument that packaging somehow amounts to agencies taking a risk on the show. They do not.
The second 3% is also from the network license fee, but is deferred until net profits, if any.
The agency then gets 10% of the show’s modified gross profits for the life of the show, even though its work is normally finished before the pilot is shot. This agency back end amounts to hundreds of millions of dollars per year for the big four agencies, far more than they would earn from 10% commission. A successful show, not just on a network, may bring tens of millions of dollars over its life to the agency in profit participation.
The implications of this system are enormous, both economically and ethically. The agencies now make their money from the show being on the air, not by maximizing the earnings of writers. This means agencies’ interests are structurally aligned with the studios, not with their clients. Once the packaging fee is negotiated (and agencies block deals until their package is in place), agencies are no longer directly incentivized to continue to advocate for writers. Agency revenue on a packaged show is in fact mostly about studio profits, not compensation for talent.
The agency’s package fee is usually negotiated before any deal for writers or other talent. Packaging fees remove the single greatest incentive for agents to fight on writers' behalf: mutual and immediate shared economic self-interest. The practice of packaging makes a mockery of the proper notion of a fiduciary being trusted to put the client’s interest first. This is what we mean when we say agency interests have become misaligned from writers’ interests.
How does packaging work in feature films?
In features, typically on independent films, agencies seek to get paid in at least five different ways. First, agencies get paid 5% of the budget of the film as a packaging fee. Second, agencies often demand the right to sell the film domestically, taking a percentage of the sales revenue. Third, agencies seek to represent the film for foreign distribution, taking a distribution fee. Fourth, agencies charge third-party producers, distributors, and financing companies for access to films represented by the agency. And, finally—unlike in television where the agencies are prohibited from collecting the 10% from talent when they also get packaging fees from studios—in features, the agencies also collect that commission from their clients. After discussions with members working in independent film, as well as conversations with the agencies about their expanded role in independent film, the WGA has crafted a revised proposal that would allow agencies to perform film financing and sales services subject to disclosure of those services and related fees and writer consent. Packaging fees remain prohibited, but a writer’s agency could help raise money for the film or sell the film to distributors and be compensated for those services.
Doesn't packaging by agents help get films produced and shows greenlit? Won't writers be disadvantaged if packaging is banned?
There is a critical difference between agencies packaging talent elements of a project, and requiring packaging fees on the projects for themselves. Finding the right performers and directors and producers for a writer’s project is an appropriate agency function. In fact, it is their job. Even without a “packaging fee,” agents already have a financial incentive to continue to put talent and IP together to make film projects more attractive to studios. The packaging fee represents the conflict.
The WGA’s revised proposal on independent film prohibits packaging fees but would allow an agency to help raise financing for the film or act as a sales agent and be compensated for those services. Enhanced disclosure and consent requirements will ensure that writers have a say in their agencies' role on an independent film.
Can't the agencies just get a package fee with actors and directors?
It is possible, but very unlikely. First, our proposal prohibits an agency or a related entity from having any financial interest in any series or film on which a writer-client works. That would include a financial interest even where a writer was not part of the package. While there are a few actors or directors who might be attractive enough to a studio for them to agree to the package fee without a script, writers and the intellectual property they create are at the heart of the current system. Writers often are the package. Why would studios pay a package fee if they don’t get writers and pilots as part of the deal? The big agencies know this, which is why they care so much about what writers decide to do in a new franchise agreement.
WHO WILL BENEFIT FROM A NEW AGENCY AGREEMENT?
Isn't packaging just about rich TV writers' interests?
No. Middle-class writers in television and screen are hurt as much by packaging as showrunners are. Showrunners have a better ability to defend their quotes, but are hurt by losing both part of their back end and the budgetary resources to make shows as good as possible. Middle-class writers in both TV and screen are hurt because their quotes aren’t being defended. Our most recent survey shows a 16% decline in the median weekly pay of writer-producers between 2014 and 2018, but experienced TV writers know the decline began well before that. The survey also revealed a median of $150,000 for a screenplay, with 20% of screenwriters reporting working at minimum. Minimums are what the Guild negotiates, not the agent.
The conflict of interest caused by packaging is the root cause of ineffective representation by agencies. In a booming business, agencies have not defended the quotes of working writers. They have been unable or unwilling to insist on increasing writer pay. Instead of making more when their clients make more, packaging agencies’ income is tied to studio profits. Realigning these incentives—so agents make more when their clients make more—will benefit writers in all work areas and at all levels.
