WGA Outlines Steps CAA, WME Must Take to End 18-Month Standoff

“At the same time, we sent them a renewal of our initial information request, which they have, up to this point, only partially satisfied,” the letter reads

Writer’s Guild of America (WGA)

The Writers Guild of America (WGA) sent a proposal to agency powerhouses CAA and WME on Friday outlining steps the companies must take to end the 18-month standoff over packaging fees and ownership caps.

The WGA sent an email to members saying that CAA and WME still cannot represent them because the agencies have not supplied enough information on how they will comply with the guild’s demand to roll back fees for packaging film and TV projects.

“Today, the WGA sent both WME and CAA a proposal that outlines the steps each of them must take in order to be in compliance with the 20% ownership cap on production affiliates in the franchise agreement,” the letter read. “At the same time, we sent them a renewal of our initial information request, which they have, up to this point, only partially satisfied.”

Representatives for CAA and WME have not yet responded to TheWrap’s request for comment.

ICM and UTA were the first two major agencies to agree to the deal. On Sept. 14, CAA said it signed a version of the franchise agreement with the Writers Guild of America, but in its own responding memo, the Writers Guild said that “CAA has proposed changes to the agreement that the WGA has not – and cannot – agree to.”

UTA, ICM, CAA and WME account for more than 90% of the packaging fee deals — those in which agencies bundle writers, talent and creators for a project and sell to a studio — in Hollywood. The WGA has already signed deals with more than 80 talent agencies for whom packaging fees are less of an issue.

Last year the WGA implemented a new Code of Conduct for agents designed to end practices it has described as conflicts of interest: packaging, where agencies bundle talent and projects together and bring them to a studio as a package, for which the agency collects a fee on top of the commission for their clients’ work; and affiliate production, in which a studio partly owned by the agency is involved in a packaged project. Thousands of writers terminated their representation shortly after the code went into effect.

The WGA, last year, sued CAA, UTA and WME over packaging fees, which the suit called illegal. The agencies responded with their own lawsuit accusing WGA of participating in an “illegal boycott” by having their writers terminate their representation. In April, a judge dismissed most of the union’s claims of unlawful racketeering. An antitrust lawsuit by the agencies against the WGA continues, with a trial that could begin next March. That lawsuit, however, will have to proceed without UTA, as the agency must withdraw from the lawsuit as a condition of the agreement. WGA says that CAA must also withdraw from the lawsuit as a condition of any franchise agreement deal.

Outside of the major issue at hand of packaging fees, the other to top-line issues addressed in the WGA’s deals are now there will be strict limitations on agency ownership of production entities. In addition to that, contract, deal memo and invoice information will be provided to the WGA, allowing it and the agency to partner in systematically addressing late pay and free work.

Read the full memo below.

Dear Members,

Today, the WGA sent both WME and CAA a proposal that outlines the steps each of them must take in order to be in compliance with the 20% ownership cap on production affiliates in the franchise agreement. At the same time, we sent them a renewal of our initial information request, which they have, up to this point, only partially satisfied.

As a reminder, both CAA and WME have agreed, in theory, to the 20% cap provided for in the UTA/ICM agreement. What they have not done is spell out how they will actually comply. WME says it wants until 2022; CAA has given no specific timeline, saying that it will sell when “commercially practicable.”

As we communicated to you in our previous correspondence (Sept 1, Sept 14, Sept 30), CAA and WME enter these negotiations more deeply conflicted than any of the other agencies.  But that does not give them the right to come out on the other side of this process still conflicted. We have been clear with them from the start that we will not make a deal with them that undercuts the gains this campaign has achieved.  Everything we ask from them today is necessary to ensure that writers are protected: which means that the agencies divest to the 20% limit in a timely fashion – that they remain divested – and that we can verify their compliance.

All of this begins with transparency over their corporate structures and private equity ownership.  Earlier this month, at the request of both CAA and WME, the WGA agreed to confidentiality regarding certain corporate information that might be disclosed to us during the course of negotiations.  While both agencies have now provided some corporate structure information, much of it was already publicly ascertainable, and most of our requests have gone unanswered.  Any agreement must start with openness and full disclosure. We cannot protect writers from conflicts that are deliberately hidden from us.

You can read the complete correspondences from the WGA to WME and CAA, which includes the following terms these agencies need to meet to protect your interests:

  • The limitations in the franchise agreement on 20% ownership of an affiliate production entity must apply to all the agency’s parent entities, investors, shareholders, and affiliates. Those are the terms of the UTA/ICM deal and there can be no exception for CAA and WME. To allow otherwise would permit the agencies to execute an “end run” by shifting ownership to another related entity while remaining conflicted.
  • Neither agency will be permitted to sign the franchise agreement until it can demonstrate that it has properly divested according to the terms of that agreement. The Guild will not be in the position of sending writers back to their agencies on faith and waiting for compliance from agencies who have been relieved of their greatest pressure to do so. Nor will we be faced with telling writers to terminate their agency a second time, should that agency fail to comply.
  • Preexisting projects cannot be exempted from the limitations on financial interest beyond 20%.  We allowed preexisting packages to survive because requiring all writers to pay back commission in order to undo already packaged projects would not have been a tenable solution. There is no such parallel with affiliated ownership.  What’s more, this requirement of full divestment to 20% ensures that there is no residual conflict inherent in agency-owned studio projects.
  • The agency’s restructuring – and its continued compliance – must be subject to third-party oversight and verification.  This is necessary because the agencies are privately held companies whose structures are entirely obscured from public view. Unlike packages, which can at least be ascertained in show budgets and profit statements, the Guild would have to take compliance on faith alone. That we will not do. We need to be assured that the divestment is complete and enduring. We’ll also need appropriate sanctions spelled out in the event of noncompliance.   We are not insisting on auditing the agencies; however, there must be third-party monitoring to protect writers’ interests.

We will update you with any significant developments.

In Solidarity,
WGA Agency Negotiating Committee

Chris Keyser, Co-Chair
David Shore, Co-Chair
Meredith Stiehm, Co-Chair
Lucy Alibar
John August
Angelina Burnett
Zoanne Clack
Kate Erickson
Jonathan Fernandez
Travon Free
Ashley Gable
Deric A. Hughes
Chip Johannessen
Michael Schur
Tracey Scott Wilson
Betsy Thomas
Patric M. Verrone
Nicole Yorkin
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

More to come…

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