Why Did Agencies Only Offer Writers One Percent of Packaging Fees?

Hollywood Sign - H - 2019

There’s an explanation behind what looks like a lowball offer.

It seems a mystery. The last time they met, the Association of Talent Agents offered to share backend television packaging fees with the Writers Guild of America, but that April 12 offer was only about one percent, a figure ostensibly so meager as to defy explanation. Negotiations cratered and the WGA filed suit days later. Why would any negotiator propose such a minuscule amount? Why didn’t the agencies propose, say, 25 percent as a reasonable opener?

It turns out that they couldn’t. Not didn’t, but couldn’t make an offer that high. In fact, the agencies could not have offered the writers more than 20 percent of packaging fees. Anything more would amount to a mathematical impossibility, because in the guild/agency world, 20 percent is effectively 100 percent. 

Huh? That obviously requires some explanation.

It’s easiest to start from the other direction. Suppose the writers received 100 percent of the packaging fees on a show. That would leave zero for the director and actors, who are also above-the-line elements of each episode of a show. Why should they get nothing of the packaging bonanza? Their guilds, which have been watching the negotiations closely, would not stand for that. Any deal the agencies make with one guild has to take account of the others as well, just as do studio deals with the guilds, in a process called pattern bargaining.

So that 100 percent actually has to be split three ways. That sounds like one-third each, thus 33.33 percent to the writers, 33.33 percent to the director and 33.33 percent shared amongst the actors.

Except that’s not quite right either. There is precedent for the way percentages work in guild-land and it’s found in the residuals system. Whenever there is a residual that is calculated as a percentage of a pot of money, the guilds do not get equal shares. Instead, for example, if the director gets 1.2 percent, then the writers also get 1.2 percent — but the actors share three times as much, or 3.6 percent, because they are more numerous. There are many more actors on an episode than there are directors or writers.

This 1:1:3 ratio prevails throughout the residuals system and is an ironclad precedent for the allocation of percentage sums amongst the unions. It’s always 1:1:3 between them, and has been for decades. In making a deal with the WGA, the agencies have to be mindful of the anticipated positions the Directors Guild of America and SAG-AFTRA will take. It’s as though they’re shadows in the negotiating room itself, silent but ever present.

That means that the packaging fees actually have to be distributed in a 1 to 1 to 3 ratio amongst the director, writers and actors — which in turn means that the director would get 20 percent, the writers would share 20 percent and the actors would share 60 percent of the total packaging fees, for a total of about 100 percent to talent.

So the most the writers can get, given the presence of other guilds in the equation, is 20 percent, and that’s if one assumes that talent is entitled to all of the packaging fees. That’s the fully pro-talent position, whereas the current system is the fully pro-agency position, where talent gets no portion of packaging fees (although the showrunner does share in the show's backend, which is where backend packaging fees come from, too). If the parties compromised right down the middle, the writers would get 10 percent of packaging fees, yielding 50 percent for talent and 50 percent for the agency.

But at that level, the agencies might simply decide to charge commissions instead, and not take a packaging fee at all, particularly since most of the time, there are no backend packaging fees — and these days, even when there are, they’re not worth what they used to be.

So the most the agencies could be expected to agree to is 10 percent, or perhaps even less. With that in mind, it’s possible to understand the one percent opening offer. It certainly wasn’t publicly well-explained — though the agencies would be wary of an explanation that might sound like an invitation for the other guilds to join the ongoing fray — but there it is.

Other completely different approaches can be imagined (including sharing front-end packaging fees too), and in any case, the WGA has emphasized that it wants packaging fees eliminated, not shared. But still, if the parties do return to the bargaining room at some point, expect to hear the phrase “20 percent” echoing softly through the closed doors. For now, though, with each side dug in and the matter headed to court, the discordant bang of a judge’s gavel will likely come first.

For more on this subject, visit THR‘s labor page.