Apr.

11, 2019 LOS ANGELES DAILY JOURNAL

WGA’s nuclear option and the

Talent Agencies Act
Last week the Writers Guild of America voted, with the support of other
major entertainment industry organizations, to require all members to
fire any agency that does not agree to stop packaging projects.
Members of the Writers Guild of America picket in front of Paramount Studios on the first day of a
nationwide strike in Los Angeles, Nov. 5, 2007. The current dispute between Hollywood writers and
agents is highly unusual. In previous Hollywood labor battles, like the one that began in late 2007, the
guild has typically gone after the studios. (New York Times News Service)

Imagine, if you will, a world where you own a pants store. Now imagine a wholesaler
saying that to carry the Levi's jeans line, they are demanding more than a standard
commission. Under the pretext of bringing you the idea to put Levi's in your store, rather
than taking a standard 10 percent commission from the manufacturer, your store has to
give them a percentage of the overall jeans budget... and a matching percentage of your
net profits.
Worse, you learn that the wholesalers for Wranglers, Guess, Lucky, Diesel and every other
major brand of jeans are making similar demands. And worst, the only way to buy these
products is to use these wholesalers.
Or say you're a manufacturer wanting that pants store to carry your goods, knowing that
no lawyer or outside marketing team can do your bidding. The only mechanism for selling
your wares is via one of these wholesalers, a wholesaler who, because of its demands, will
make more money as the middleman than you will as the product provider. Worse,
because of the money being taken out of the overall transaction, you may have less cash
available for products.
However absurd this extraordinary level of compensation might seem when analogized as
a retail model, this paradigm is the real-life underpinning of the day-to-day transactions of
show business and agency packaging.
With these truths, it should not shock anyone that the members of the Writers Guild of
America, with the support of other major entertainment industry organizations, voted last
week to arm themselves with a nuclear option: to require all their members to fire any
agency that does not agree to stop packaging projects.
With a just-announced extension to the deadline, there is for the first time a glimmer of
hope that this action can be avoided. But as the talent agent's compensation level is so
anomalously inflated compared to other job facilitators, it's fair to ask, "How did their
compensation get so high to begin with?"
Simple: The California Talent Agencies Act (Labor Code Sections 1700 et seq.) and how the
labor commissioner interprets and enforces it.
The antecedent of the TAA was enacted in 1913 as a protection against owners of
burlesque halls and bordellos masquerading as talent agents to lure ingénues into their
employ to protect artists. In short, it was created to bar employers from also serving as
employment counselors. Soon afterwards, the TAA was put under the aegis of the state
labor commissioner.
For decades the TAA existed without challenge or controversy. But the labor
commissioner's response to two disparate events significantly changed the course of
show business behaviors.
The first event was when the then-president of the Screen Actors Guild Ronald Reagan
gave his own talent agency, MCA, an exclusive blanket waiver allowing the agency to
engage in production. Despite the TAA being created specifically to bar employment
counselors from also being employers, the labor commissioner did not in any way
interfere with this arrangement. This questionable duality only ended in 1962 when the
U.S. Justice Department filed a federal antitrust suit against MCA for it being a talent
agency and production company. Seehttps://www.moldea.com/ReaganRedux.html
The other event was the first lawsuit to ever allege the TAA gave talent agents the
exclusive right to procure employment for artists. The personal manager won the case at
appeal, despite the labor commissioner submitting an amicus brief contending the
representative was engaging in subterfuge and acting as a talent agent without a
license. See Laurie v. Radin, 120 Cal. App. 2d 778, 782 (1953).
This was the first time the labor commission memorialized its "contention" that the TAA
gave licensed agents the exclusive right to help artists find work. In doing so, the TAA
morphed from something that solely protected artists into a marketing bonanza for talent
agents. Just like the fictional pants store, the distributor/studios now needed talent
agents to access the manufacturers of the creative process, and directors, writers, actors,
musicians and the like had to utilize talent agents to find work.
"Packaging" is just a natural offshoot of this; a way for agents to get more than their
standard 10 percent commission. Whenever there is one entity with an oversized portion
of the market share, it is able to exert unnatural control over the market. With talent
agents, it became, "You want to work with the superstar writer or actor we represent, we
want back end. Not that you have to give it to us, we can go across the street."
