WME Signs WGA Franchise Agreement, Giving Guild Historic Win In Campaign To Reshape Talent Agency Business

WGA and WME Logo
WGA; WME

UPDATED with statements and WGA West letter to members: The WGA has won its historic campaign to reshape the talent agency business, signing WME – the last agency holdout – to its franchise agreement today. All the major agencies now have signed the agreement, which will return them to a 10% commissioning business model not seen in decades.

The sides also agreed today to drop their antitrust lawsuits against each other “in consideration of a negotiated settlement executed by them.”

“WME and the WGA have agreed to a new franchise deal that addresses writers’ core concerns while recognizing the unique aspects of our business,” Endeavor CEO Ariel Emanuel said in a statement. “Writers have been a part of this agency since our inception, and they will continue to be a part of the lifeblood of WME. We look forward to once again serving as their advocates during this unprecedented time in our industry.”

WGA West President David A. Goodman issued this statement:

“I’ve said repeatedly no one wanted the agency campaign over more than me, and I’m very pleased that we’ve achieved our goal: the agencies who represent us now have their financial interests aligned with their writer clients, and the agencies problematic business practices such as packaging fees and agency-owned production entities are at an end.  As difficult as this battle was, the simple and just clarity of the goal, that a writer’s agent should make more only when his client does, is what helped us succeed.

I could not be more grateful to the negotiating committee, elected leaders and staff whose commitment and tireless work over the last three years won the day.  But, as with all the successes in the WGA’s history, such as our pension and health benefits, our residuals in perpetuity, and our jurisdiction over the Internet, this achievement is owed to the members, who understood what we were fighting for, and were willing to make personal sacrifices for the greater good.  I’m proud and lucky to be one of them.”

The WGAW sent a letter to its membership today that outlines the deal; read it in full below.

Today’s agreement allows WME’s writer-clients to return to the agency for the first time since April 2019, when the WGA East and West ordered their members to fire their agents who refused to sign the guilds’ Code of Conduct, modified versions of which will now phase out packaging fees by 2022 and limit the agencies’ ownership interests in affiliated production companies to just 20%. WME was the last of the major agencies to sign the WGA’s agreement, in part, because it has the most tangled corporate structure, and its production-distribution affiliate – Endeavor Content – has the most projects currently in production and development – more than 300.

WME’s signing will also end its long-running legal battle with the guild, with both sides agreeing to dismiss their anti-trust lawsuits against one another – a fight that’s been going on for nearly two years. The WGA dropped its lawsuit against UTA when it signed the franchise agreement last July, and against CAA when it signed in December.

The WGA has long maintained that packaging, in which agencies bring together many of the creative elements of a show – and agency affiliations with related production and distribution companies – create a conflict of interest for the agencies, giving them an incentive to low-ball writers on projects in which the agencies have a financial interest. The guild claimed that the packaging fees paid by the studios to the agencies were a violation of state and federal labor law because they amounted to “illegal kickbacks” from an employer to an employee representative. The guild also argued that agency affiliations with corporately related production companies made the agencies, in effect, both their clients’ representatives and employers.

The WGA’s victory could also normalize relations between the guild and the Association of Talent Agents, the bargaining representative of more than 100 agencies, including all the major ones. The dispute began on April 6, 2018, when the WGA sent the ATA a 12-month notice to terminate their Artists’ Manager Basic Agreement of 1976 (AMBA), which regulated talent agency representation of writers. The WGA then made proposals to the ATA for a new AMBA agreement that would eliminate agency conflicts of interest, but the two sides were unable to reach a deal, and on June 19, 2019, the guild announced that it would no longer negotiate with the ATA, and would instead negotiate with individual agencies.

One by one, the agencies began to fall, signing the WGA’s code of conduct – slowly at first, but then in a steady stream after more than 7,000 WGA members fired their agents in April 2019. Verve, which was not an ATA member, became the first mid-sized agency to sign in May of that year, followed by a succession of ATA member-agencies: Kaplan Stahler and Buchwald in July of 2019; the Gersh Agency and the Agency for the Performing Arts signed in January 2020; Paradigm signed last March; UTA in July; ICM Partners in August, and CAA in December. And now WME.

