February 5, 2021
Agency Campaign Update: Agreement with WME
The WGA and William Morris Endeavor Entertainment, LLC (WME) have reached a deal on a franchise agreement. Therefore, effective immediately, WME may once again represent Guild members for covered writing services. WGA and WME have also agreed to withdraw the legal claims each has brought against the other in federal court.
The WME franchise agreement contains the same terms as those set forth in the UTA/ICM/CAA deals and protects writers in the three fundamental areas that the Guild has emphasized since the beginning of the campaign:
- Contract, deal memo, and invoice information will be provided to the Guild, allowing the WGA and the agency to partner in systematically addressing late pay and free work.
- Strict 20% limitation on agency ownership of production entities.
- A sunset period that ends the practice of packaging by June 30, 2022.
The WGA also negotiated a side letter with WME, its parent company Endeavor, and Endeavor’s private equity owner Silver Lake that contains the protections previously negotiated with CAA, as well as additional terms. The purpose of the WME side letter is to address two complicated conflict of interest issues, one that is currently in play and one that is prospective. Specifically, WME is currently majority-owned by Silver Lake, and WME hopes in the future to become a publicly-traded corporation. Both of these circumstances required complex negotiations in order to ensure one thing: that WME be required to behave as a proper fiduciary, putting writer clients first regardless of the agency’s ownership structure. WME, Endeavor and Silver Lake have worked with the WGA over the past month to craft an agreement that achieves this objective.
- WME/Endeavor agreed to a mutually-chosen third-party monitor, Louis M. Meisinger, a retired judge and mediator, to ensure that the agency sells down its interest in Endeavor Content to the required 20% or less in compliance with the Franchise Agreement. The side letter provides a deadline for the sale of Endeavor and Silver Lake’s interests in Endeavor Content down to the permissible level.
During the divestment period, WME will escrow all after-tax gross profits, writer commissions and packaging fees related to WGA-covered projects produced by Endeavor Content. Judge Meisinger will also oversee all writer deals negotiated by WME with Endeavor Content to make sure the agency is properly carrying out its fiduciary duties for writer clients.
The side letter imposes serious consequences if the sale is not completed by the agreed deadline, including the right for the WGA to suspend WME’s ability to represent writers and an enhanced obligation to escrow profits, package fees and commissions WME/Endeavor receives related to WGA-covered projects produced by Endeavor Content until the sale is complete.
- Consistent with the CAA agreement, the side letter ensures that WME/Endeavor and any Silver Lake entity will not jointly have a greater-than-20% ownership interest in any affiliate production company. The Silver Lake fund that owns WME/Endeavor will not have a greater than 20% ownership interest in any affiliate production company, regardless of whether WME/Endeavor also has an interest in the entity.
- The side letter provides that small (de minimis) shareholders of the agency are exempt from the 20% production ownership cap. This exemption applies only if the shareholder owns 5% or less of the agency and has no control over its operation or management.
As long as WME remains a privately-held agency, the exemption will apply only to a limited group of institutional shareholders whose small stake confers no say over agency operations. WME must disclose those shareholders, and is also required to disclose to its writer clients the investor’s greater-than-20% ownership interest in any production company that makes an offer of employment. WME must also provide the WGA the offer and final deal terms.
If WME/Endeavor becomes a publicly-traded company, it has agreed to publicly disclose the obligations shareholders have under the Franchise Agreement to prevent potential violations, including the fact that any shareholder who owns more than 5% of the public company would be bound by the Franchise Agreement. Thus, even in the event that WME/Endeavor goes public, any investor that owns 5% or more of the publicly-traded company will be required to abide by the 20% production cap.
- As in the CAA agreement, the side letter contains protections in the event a Silver Lake investment fund, other than the fund that has a direct interest in WME/Endeavor, acquires a greater than 20% interest in a production company. Silver Lake has agreed, going forward, to identify any such production company (as of today, there is none). If WME were to negotiate a deal with such a company, the agency would be required to disclose to its writer clients the existence of Silver Lake’s ownership and to provide to the Guild a copy of the offer and final deal points.
This transparency will allow the Guild to make sure that WME is negotiating appropriate deals for writers in these circumstances, and that Silver Lake’s ownership interest is not suppressing the value of writers’ services. If there are patterns in the writer deals—such as below-market pilot script fees, for example—the Guild will have the information it needs to investigate and take any necessary corrective action with WME.
The Guild appreciates the efforts of WME and Endeavor in working through the complicated issues involved in this negotiation.
You can read a red-lined version of the WME franchise agreement here. The WME/Endeavor/Silver Lake side letter is here. Click here for the list of all franchised agencies.
This agreement concludes the negotiation phase of the agency campaign. The agreements expire on April 12, 2025 unless mutually extended on a year-by-year basis.
Congratulations are in order to the entire membership. Since saying thank you at the end of a long technical email is insufficient to recognize the member contributions and sacrifices this effort entailed, we will be back in touch soon with a wrap-up.
WGA Agency Negotiating Committee
Chris Keyser, Co-Chair
David Shore, Co-Chair
Meredith Stiehm, Co-Chair
Deric A. Hughes
Tracey Scott Wilson
Patric M. Verrone
David A. Goodman, President WGAW, ex-officio
Marjorie David, Vice President WGAW, ex-officio
Michele Mulroney, Secretary-Treasurer WGAW, ex-officio
Beau Willimon, President WGAE, ex-officio
Kathy McGee, Vice President WGAE, ex-officio
Bob Schneider, Secretary-Treasurer WGAE, ex-officio