CAA Signs Version of Franchise Agreement With Writers Guild, Approval Still Pending

WME remains last major agency holdout in dispute over packaging fees

UPDATE: 12:30 PM — Updated with response from WGA

CAA on Monday signed a version of the franchise agreement with the Writers Guild of America that could see the agency end packaging fees, according to a memo sent out to its employees.

The agency has been in a stalemate the guild for more than a year over the practice, which led to CAA not representing Hollywood writers.

“Today, we signed the same deal the WGA made with ICM several weeks ago. We delivered the signed agreement to the WGA, and we assume that it will be circulated to the appropriate members of the negotiating committee, as well as the membership, shortly,” the agency said in a statement. “There is one change we have provided that we think the WGA will be able to agree to. With regard to our investment in the affiliated production company, wiip, we are providing for a commercially practical time to come into compliance with the 20% ownership limitation contained in the agreement. We are unequivocally committed to achieving compliance.”

But in its own responding memo, the Writers Guild says that “CAA has proposed changes to the agreement that the WGA has not – and cannot – agree to.”

“The WGA will assess CAA’s offer, but not through the press,” the guild’s negotiating committee said. “CAA remains unfranchised. The Working Rule 23 order remains in effect for CAA until the WGA officially notifies members otherwise. We will keep you informed of any new developments.”

If the deal is approved, CAA would become the third major Hollywood agency to agree to a new deal, following behind ICM and UTA. WME, at this point, remains the only hold out among the major agencies.

UTA, ICM, CAA and WME account for more than 90% of the packaging fee deals — those in which agencies bundle writers, talent and creators for a project and sell to a studio — in Hollywood. The WGA has already signed deals with more than 80 talent agencies for whom packaging fees are less of an issue.

Last year the WGA implemented a new Code of Conduct for agents designed to end practices it has described as conflicts of interest: packaging, where agencies bundle talent and projects together and bring them to a studio as a package, for which the agency collects a fee on top of the commission for their clients’ work; and affiliate production, in which a studio partly owned by the agency is involved in a packaged project. Thousands of writers terminated their representation shortly after the code went into effect.

The WGA, last year, sued CAA, UTA and WME over packaging fees, which the suit called illegal. The agencies responded with their own lawsuit accusing WGA of participating in an “illegal boycott” by having their writers terminate their representation. In April, a judge dismissed most of the union’s claims of unlawful racketeering. An antitrust lawsuit by the agencies against the WGA continues, with a trial that could begin next March. That lawsuit, however, will have to proceed without UTA, as the agency must withdraw from the lawsuit as a condition of the agreement. WGA says that CAA must also withdraw from the lawsuit as a condition of any franchise agreement deal.

Since the UTA agreement was reached, both sides have spoken about the ongoing stalemate over affiliate ownership. CAA Co-Chair Bryan Lourd said at the UCLA Entertainment Symposium that the agency and WGA had “a very different way of looking at where the industry is going.”

“There is a way of thinking about things that is in the past, as opposed to what’s possible in the future,” he said. “And I want us to at least have our day in court to be able to explain what we know, and hope that we can get to some situation that’s better for them and us.”

Conversely, WGA said in a memo to its members that it had hit its limits with talks with CAA and insisted that it would not increase the allowable percentage of affiliate ownership beyond 20%.

“”WME and CAA chose to sit out the negotiation for well over a year, hoping members would give up, and relying on a lawsuit that won’t even go to trial, if at all, until summer 2021,” they said. “Because of their corporate structures and private equity investors, WME and CAA have to make decisions about the future of their affiliate production companies. We’re happy to hear their plans and proposals, but ultimately it is their responsibility to find a way out of their dilemma.”

Even in the new memo announcing that they would sign the ICM contract, CAA criticized the Writers Guild for not communicating enough with them and urged quarterly meetings as soon as possible.

“The fact that CAA and the WGA couldn’t resolve the broader dispute in a better way caused personal and professional damage to many relationships and cost millions of dollars to the Guild and the agencies. Countless opportunities were lost for so many people,” the memo said. “While litigation is never our desired business strategy, we hoped in this case that it would provide a court’s relatively prompt direction as to the disagreements with the WGA. Unfortunately, a pandemic eliminated the possibility of a prompt day in court.”

“Time will tell if the deal the agency community has agreed to with the WGA will be good for the Guild, writers, other artists, our companies, and the community. What was never in dispute was that solid reforms the Guild sought were worthy of consideration. However, good and solid reform in any relationship requires dialogue and factual information with agreed-upon assumptions from the parties involved. Unfortunately, that dialogue has not occurred to date between our agency and the WGA. With a new commitment to engagement, we are hopeful that we will be able to avoid this destructive dynamic in the future.”