Talent Agencies Cut Costs to Prepare for Probable Strikes

Hollywood’s talent agencies are tightening their belts to build up financial reserves, another sign that the entertainment industry is preparing for a strike by writers and actors later this year.

Many cost-cutting efforts took effect this week when agents returned to work after the holidays. The measures include deferring salaries and bonuses, cutting expenses and travel, and skipping annual rituals such as the Sundance and Cannes film festivals.

The actions by the talent agencies come amid growing tensions and skepticism throughout the entertainment industry that new contracts between the labor unions and the motion picture studios and TV networks can be negotiated in coming months.

United Talent Agency, which represents such stars as Jim Carrey and Harrison Ford, as well as TV’s “Law and Order” creator-producer Dick Wolf, has taken the most aggressive steps. Effective this week, UTA’s partners, board members and top-earning agents have agreed to contribute 20% of their salaries and bonuses to a company strike fund. The reserve is to help the agency avoid significant layoffs of lower-income employees should a strike occur.

“Obviously, a strike is an unfortunate event for everyone,” said UTA partner Jeremy Zimmer. “And it’s nice to know that as colleagues we not only share in the good times but are willing to face the challenges together as well.”

Agencies are not direct participants in strike negotiations, yet they will be among the first to feel the effects of a work stoppage. The bulk of agency income comes from the 10% commissions agents earn on the movie and TV deals they negotiate for actors and writers as well as the more lucrative “package fees” they earn for TV shows they help put together.

In a prolonged strike, agencies will likely take more drastic measures, including across-the-board salary cuts and layoffs.

Also this week, the nine partners at Endeavor Talent Agency, whose clients include Adam Sandler and Dustin Hoffman as well as top TV show creators David E. Kelley (“The Practice,” “Ally McBeal,” “Malcolm in the Middle”) and Aaron Sorkin (“The West Wing”), have agreed to set aside part of their pay as a strike reserve.

Endeavor’s management also put a cap on agents’ expense accounts, cutting monthly entertainment allowances by as much as 50% to 75%.

Endeavor, like most of its competitors, is curtailing its usual travel plans, sending fewer agents to this month’s Sundance Film Festival in Park City, Utah, and the upcoming national television programming convention in Las Vegas. The agency, for the first time, plans to forgo April’s international television programming market in Cannes, France, as well as the famed Cannes International Film Festival, which can easily cost $20,000 per person for a four-day visit.

Labor tensions between studios and the talent guilds are at their highest levels in more than a decade. Representatives of the Writers Guild of America and the major studios will sit down later this month to start contract talks, with the current three-year pact expiring at 12:01 a.m. on May 2. Actors have yet to schedule talks for their contract that expires at 12:01 a.m. on July 1.

The sides remain miles apart. On Thursday, producers estimated guild demands will cost them as much as $2.4 billion over three years. But the Writers Guild called that estimate wildly inflated, saying its demands will cost producers no more than $725 million. The Hollywood agencies are in a particularly delicate position because they walk a thin line between supporting their talent and protecting their businesses.

Endeavor partner Richard Rosen, speaking on the agency’s behalf, said, “This is a serious situation. We obviously represent labor and our sympathies side with labor. That said, we’ve got to run our business in a very prudent fashion and will continue to take a look at keeping all facets of our business in line with the strike and economic health of the industry.”

Every agency in Hollywood, including Creative Artists Agency, International Creative Management and the William Morris Agency, is scrutinizing costs more vigilantly in this pre-strike period.

TV literary agency Broder Kurland Webb Uffner has cut back on advertising in the Hollywood trade papers, canceled plans to attend all upcoming film festivals and conventions, and has asked its employees to watch their expense allowances. In October, the agency scrapped its annual corporate retreat, which was to be held at the La Costa resort, and has canceled the party it throws in New York every year for the new TV season, scheduled for May 15.

“We’re in much harder times than we’ve ever been, not just because of the strike but because of changes in the business,” said one agency chief.

Brad Grey, whose management/production company Brillstein-Grey Entertainment represents such stars as Brad Pitt and Nicolas Cage and such TV packages as “The Sopranos,” “Politically Incorrect” and “Just Shoot Me,” said his employees too are being “more mindful of expenses and are making sure that no one is overspending at this time.”