How might screenwriters benefit?
As it is now, the studio that pays agency packaging fees is the same studio that is cutting screenwriter quotes, insisting on one-step deals, and demanding free writing. To fight for middle-class screenwriters’ interests, the agency would have to push back against the hand that feeds it. A realignment of interests means agents will again have a stake in aggressively negotiating compensation for all writers. Screenwriters will benefit from a higher level of service by agents who are free of conflicts.
We will also require that agencies provide all deal memos, contracts, delivery information, and invoices promptly so the Guild can more effectively enforce the compensation and late pay provisions of the MBA. The bottom line is, as long as the agencies have the incentive to accommodate studios and producers over screenwriters, writers get hurt.
Big agencies are moving aggressively into producing films, through investments and affiliated companies. When your agency is your employer, you have no agency. Every dollar you get paid is a dollar less than the agency or their related parties get to keep.
How might writers on TV staffs benefit?
In a system with proper incentives, agencies would fight for the writer’s best interest and highest possible quote. If writers make more, they make more, to state it simply. That makes sense in both ethical and practical terms. As it is now, whether the writer makes more or less has little financial impact on the packaging agency. Thus, agencies have little incentive to fight for writers’ title bumps and episodic fee increases, which has resulted in quote stagnation for 20 years, despite a booming business. Packaging can also distort the hiring process, since the agencies have mixed incentives in placing their clients on a show for which the agency gets a package. Without packaging, writers would be more easily able to work on series they are best suited for, even if it’s from a creator at a different agency.
How might showrunners benefit?
In a world of properly aligned incentives, the agency would earn 10% of the showrunner’s compensation, including profit participation. A showrunner can be the key creative force in a series that makes as much as a billion dollars in revenue for the companies. The idea that an agency should make more than 10% of what such a writer would make is wrong, morally and economically. No agency, with hundreds of clients, should make more or anywhere near what a single client makes on a given project.
How might writers just starting out benefit?
If we eliminate the package fee from the budget of the series, shows can afford more writers on staff, creating more entry-level jobs. Since agents will earn their commission from staffing you—not only on pilots—they will be motivated to place writers on staff long enough to get experience, rather than pushing them to develop too soon. When you do develop, you will be more able to work with talent from other agencies. Also, without packages, agencies get paid the same if you are on a series from a showrunner at that agency or another one, so you will able to get meetings on more series. Most importantly, your agency will get paid more when you are paid more, not when studio profits are higher, which is the way it is with packaging.
Aren't I better off because I don’t have to pay 10% to my agency on a packaged TV show?
Not in the long run. Guild surveys over the last five years have documented the decline in TV writer pay. Between the 2013–14 and 2015–16 seasons, the median weekly compensation for writer-producer declined 23%. During the 2017–18 season, median weekly compensation improved slightly compared to 2015–16, but remained 16% lower than in 2013–14. Thirty-five percent of TV writers are working at Guild minimum. This means that not just staff writers and story editors, but many writer-producers are at Guild minimum. Quotes by job title are down, and writers report they are lower than quotes for the same job title 20 years ago. “Saving” 10% on agency commissions is a losing bargain.
In addition, paying a manager and lawyer 15% to “keep the agency honest” is a 25% tax on writer earnings necessitated by the pervasive conflicts agencies have under the current system.
Why won't the studios just keep the package money if the agencies no longer get it?
They will try. But in a properly functioning market, with agents incentivized to negotiate increases, there will be leverage to get that money into writers’ pockets. Both writers and their agents will know going into the negotiation that the studios were previously willing to spend an extra $30,000 to $75,000 per episode, 10 points on the back end in television, and 5% of the budget in film. With the agency’s incentive properly aligned with writers, they will fight harder to make the studio spend that money because it affects their 10%.
Agencies may claim that if packaging goes away, all of the money would go to the studios, not writers. The argument defies logic. If an agency can successfully use writer power to negotiate packaging fees that take tens of thousands of dollars out of each episode’s budget and potentially millions on the back end, why can’t it negotiate for this money to flow to writers in the form of higher episodic fees and better back end? Packaging co-opts writers’ power to benefit the agency. We are simply asking agencies to exert that same power to benefit writers. Remember, that’s their job.
If we return agencies to a 10% commission model where writers' earnings and market incentives are properly aligned, what is the guarantee that things will be better for writers?
