Another Round of SAG Talks Is Going Round and Round

Negotiations between Hollywood’s talent agencies and the Screen Actors Guild to form a new agreement governing relations between the two groups are stalling after round-the-clock meetings over the weekend, according to sources close to the ongoing talks.

The agents’ demands to be able to raise funds by selling pieces of their agencies to other entertainment companies, acquire new businesses and collect commissions on their clients’ income from such things as video and DVD sales seem to be insurmountable obstacles at this point in the negotiations.

“We are absolutely nowhere,” said the head of one major talent agency.

SAG and the Assn. of Talent Agents trade group had hoped to have a new deal by Wednesday, an arbitrary deadline the parties had imposed on themselves. With no deal, neither side is certain what will happen to their long-standing business relationship.

The so-called “franchise” agreement between the two groups sets the ground rules under which agents operate when representing SAG actors. It expired in October, but the agents and actors have been abiding by the old rules, tabling their negotiations until SAG finally settled its six-month-long strike against the advertising industry late last month. They began this latest round of negotiations Thursday.

Both sides have said that a new agreement is absolutely imperative if they hope to preserve their mutually beneficial relationship. Although neither party said it anticipates failing to resolve their differences, a resolution isn’t happening quickly or easily.

The standoff is over money.

Agents are asking SAG to relax the financial interest rules that prevent them from operating more like other businesses. Agency principals see big dollars ahead if the regulations are relaxed. They could more easily sell a chunk of their businesses to outsiders in the same way some of Hollywood’s management-production companies and public relations firms have done in recent years.

Agents argue that their business is under siege from managers, many of whom used to be agents themselves. Unfettered by regulations, managers are free to finance and produce films and TV shows, operating as de facto agents even though technically they are not sanctioned by state law to procure work for their clients.

SAG has acknowledged ATA’s argument that the entertainment industry has changed radically since the 60-year-old regulations were last amended three decades ago. But actors fear that if rules are loosened too much, they won’t be protected from potential conflicts of interest. They want to make sure that agencies stay at arm’s length from producers and studios, fearing that they can’t be represented fairly when an agent is negotiating with an investor or a sister company.

In spring, the two sides came up with a compromise that would have enabled ATA to invest in or be invested in by companies such as ad agencies, Internet firms and other companies that may be involved in production and distribution. SAG’s leaders then got cold feet, and negotiations foundered. Incensed, agents demanded that the issue be reopened, leading to this week’s talks.

A top agent who spoke on condition of anonymity said that despite ATA putting “tremendous, detailed safeguards” into its proposal to protect against conflicts of interest, SAG still doesn’t seem satisfied.

“They don’t trust agents,” suggested the agent, who is involved in the current negotiations. “They just keep asking the same questions and keep saying, ‘How do we sell this to our membership?’ ”

Agents point out that a significant problem is that two-thirds of SAG’s 98,000 membership don’t work enough to even have agents and so have no reason to ratify a deal giving agents more power and clout than they already have.

Another problem, according to agents, is that the actors’ union is very factionalized, with some officials being supportive of the very changes that others in the guild vehemently oppose.

Both ATA and SAG have 12-person negotiating committees trying to forge a new agreement, which would then have to be ratified by SAG’s entire membership.

“It’s hard to deal with a committee that doesn’t have a vested interest in this,” said one of the 12 agents involved in the negotiations. “If they can’t make a deal, it doesn’t affect them.”

Agents, on the other hand, have a huge vested interest in seeing the rules that govern their businesses change dramatically.

For the smaller, independent agencies, which make up more than half of ATA’s membership of some 100 companies, finding new sources of revenue is critical to staying in business.

Owners of larger agencies worry they will forever be stuck with an illiquid stake in their businesses if they aren’t freed up to attract a wide range of investors.

“We’re stuck with a ball and chain in a time warp with no chance to earn equity that appreciates and no currency to trade,” said one veteran agent.

There appear to be several hungry suitors just waiting in the wings, including Omnicom and aggressive New York holding company Interpublic Group, which owns various ad agencies including McCann-Erickson. In 1997, Interpublic Group bought a major stake in the personal management/production company Addis-Wechsler (later renamed Industry Entertainment), and last year acquired public relations giant PMK.

Also, last year, publicity firm Baker Winokur Ryder was bought by Ogilvy, the public relations unit of advertising agency Ogilvy & Mather.

Unlike management firms such as Brillstein-Grey Entertainment, which represents talent and has financial stakes in its TV shows and movies, talent agencies are strictly a personal services business with one primary source of income: the 10% commissions they collect on jobs booked.

Although all of the major talent agencies, led by Creative Artists Agency, International Creative Management and William Morris Agency, are profitable, most of the money goes out the door to agent salaries and bonuses--which can be more than $2 million a year--and other overhead expenses, leaving little left to invest in the agency.

“Agents want to be able to build equity and have hard assets they can sell,” says one former agent who has since become a manager.

In what is widely considered a very shrewd series of transactions, Brad Grey and Bernie Brillstein successfully sold and resold all or parts of their management-production company three times to different parties to the tune of more than $150 million.

The principals of Hollywood’s big agencies say that although they would naturally welcome cash infusions from investors or entertain a merger, few, if any, say they would be willing to give up controlling interest in their businesses.

Then again, what agent in Hollywood wouldn’t close a deal for the right price?