Monday we talked about the Writers Guild of America’s upcoming move to put out a report on how talent agencies have been screwing their writer clients when they put together packaging deals that include them.
Well, that move is no longer “upcoming.” The WGAW released the report yesterday. Here it is:
Introduction:
Talent agencies have represented Hollywood actors, writers, and directors for almost a century. But what began as a service to artists in their negotiations with film studios has become a cartel dominated by a few powerful agencies that use their control of talent primarily to enrich themselves. Today, the major Hollywood agencies make money not by maximizing their clients’ earnings and charging ten percent commission, but through direct payments from studios known as “packaging” fees, which are unrelated to their clients’ compensation and come directly from TV series and film production budgets and profits. More recently, an even more overt form of conflict has taken root. The largest talent agencies have themselves formed production entities that hire and employ their own clients.
These conflicted practices systematically favor the interests of the major agencies at the expense of their clients, and constitute a violation of fiduciary duty under multiple bodies of law. During a period of unprecedented prosperity for the major media companies, these conflicts have contributed to declining writer pay. In each of the last three years, the companies that dominate the entertainment industry—Disney, Fox, Time Warner, Comcast, CBS, and Viacom—generated more than $50 billion in operating profits. Meanwhile, television writer-producers’ median weekly earnings declined 23 percent between 2014 and 2016.
Conflicted practices have driven agency profits, attracting billions in investments from private equity firms and institutional investors that now own majority stakes in the two largest agencies, William Morris Endeavor (WME) and Creative Artists Agency (CAA), and have a minority stake in the third, United Talent Agency (UTA). The influx of capital has fueled expansion efforts into sports ownership, marketing and advertising, investment banking, and content production and distribution. With these agencies increasingly representing companies that employ clients, and even becoming the employer themselves, conflicts of interestare at the heart of the dominant agencies’ business model. This fact is not in dispute, as co-CEO of WME Ari Emanuel said in 2015 of his agency’s operations, “No conflict, no interest.” More recently, Emanuel was quoted in The Telegraph stating, “If you don’t have a conflict you don’t have a business.”
While the major agencies have pursued growth through conflicts of interest, these practices contravene how agents are required to act under state and federal law. When representing clients, agents act as fiduciaries, who have specific responsibilities under the law in California and virtually every other state. A fiduciary is a person to whom power is entrusted on behalf of a client, giving the fiduciary a duty “to act loyally for the principal’s benefit” and requiring that the fiduciary “subordinate [its] interests to those of the principal and place the principal’s interests first.” Whether negotiating directly with a studio for their own compensation or becoming a producer-employer, the major agencies are clearly not abiding by the standard of fiduciary duty required under the law.
This report provides an overview of talent agency representation in Hollywood and details the extent to which the major agencies’ business model is based on conflicts of interest that harm their clients and violate the law. It shows how, by maximizing their own profits and now the profits of their outside investors, these agencies have strayed from their core purpose of representing the interests of their clients…..