We can’t definitively answer the question “what happens afterward,” because there is no guaranteed outcome of this or any other union struggle. However, it is common sense that a good bit should come back to writers when agents are properly incentivized to fight for higher writer compensation, since the studios are already paying that money for talent, but it is currently funneled to the agencies as talent gatekeepers.
Ultimately the Guild’s power depends on using our collective strength to better writers' pay and working conditions. That requires the willingness to struggle. When we go into MBA negotiations or on strike, there is no guarantee of success. The Guild has a history of making gains through our collective power, and we have to demonstrate that we can do it again now.
Are we threatening to put the big agencies out of business?
Eliminating packaging and producing is not an existential threat to the big agencies.
Since agencies are privately held, little financial information is publicly available, and packaging is not very transparent. However, there is information available from leaked financials, credit rating agency reports, lawsuits, episodic budgets, and profit participation statements.
We do know that among the top agencies there are significant differences in the size of the business as well as in the importance of talent representation and packaging to total agency revenue.
The information below is our current best estimate:
- WME is the largest agency, with $3.2 billion in annual revenue. Talent representation is a fraction of company revenues, and packaging is less than 5%.
- CAA is much smaller than WME, with $600 million–$700 million in annual revenue. Packaging is around 10% of its revenue.
- UTA is even smaller—and is still mostly in the business of representing talent. Agency revenue is around $200 million and packaging is about 25–30% of the total.
These differences mean the larger firms could more easily adapt to a new model of representation without much effect to their bottom line. And the three largest agencies must answer to their private equity owners who may not be interested in a protracted struggle. The smaller agencies could also be motivated to adapt to a representation model free of conflicts of interest because of the importance of talent to their bottom line.
There is some chatter within the industry that packaging is not lucrative for the agencies anymore because we aren’t seeing astronomical syndication deals like Seinfeld. But it’s worth remembering that the growth of foreign and SVOD licensing has made series television virtually risk-free and more profitable overall, and the agencies continue to package all the shows they can, including those on Netflix and Amazon.
While the importance of packaging revenue varies across agencies, keep in mind that prohibiting packaging would be on a going-forward basis. In the short-term, agencies would continue to earn profits from existing shows while earning 10% on new projects, meaning there may not be much of a short-term impact. And in the long run, when agent incentives are properly aligned with talent, they should negotiate to recapture revenue through commissions on increased client income.
Why now? Packaging fees have been around for a long time.
At a time of peak demand, when compensation for writers at all levels should be substantially higher, writer compensation has declined. This defies the laws of supply and demand, unless something else, such as conflict of interest, is at work. The downturn for writers has coincided with unprecedented consolidation in the agency business, and the emergence of massive private equity investment in the three largest agencies. Agencies becoming producers (writer employers as well as writer representatives) increases the urgency of changing our agreement so writer interests once again align with writer representatives.
Are we taking on yesterday's battle by trying to take on packaging, since Netflix and other streaming platforms are changing the back-end game?
No. The major agencies continue to package almost every scripted series made for Netflix, Amazon, and other streaming platforms. Netflix and Amazon are negotiating profit participation deals that impute license fees for the streaming usage, as well as revenue for home video and syndication usage if the series remains available only on the SVOD service. This makes back-end negotiations even more opaque and prone to abuse by agencies that use the power of writers to secure their own fees from these services.
What can I say if my agent calls me?
We have prepared this FAQ and other documents for you to use if you find them helpful. Basically, you are under no obligation to talk with your agent about the AMBA. Nor do you need to defend the WGA’s proposals to your agency, since that is the job of the Guild and negotiating committee. Just as in MBA negotiations, a united front is crucial. If you are concerned about anything you hear from your agency about the negotiations, please take good notes and contact the Guild at Agency Agreement.
What if I like my agent and know they have done good work for me? What if I feel conflicted?
Many of us have not only professional, but also personal relationships with our representatives. And there are agents who do the best they can in a flawed system, who have supported their clients through both bad times and good. Our focus is not on individual agents; it is on the flawed system that places agencies in conflict with the interests of their own clients. A good agent will eventually welcome the systemic changes we’re advocating—some of them have told us so already.
Agencies should function as our partners, and sometimes they do. Agents and agencies can provide valuable services to many writers: information about employment opportunities, career advice, and overscale negotiations, to name just a few. Yet the compensation of most writers is disproportionately low compared with the value of the intellectual property we create at a time of peak employment, with the business generating historically high profits.