Labor disputes come and go, and even strikes end eventually, but curbing the major agencies’ conflicts of interest will have a lasting and profound impact not only on writers and their agents, but on the industry as a whole.

The WGA West’s “Two Davids” – executive director David Young and president David A. Goodman – deserve much of the credit for the guild’s victory over the agency Goliaths, but they, no doubt, would be the first to share the credit with the WGA’s 24-member Agency Negotiating Committee, which was co-chaired by Chris Keyser, David Shore and Meredith Stiehm. Their conquest of the agencies would not have been possible, however, without the unwavering support of the membership of the WGA West and East, more than 7,000 of whom fired their agents in the first shots of the battle back in April of 2019.

History will also record that seven writers – David Simon, Meredith Stiehm, Patricia Carr, Ashley Gable, Barbara Hall, Deric A. Hughes and Deirdre Mangan – led the charge as the named plaintiffs in the long-running court battle, which was ably waged by WGA West general counsel Tony Segall and a team of attorneys that included P. Casey Pitts, Stephen P. Berzon, Stacey Leyton, Andrew Kushner, Juhyung Harold Lee, Stephen Cannon and Ethan E. Litwin.

The WGA’s victory could also open the door for SAG-AFTRA and the DGA to negotiate new franchise agreements with the ATA for the representation of their members. SAG-AFTRA hasn’t had a franchise agreement with the ATA since the old Screen Actors Guild had a falling out with the ATA in 2002 when they couldn’t come to terms over agency affiliations with related production entities. SAG argued back then, as the WGA did many years later, that such relationships made agents both the representatives and the employers of their members. SAG’s move to disenfranchise the major agencies, although dramatic, saw no change in the way the agencies conducted business, and few if any actors left the big agencies to be represented by smaller ones that had agreed to SAG’s terms. It’s a standoff that continues to this day.

And the DGA recently weighed into the dispute between the WGA and WME, siding with the WGA. On Dec. 31, 2020, DGA national executive director Russell Hollander sent WME president Ari Greenburg saying that the DGA has “been closely following the negotiations and litigation and believes now is the right time to communicate our strong support for the WGA’s efforts to remedy the affiliated production company issue.”

“The issue of talent agencies owning production entities is, and always has been, an issue of great concern to the DGA,” Hollander wrote. “The issue of avoiding conflicts of interest is exceedingly important to the DGA and our members. Affiliated ownership carries with it inherent and obvious conflicts of interest. Agents should be free and unencumbered to carry out their duties to their director-clients with only the directors’ interests in mind, and should procure work for directors without the incentive to make cost-effective deals with production companies owned by the same parent company as their agency…This continued conflict of interest is not acceptable to the DGA. Absent prompt resolution, we intend to take all necessary and appropriate steps to protect our members.”

The end of the historic legal battle between the WGA and WME came into view on Dec. 18 when U.S. District Court Judge André Birotte Jr., who is presiding over their antitrust case, repeatedly urged WME and the union to settle their dispute before it goes to trial. “Come on folks. Get together. Get this done,” he told the lawyers who attended via Zoom.

A few days later, WME gave the WGA a proposal that updated the terms of a previous proposal, but the WGA rejected it on Dec. 29, saying, “WME has yet to grapple, in a serious way, with its own conflicts of interest.”

The next day, the judge denied WME’s request for a preliminary injunction that would have ended the WGA’s boycott of the agency until the case can go to trial. It was a major legal victory for the WGA and added pressure on WME to settle and sign the WGA’s franchise agreement. On Jan. 25, Endeavor president Mark Shapiro said that “We are currently in substantive discussions with the WGA to resolve the ongoing dispute. The tenor of the conversation is positive, and we are working diligently with the WGA to move this forward as quickly as possible.”

And now that the deal is done, a new era of representing the interests of writers can begin.

Here is the WGA West’s letter sent to its members today:

February 5, 2021

Dear Members,

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.

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

This article was printed from https://deadline.com/2021/02/wme-signs-writers-guild-deal-wga-reshapes-talent-agency-business-1234688833/