Neither the artists nor the studios had another avenue: The labor commissioner had
granted talent agents a monopoly. Their interpretation and enforcement of the TAA,
which began with Piper Laurie and became legal precedent when the Jefferson Airplane
was able to get out paying millions to their personal manager in the late '60s, has had the
effect of not just protecting talent agents, the very occupation it wishes to regulate, but it
gave them a monopolistic advantage that unsurprisingly, became a hammer.
My first packaging experience was when a management client who was on a hit series and
had co-written and starred in a couple of well-received films got a sellable pilot idea.
We took seven studio meetings. Six of them wanted to partner up as we went to the
networks. The only place we were rejected: the one meeting the talent agent had set up.
The pitches went well at the networks, and we were getting multiple offers. I kept the
agency up-to-date on the process, they had not gone to a single meeting. As things heated
up, and it looked like we would close with ABC in the next day or two, I got a call from the
agent:
"Just need you to know that this is going to be an agency package," she said. "If your
client doesn't say yes to this, he'll have to leave the agency."
Selling a pilot is pretty stressful, no artist needs to be also having to make a choice about
his overall future. I presented it as a fait accompli, rather than giving what the client might
see as a Hobson's Choice.
In the end, the script was written but the pilot was never produced. If it had been, my
client, a first-time showrunner, would have made $35,000 an episode for working pretty
much around the clock. I asked for and would have received $5,250 an episode for my
probably putting in 10-20 hours a week on the show; I requested my same 15 percent,
only that now the production would pay for my time versus being paid that commission
amount by my client. And the agency, which had spent no time creating or developing the
idea, almost nothing to do with selling it, and probably would not put in even a couple
hours a week during its production, would make $37,500 an episode. Or more, if the
license fee went up.
Agencies claim that the practice of packaging creates employment. How, if the salary of
two co-executive producers or 4-6 lower-level writers is being taken from the budget to
compensate those who otherwise would have been paid $3,500 per episode by their
client, does packaging increase employment? Does having to give a percentage of the
show budget and an equal amount of back end participation encourage more production?
To be clear: The antagonist of this morality play is not the talent agents. We all try to
maximize our incomes, and while the TAA is set up to give them an arguably unfair
advantage, it is understandable that they would take advantage of it.
It is time for Labor Commissioner Julie Su to do her job. The WGA should not need to
threaten total disruption when all they are simply asking is for agents to follow the law.
The agencies owning production companies and sports/entertainment leagues are exactly
why Bobby Kennedy's Justice Department required MCA to tether either its agency or
production entity.
The TAA has a provision barring talent agencies from splitting fees with an employer --
which is what they do when they receive a part of employers' budget and a percentage of
their net profits. In an Oct. 30, 1998, opinion letter to producer Leonard Hill, the labor
commissioner said the reason agencies were not prohibited from the practice was
because, "A 'package agreement' or 'package program' ... is more analogous to selling an
idea or a concept. ... The concept of packaging is a 'pitch' that must be sold prior to any
procurement of employment." After the idea is sold, and once the artist begins work
under the signed package agreement, only then would jurisdiction of the labor
commissioner commence.
Except more often than not, before a pitch is brought to a network, the writer's deal is
already in place. And the very idea of packaging is that the agency is being rewarded for
bringing key employees, be they directors, designers, musicians, writers or performers, to
a project.
Moreover, this opinion is misaligned with multiple TAA determinations. The act
specifically excludes securing a recording contract from being subject to violation.
However, securing a "360 Agreement," which is how most record deals are now done and
incorporates future concert work along with merchandising and publishing rights (see
Ke$ha v. DAS Communications, LTD, TAC-19800), is subject to TAA scrutiny. Likewise,
when a script sale requires the writer to provide rewrites -- future work -- it also is subject
to TAA regulation (see Strouse v. Corner of the Sky, TAC 2000-13).
The California Legislature gave the labor commissioner the power to "adopt, amend, and
repeal" any part of the TAA as it sees as reasonably necessary for the purpose of enforcing
and administering the law (Labor Code Section 1700.29). If, oddly, she wants to fully
endorse packaging and an agency's ownership in a production entity, Commissioner Su
can unilaterally do so. But as it more likely Commissioner Su wishes to protect the artists,
she should be on the front lines to force these changes.