Mixed emotions in this kind of struggle are understandable. But there are things at the core of our agency partnership that have gone wrong. The agencies’ incentives are not aligned with ours and that has to change.
This is not personal, it’s business. As our agents don’t hesitate to demand packaging fees to our detriment, we must not hesitate to express our objection to these pernicious practices.
What if my agent is a good friend?
If your personal relationship with your agent makes you feel pressured, you might say something like this: “You and I are friends. But we are also business partners. We are partners in a system that for decades has seen agencies (not you, the agencies) take advantage of writers. We want to change that now. I hope that doesn’t change our friendship, but if we are friends, then you will understand that I cannot allow myself—and my fellow writers—to continue to work in a broken system that treats us unfairly. If this means that we can no longer work together, I am sorry. We can still be friends.”
What if my agency asks me to stick with them and oppose the Guild's bargaining agenda?
There is no question that many agents are honest, hardworking, and try to be good trustees of their clients’ best interests. It is also true that the major agencies’ practices are rife with conflicts of interest that are not in the best interests of writers. A reasonable person should realize that what writers are doing to fix the agency relationship makes sense and is long overdue. If agents don’t recognize this truth, they are being blinded by the conflict of interest that their situation embodies. We think there are many agencies and agents who will ultimately welcome what the Guild and writers are doing by reopening the agency agreement.
Proper representation means the client’s best interest should be paramount. As your advocate, your agent should be willing to understand that proper representation means your interest as their client must come first.
What if my agency drops me in retaliation for the Guild's demands during the renegotiation, holds back-payments, holds meetings hostage, or otherwise works against me?
Any writer who feels they are being threatened or retaliated against should contact the Guild immediately at Legal.
The Guild stands ready to bring legal claims, either in court or in arbitration under the AMBA, to protect writers from retaliation.
In addition, members can exercise their individual and collective power to fight against any agency that retaliates. Writers can refer other writers to open jobs. Writers can leave their agencies in protest if they or other members are threatened or dropped as a result of the negotiations.
What if my agency asks/demands that I sign a written representation agreement during this negotiation process?
Please consult with the Guild before signing any new agreements with your agency. The vast majority of agencies have abandoned written agreements over the past two decades, because they believe it is to their advantage. If you are given a new agreement, you can send it to the Guild (Agency) for review. No writer should sign a representation agreement that extends beyond the April 6, 2019 expiration date of the AMBA. That is the day that writers may have to leave their agencies. If you have a written agreement that extends beyond that date, contact Agency.
What if the agencies become managers and keep doing the same conflicted things?
If agencies seek to use nominal manager status to perpetuate their conflicted representation of writers, the Guild will take action against the offending agencies.
WHAT ARE RISKS OF SEEKING A NEW AGENCY AGREEMENT THAT BANS CONFLICTS OF INTEREST?
Is the WGA going to be sued by the agencies? Can we defend that?
It’s possible the Guild could be sued, and we are prepared. The Guild has done extensive legal preparation and we believe the law is on our side. We have been working with experienced outside antitrust counsel for a few years now to prepare and are confident in our legal positions. Additionally, the Guild is on strong financial footing and is in no risk of running out of funds should a legal battle become protracted.
HOLDING THE AGENCIES ACCOUNTABLE
How will we enforce provisions in a deal with the agencies?
The Guild’s Agency Department will do regular outreach to writers to ensure that the agencies comply with the agreement. In fact, the new world of a renegotiated AMBA will allow the Guild to become much more proactive in enforcement of writers’ contracts. The new provisions will contain an effective arbitration clause that includes expedited arbitration with real penalties. The ultimate penalty for a non-complying agency is to cancel its franchise and prohibit it from representing writers. The agreements for all of the major professional sports unions do this, and the Guild’s can, too.
In the event that the Guild isn’t able to renegotiate the AMBA, it can implement a code of conduct with which all agents who want to represent writers must comply. This is how the sports unions representing players in the NBA, NFL, MLB, and NHL protect their players. As with a renegotiated AMBA, the Guild will be able to enforce a code of conduct through an effective arbitration mechanism with real penalties.
HOW CAN I HELP?
What can members do to support the campaign for a stronger AMBA?
Please stay informed by coming to meetings and keeping up with information you receive from the Guild in emails and on the website. Talk with your fellow members and others in the industry about our overall goals.
Inform the Guild about rumors, ask questions, provide information, hang tough, and hang together. Together we’ll make this happen.