In defense of packaging deals, the Association of Talent Agents on Monday released a report that claims writers would have had to pay at least $49 million more in commissions during the 2017-2018 TV season if their projects had not been packaged, because under the current system writers don’t pay agents their 10% commissions on packaged deals.
According to the report, ending packaging fees would have cost writers, actors, directors and producers combined at least $111 million in additional commissions in that one season alone.
“If packaging fees are eliminated, the consequence is simple – writers will have to pay more money out of their pockets,” said an agency source. “Studios, on the other hand, would pay less – they would retain the fee and share of the profits that would otherwise go to the packaging agency, and artists would have to pay the standard 10% commission on their earnings. Contrary to myths being circulated, those packaging fees likely would not be redistributed in any way to talent. The studios would keep the money they pay the agencies now.
“The studios likely will have to pay for more development executives or more creative producers, who will have to do the work packaging agents do now. Studios will recoup these costs at writers’ expense. Even in the unlikely scenario that all packaging fees were passed on to writers and artists, they would still make less money than they would in the current system.”
Responding to the ATA report, WGA West president David A. Goodman said: “It’s good to see the agencies’ own study confirms that packaging is no risk to them. Now they should publicly disclose the amount they make each year from packaging profits.”
The report (read it here) comes just hours before the two sides are set to resume bargaining for a new franchise agreement – and just minutes after the WGA released its own report that claims packaging deals are an illegal “blackmail scheme,” and that private equity investment in the big agencies is “upending Hollywood talent representation” and “threatens to overwhelm, the major agencies’ core purpose as agents – to represent their clients.”
The ATA’s new report, which was conducted by L.E.K. Consulting, claims that all the gains won by the WGA in its last film and TV contract with management’s AMPTP would have been completely wiped out by these additional commission payments.
According to the report, writers earned “at least $493 million in non-commissioned front-end earnings for their services” on packaged shows during the 2017-18 television series, and that writers would have had to pay at least $49 million more in commissions on those shows if they hadn’t been packaged.
“If one assumes that writers would receive a pro rata share of any agency fees that are passed-through, one would have to assume that the studios would pass-through all of those fees in order for writers to approach break even,” the report states, noting that “this 100% pass-through scenario assumes that no money is diverted to other purposes (studio profit, VFX, location costs, etc.), and all saved packaging fees are given directly to talent.”
The report says that “In the event that no front-end packaging fees are passed-through from studios to writers, writers would receive approximately $49 million less. Similarly, the amount at risk for actors is approximately $42 million, and the amount at risk for directors is approximately $4-5 million.”
According to the report, writers, actors, directors and producers on packaged shows “generated at least $1.1 billion in non-commissioned front-end earnings” during the 2017-18 TV season, but noted that “This figure likely understates the total amount given that agency accounting systems may not have full purview of all non-commissioned client earnings.
“These clients would thus need to pay at least $111 million in commissions on current earnings if packaging fees were eliminated (at the standard 10% agency commission).
“The agencies generated an estimated $120 million in front-end packaging fees for the same period. This figure is believed to be accurate given that agencies have clear visibility into their own packaging fees.
“The studios would have to pass-through all those fees to talent in order for talent to approach break even. Note that this 100% pass-through scenario assumes that no money is diverted to other purposes (studio profit, VFX, location costs, etc.), and all saved packaging fees are given directly to talent.
“In the scenario that no front-end packaging fees are passed-through from studios to talent, talent would receive $111 million less.”
WGA members will be voting at the end of the month on a new Code of Conduct that would ban packaging fees and force agencies to sever their ties with affiliated production entities. If approved, and a new deal isn’t reached with the ATA by April 6, the WGA could ordered its members to fire their agents en masse who refuse to sign the code.