What's at Stake as Hollywood Writers Go to War With Their Agents

As an April 6 contract expiration approaches, a "power grab" by the WGA threatens packaging fees — which would cut into agency profit margins but might not result in more money for union members.

It's been decades since the talent agencies were exclusively "tenpercenteries," making their living by charging clients a set commission. Now, particularly in television, key agencies rely heavily on packaging fees paid not by clients but by the studios that employ their clients. That's been the practice for about 60 years. And more recently, the three biggest agencies — CAA, WME and UTA — have sprouted affiliated production companies that compete directly with the studios.

The Writers Guild wants to undo all that in a move that would dramatically reshape the industry — not just for agencies but also for studios and pretty much everyone else — by rewriting the agreement that governs the agencies. As an April 6 contract expiration approaches, the battle has gone scorched earth, with the two sides agreeing on almost nothing. Does the WGA have the power to unilaterally rewrite the rules or not? Are talent agencies true powerhouses or do they exist at the sufferance of the guilds? Are agents essential servants of writers or just out for themselves? Do agencies make more than their clients off hit shows? Are writers making more money these days or less? If less, is that the agencies' fault or the studios' and streamers'? And hovering over it all, will WGA members really leave their agents en masse if the guild orders them to — and if they do, will other guilds follow suit? And will the WGA target managers next?

It's a whirl of questions, and litigation may be on the way. The WGA points to 1991 federal district court precedent in Denver that upheld the NBA Players Association's talent agent rules in favor of the union, but the Association of Talent Agents, led by executive director Karen Stuart, says the issue is far deeper. Yet the Supreme Court upheld Actors' Equity's regulation of agents in 1981 as "clearly designed to promote the union's legitimate self-interest" and said that courts should not judge "the wisdom or unwisdom, the rightness or wrongness, the selfishness or unselfishness" of a union's goals. Still, none of the cases involve an effort as ground-shaking as the WGA's, and judges are often loath to upend an entire industry.

Federal labor law makes the guild, like any labor union, the exclusive bargaining representative of the workers, which seemingly supports the WGA's contention that agencies' authority derives from "the consent of the Guild." But industry custom and practice effectively treat the guild and agencies as co-equal representatives of their mutual constituents, with separate, yet overlapping, powers. And state laws in California, New York and elsewhere explicitly regulate agents, as do federal court cases and the existing WGA-ATA agreement, creating a legal regime that recognizes their role.

Over time, the agencies have become powerhouses, but now the guild wants to drastically dial that back in what WGA West president David Goodman has called a "power grab." The new Code of Conduct the WGA says it intends to impose April 7 would be subject to unilateral change at any time by the guild on 60 days' notice, a provision the agencies deem a Trojan horse that would seemingly allow the WGA to do whatever it wants. "We're not going to let a third-party union organization … dictate our business practices," a top agency executive tells The Hollywood Reporter.

But that's precisely what the guild seeks to do, and the effects would touch everyone. The WGA says that eliminating packaging fees would free up more money for writers and make up for the fact that writers would have to pay commissions. "Packaging is where the agencies' big profit margins are," says industry analyst Hal Vogel, which explains why they're resisting fiercely. And whether studios and streamers would so readily ante up is open to question, particularly since they might have to hire their own packaging staff in-house. Studios are not known for their largesse: The result might simply be more money for the conglomerates. Meanwhile, with packaging fees gone, actors and directors would also have to pay commissions, which is unlikely to make them happy.

With no meetings scheduled, both sides acknowledge that a negotiated agreement seems improbable. On March 25, guild members will vote on whether to approve the proposed Code of Conduct; there's little doubt it will pass. Come April 7, the guild is convinced, writers will comply with WGA rules, leave the major agencies and flock to smaller boutiques that the WGA believes will sign on to the code. The ATA and agency representatives are equally adamant that most writers won't leave and most agencies won't sign. Within the writer community, confusion and suspicion reign.

Some wonder whether it's just one big negotiating tactic, but writers are genuinely angry. "I put an entire show together, but I didn't want my agency to get the package. In the end, they held the deal hostage," one writer stated on the WGA's "share your experience" page. Another, a showrunner, told a recent dinner companion that he wasn't interested in hearing his agency's position because he felt the agents would just lie to him anyway. Says a prominent writer with a contrary view: "It's a surprising time to disrupt the industry this way. It feels almost negligent."

Rebecca Sun contributed to this report.

This story first appeared in the Feb. 27 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.