Talent Agents About to Demand Bigger Piece of Pie

With its strike against the ad industry now settled, the Screen Actors Guild is staring another urgent problem in the face: forging a new agreement with agents. The changes under discussion could lead to a permanent realignment of Hollywood’s talent representation business.

Beginning Thursday, SAG and the Assn. of Talent Agents trade group will meet for weeklong negotiations aimed at hammering out a new deal. In short, agents are asking to be able to enter new business ventures as well as to get a cut of all streams of income flowing to their clients. Actors, on the other hand, want assurances that such changes will not leave them vulnerable to agent abuses.

“We can’t stay in business under the rules,” says ATA Executive Director Karen Stuart. “This business is going to be a graveyard business if we are not able to grow our companies.” She said that in recent years, at least 10 of the ATA’s smaller agencies have closed up.

SAG officials recognize that some of the rules governing agents need to be revised.

“It is a changing business and appropriate changes may be needed. But actors must continue to be protected,” Leonard Chassman, the Hollywood executive director of SAG, said Monday.

For more than 60 years, SAG has “franchised” agents, authorizing its members to be represented by them as long as the agents abide by SAG’s rules. These regulations govern many aspects of the agency business, including limiting agent commissions to 10% and determining contract lengths.

Agents argue that the entertainment industry has changed dramatically in recent years and that SAG’s rules have become antiquated and financially restrictive, and so need to be radically altered.

The agents want to be allowed to expand their operations both by developing new businesses and by getting a cut of all the streams of revenues that flow to actors, including video and DVD sales.

Without change, they predict, more agencies will disappear, agents will further flee the ranks to become unregulated managers and, as a result, actors on the lower rungs will have a difficult time finding decent representation.

However valid those arguments, actors are reluctant to embrace radical change. They are worried that loosening the rules could result in agents becoming arms of production companies and even studios, a situation rife with conflicts of interest that could hurt actors. Unhappy with current safeguards, actors also want new rules defining the fiduciary responsibility of agents toward their clients.

At this early point, both SAG and ATA are optimistic that a new agreement recognizing their respective issues can be worked out by Nov. 8.

It doesn’t hurt that SAG appreciates the formal support of agents during their six-month strike against the ad industry. ATA members refused to send their clients out for work that would violate the union’s strike rules.

The parties began talking about changing the rules--the first amendments since 1975--last spring, but negotiations were put on hold until the commercial strike could be resolved. The talks resumed recently and, sources say, some progress already has been made.

There is ample evidence that the talent agency business has changed.

Over the last few years, there has been a proliferation of management outfits in Hollywood. In 1998, Michael Ovitz, co-founder of Creative Artists Agency, formed a major talent management firm, Artists Management Group, which represents actors, writers, directors, sports figures and animators.

Stuart said that in the five years she has been with ATA, “I’ve heard over and over again that there are agents that are leaving the business, that members of the Screen Actors Guild are being represented by representatives other than franchised agents, and what are we as agents doing in a box when it’s apparent that you don’t need to sign a franchise agreement to represent their membership?”

Franchise agreements were originated to establish some ground rules for the representation business, which grew out of vaudeville and radio.

Today, ATA represents more than 100 agencies, from industry giants like CAA, International Creative Management and the William Morris Agency down to tiny independent shops.

Of SAG’s 98,000 active members, less than 30% work enough to have agents, according to the guild. Stuart estimates that ATA member companies represent close to 90% of all working actors.

Agents are particularly rankled by the double standard that exists between how they are forced to operate their businesses and the lack of rules governing how managers operate.

Unlike agents, managers are unregulated and not required to be licensed by the state. This gives managers the freedom to charge as much commission as they want--typically 15%, compared to the agents’ capped 10%--and to produce and own programming.

Stuart says agents are not asking to raise the 10% commission they charge clients on the initial compensation of any job they book.

But they want to be able to draw commissions from all forms of payment involving the reuse of a movie or TV show, be it video and DVD sales or cable and pay TV runs. Present rules prohibit agents in California from doing so, although in some other states such restrictions do not apply.

For some time, agents and actors have sharply disagreed over how commissions should apply to the Internet. ATA maintains that the regulations, written in 1939 and amended 25 years ago, have no jurisdiction over new media, but SAG holds the opposite position and has a proposal addressing the issue.

Agents insist that boosting their income is imperative given the increased costs associated with talent representation, including messengers, faxes, tape dubbings and other expensive client services.

“You can’t make money booking and taking 10% anymore,” Stuart insists.

But aren’t agents, especially those at the big agencies collecting six- and seven-figure salaries, just being greedy?

Stuart insists not. “In every other business, you can raise costs as your costs rise. But we can’t pass on our costs.

“If we wanted an equal playing field, we’d give up our franchise and become managers,” she asserts. “We want to stay agents. We don’t want to be managers. But financially, we are not going to be able to stay in business under the [existing] SAG regulations.”