SAG Delays Decision on Deal to Rewrite Agent-Manager Roles

Hollywood agents pride themselves on their ability to quickly close deals.

But getting the industry’s largest acting union to sign an agreement stripping away decades-old restrictions on who can invest in agencies and what talent agents can do is proving more difficult than expected.

After a year of talks, the Screen Actors Guild appeared last week to be on the verge of a deal allowing agencies for the first time to take financial interests in TV and film production, putting them on par with talent managers.

Expanding agents’ powers could profoundly change the Hollywood landscape--allowing advertising agencies or Internet and production companies to also own interests in agencies. Although the new deal would still prohibit traditional studios and networks from owning agencies, parent companies such as Seagram Co. and Time Warner Inc. would be allowed to have stakes.

Some critics worry about the potential for agencies to steer talent to projects in which they are invested.

The complexities of the issue may be behind SAG’s hesitancy in recent days to grant a two-year waiver of the rules, calling any talk of an agreement premature.

Some members are wondering aloud what actors would gain economically by giving agents more power and the ability to make more money. Some high-profile stars such as Warren Beatty, who attended a meeting Tuesday at SAG headquarters along with other actors, say they want to take a hard look at all the issues before taking a stand.

“Until I went to the meeting, I was largely uninformed on the matter,” acknowledged Beatty, who is also a top producer. “I don’t think a quick fix is going to do the trick. I want to study the ramifications and the resonance.”

Opponents of the waiver argue that it could create conflicts of interest for agents when it comes to negotiating deals for actor clients with companies in which they’re financially invested.

Beatty points out that this, too, is no simple issue.

“It’s very difficult to identify conflicts of interest,” he said. “Life is full of them, and many are impossible to legislate against. At this particular moment, I think that as the economy is full of change, so is the economy of the entertainment business full of change, and it requires real study. There are many, many changes that we all need to familiarize ourselves with and not speak glibly or shoot from the hip.”

SAG’s executive board is scheduled to vote on the matter March 7.

Yet the agencies believed they had a deal with the union after SAG’s national board voted Feb. 15, approving all but two parts of a 25-point proposal for a two-year waiver. The agreement gives agents the right to participate in the financing and distribution of films and TV shows and to have a noncontrolling interest in production companies.

The next day, the Assn. of Talent Agents, the trade group representing agents, agreed to all 25 points, but SAG officials have since insisted there is no deal until its executive committee meets to approve it.

It’s highly conceivable that the matter will be put to a vote by SAG’s entire membership if 10% of its 100,000 members petition for its reconsideration.

SAG’s hesitation has irritated the ATA. In a letter sent this week to SAG, ATA Executive Director Karen Stuart brusquely detailed the history of the talks on the issue “because it establishes that an agreement has been reached.”

SAG isn’t talking. Hollywood labor observers say the stumble doesn’t reflect well on the union’s new leaders, who ousted the previous regime last year, adding that the entire episode is typical of the disunity that has plagued SAG in recent years.

Agents argue that nothing less than the viability of their business is at stake, as well as their ability to retain agents who are increasingly leaving the fold to become managers. Unlike agents, managers are not regulated and are thus free to produce and own programming.

The issue comes to a head now as agents’ grip on Hollywood has eroded largely because of heightened competition from talent managers, who operate virtually unshackled from either state or SAG restrictions.

Agents say they are simply looking to narrow the competitive gap managers enjoy and want the same kind of freedom to build their receivable-dependent businesses into companies with hard assets so they can demand real valuations.

They argue they need to attract investor capital to expand into such fledgling areas as new media. With a waiver in place, an ad agency or production company, for example, could provide that money, or even buy an agency outright.

In theory, agents and managers have separate jobs, though in reality they operate similarly. Under SAG guidelines, agents, not managers, can procure work for actors.

But the union has looked the other way, blurring the lines. So managers operate as de facto agents while also producing films and TV shows. Such top stars as Leonardo DiCaprio and Kevin Costner don’t even have agents, saving them the 10% commission agents can charge. Managers generally charge 15%.

Once-prominent agents such as Michael Ovitz, Gavin Palone and Judy Hofflund now work as managers who, unlike producers, enjoy a financial upside in projects in addition to drawing salaries.

Some managers say they have no problem with agents receiving parity.

“I think the entire business should be completely deregulated,” Palone said.

Regarding potential conflicts of interest, Palone, who was an agent for nine years before becoming a manager, said, “Agents already have conflicts by collecting package fees on TV shows. But it doesn’t seem like we should maintain these ridiculous regulations. If there is some kind of malfeasance, it will be settled by litigation.”

Brad Grey, chairman of Basic Entertainment, which in addition to being one of Hollywood’s most successful management companies also produces such top TV shows as HBO’s “The Sopranos,” says he, too, has no problem with agents being deregulated.

“I think it’s completely appropriate for owners of these agencies to want to grow and build their businesses with hard assets. It’s much more advantageous to build a business based on assets rather than receivables.”

Agencies today are faced with losing agents not only to management/production companies but also to “dot-coms,” which offer employees lucrative stock option packages.

Agencies argue that to keep good employees, they must be able to develop Net ventures, which some already have done.

In the bigger picture, agents argue that a healthier agency business is in the best long-term interests of actors. Agents can create more job opportunities, especially in the new-media area, for clients if they have more resources and can better compete with managers.

To placate actors and their union representatives, agents are offering such carrots as providing information SAG needs to organize nonunion jobs as well as helping to stem runaway production in Canada. The agents’ association also is offering to set up a fund as a safety net so actors won’t get financially shafted if the agency representing them goes under.

At the heart of concern for actors is the potential for various conflicts of interest between agents and financing entities, between agents and managers, even between agents and the upper and lower ranks of SAG members.

Such conflicts have long been a concern in Hollywood. MCA, now Universal Studios Inc., had its roots as a talent agency under the late Jules Stein and Hollywood legend Lew Wasserman. In 1952, the guild granted a waiver under then-SAG President Ronald Reagan that allowed the company to produce TV programs while representing actors. The expanded powers, which critics called a conflict of interest, allowed the company to acquire Universal Studios and other operations.

Finally, the Justice Department during the Kennedy administration forced MCA under a consent decree to divest the talent agency business.

One actor says the real question in deciding to give agents a bigger slice of the financial pie is, “Will this also create economic benefits for the talent?”