At one point or another, most of us have hired an agent to negotiate on our behalf. When we feel out of our depth or stuck behind closed doors, an agent—whether a real-estate agent, lawyer, literary agent, or financial adviser—can provide the knowledge, experience, connections, and negotiating skills needed to get us a great deal.
Our agents can become such trusted partners that we often forget to consider conflicts of interest arising from the fact that their financial interests are almost never perfectly aligned with our own. A real-estate agent may advise you to offer more for a house than is necessary in the hopes of wrapping up a quick sale and earning their commission. A lawyer who bills by the hour may spend more time than is necessary on your case. A dispute between TV writers and their agents shows what can happen when we fail to examine such conflicts of interest closely.
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With a New Business Model, Growing Conflicts of Interest
In 2019, TV writers’ wages were stagnating at a time when they should have been rising, thanks to the growth in streaming, according to the Writers Guild of America (WGA).
Traditionally, Hollywood agents have taken a minimum 10% cut of the deals they negotiate for writers. In the early 2000s, the major talent agencies—William Morris Endeavor (WME), Creative Artists Agency (CAA), United Talent Agency (UTA), and ICM Partners—increasingly moved from relying on agency commissions toward content ownership, the New York Times reports. They did so by accepting cash infusions from private-equity firms in exchange for partial ownership.
As Hollywood agencies began to mutate into “full-fledged media conglomerates,” Vanity Fair reports, the large agencies moved from negotiating deals for individual clients to bundling clients into package deals. In a typical package deal, an agency offers a studio the key elements of a TV series from its stable of talent, such as a showrunner, writers, and a star or director. Studios pay packaging fees to agencies up front, as well as a percentage of a show’s future profits. Packaging can be far more profitable to agencies overall than the commission model.
The rise of packaging created untenable conflicts of interest in agencies’ relationship with clients, according to the WGA. Because agencies were compensated based on the predicted success of a show rather than on how much their client would earn from it, they were motivated to keep labor costs low to boost a show’s long-term profits. The agencies countered that their writers were earning more from packaging because their agents waived their commissions. The WGA disputed this claim.
The WGA also objected to the three largest agencies (WME, CAA, and UTA) using private- equity money to create their own content-production divisions, saying writers get subpar deals when they are essentially hired by their agents. The agencies argued that their representation and production divisions were run separately and that agents have a strong motivation to retain their clients.
A Time for New Negotiations
In April 2019, following unproductive negotiations with the Association of Talent Agents (ATA), the WGA told its members to fire their agents until writer-friendly improvements were made to the system. The WGA also sued the four leading talent agencies, alleging unlawful conflicts of interest. Within days, about 80% of TV writers with agents, including Shonda Rhimes and Stephen King, sent termination letters to their agents.
Without their agents, many found new work through their networks. For entry-level writers, the WGA created a script submission system. As a result of the dispute, it was possible that most writers would not have agents in the “near future,” predicted film and TV producer (and former agent) Gavin Polone in the Hollywood Reporter.
The trial was delayed by the pandemic, which also imposed financial hardships on both sides by putting film and TV production on hold. Over the course of two years, the agencies caved in one by one, agreeing to do away with packaging fees and return to a commission payment model, Vanity Fair reports. They also agreed to limit their stake in production companies. It was a huge win for the writers—and for many of their agents, a big relief.
Preventing Conflicts of Interest
When interviewing potential agents, think about the conflicts of interest an agent may face when representing you in your negotiations. Compare their proposed compensation terms to industry standards. If you identify any conflicts of interest, openly discuss your concerns, and explore alternative compensation models.
In addition, scrutinize new business models when they arise. The WGA tolerated talent agencies’ packaging practices for decades before arguing that they were unlawful. Examine counterparts’ new ways of doing business from the start, and renegotiate your contract at regular intervals.
How have you avoided or managed conflicts of interest in your industry?
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