CAA President: Warner Bros.' Streaming Bet Will "Dramatically" Impact Clients' Backend Pay

Richard Lovett
Alberto E. Rodriguez/Getty Images

CAA president Richard Lovett.

Richard Lovett sent a letter to WarnerMedia CEO Jason Kilar calling the plan a violation of "trust and boundary." 

As Hollywood reckons with Warner Bros.' unprecedented streaming bet — the studio is sending 17 of its films directly to its parent company's service HBO Max in 2021 — talent agency CAA is objecting to the details of the plan.

In a letter from CAA president Richard Lovett to WarnerMedia CEO Jason Kilar, the agency calls the deal a violation of "trust and boundary."

"Your determination to release our clients’ movies on HBO Max at the same time as in theaters effectively torpedoes the theatrical release and dramatically harms our clients’ ability to earn backend compensation, which they negotiated for, expected, and have every right to protect," the CAA letter from its leadership team read. (Deadline first reported the letter.)

The note added: "The bottom line is that you are trying to take advantage of our clients to benefit your company."

The missive echoes sentiment in some corners of the industry from partners who were blindsided by the Dec. 3 reveal by WarnerMedia's Kilar and Warner Bros. chief Ann Sarnoff that tentpole films like In the HeightsGodzilla vs. Kong, Dune and The Matrix 4 will go straight to streaming on the same day as the titles hit theaters.

On Dec. 8, a letter signed by Directors Guild of America national executive director Russell Hollander was sent to Sarnoff expressing concerns about how films will be valued in the deal. The 18,000-member guild was the first of Hollywood's unions to weigh in on the plan.

AMC, the world's largest theater chain, has already signaled its displeasure to the WarnerMedia plan, which will kick off when Wonder Woman 1984 hits theaters Dec. 25 and debuts on HBO Max the same day. (Cineworld, the owner of Regal Cinemas, issued a more cautious reply Dec. 4, saying that it hopes Warner Bros. "will look to reach an agreement about the proper window and terms that will work for both sides.")

And Warners' Tenet helmer Christopher Nolan hasn't held back his opinion during his press tour for his spy thriller's home entertainment release. Nolan told The Hollywood Reporter on Dec. 7 that the plan makes "no economic sense, and even the most casual Wall Street investor can see the difference between disruption and dysfunction."

A day after Nolan's comments, AT&T CEO John Stankey told an investor conference that the plan from the WarnerMedia division would be a "win-win-win" for partners, consumers and the company and disclosed that HBO Max hit 12.6 million "activated" subscribers. The 2021 slate of Warner Bros. films will be available on the streamer at no cost to subscribers for the first month of their release.

Some financial observers have signaled notes of caution about the bet, which Kilar described as "an opportunity to do something firmly focused on the fans, which is to provide choice." Analysts at research firm MoffettNathanson noted in a Dec. 4 report: "Pushing your best content into a subscription window caps the upside on the truly mega hits that drive all of the profit. And the move into HBO Max undoubtedly will have downstream impacts on home video and rental revenue streams, as well."

The full note from CAA's Lovett to WarnerMedia's Kilar is below:

Jason, 

The blind side Warner Brothers announcement Thursday was entirely unacceptable to CAA and to the clients we represent. 

So we are clear about what is unacceptable:

You made a decision to release our clients’ movies in an unprecedented manner – a simultaneous release theatrically and on your own streaming service, HBO Max – without consideration of our clients’ desires or contractual rights.  It plainly violates the rights of a number of our clients who hold approval rights over distribution plans and streaming selections.  

Your determination to release our clients’ movies on HBO Max at the same time as in theaters effectively torpedoes the theatrical release and dramatically harms our clients’ ability to earn backend compensation, which they negotiated for, expected, and have every right to protect.

You chose to release our clients’ movies on your own streaming service without any input from or discussion with our clients and you made no effort to negotiate with or otherwise seek out market-rate deals with other streaming services. This is the epitome of a self-interested corporate maneuver intended to benefit your company while wreaking havoc on the industry and ignoring and greatly damaging our clients’ creative and financial interests.

To the extent you negotiated a license fee with HBO Max, which remains unclear, we reject that entirely as that is the job of their representation and is, in many cases, in violation of our clients’ approval rights.  

You made a decision about movie distribution based on your opinion about the potential theatrical marketplace when it is impossible to predict that marketplace through the end of 2021.  Indeed, it ignores the very real possibility of a vaccine in Q1 or Q2 2021 that would likely result in a reopened theatrical market with robust demand.

Without any apparent basis, you have taken a contradictory position for the domestic and international marketplaces, seemingly with the belief that the international marketplace is safe and strong enough for our clients’ movies. In doing so, you have ignored the reality that the compromised domestic theatrical release will hurt films’ international performance, will hurt all of the downstream distribution channels, and therefore will hurt our clients.

You unilaterally determined a value for our clients and their work to benefit the long-term prospects of HBO Max and the finances of AT&T, a choice that our clients did not make and a value decision that is out of sync with the marketplace and other streaming platforms.

The bottom line is that you are trying to take advantage of our clients to benefit your company.  Neither we nor our clients will stand for it.  

Worst of all, in a business of relationships, you violated trust and boundary.             

In doing so, Warner Brothers has made a statement that relationships with artists and their representatives are not important to the studio.       

 The leadership of CAA has worked with Warner Brothers for nearly four full decades.  At one point, Warner Brothers took pride in the studio leaders’ relationships with artists.  Today, the only scarce resource in our business is talent.  To insult talent this way is to redefine your company in a way that is a major setback.     

We reject the deals you have made with yourself on behalf of our clients.

Our clients’ contractual rights will be enforced. 

Our lines of communication are open, but our point of view is clear.

CAA Leadership Group