As Packaging Comes To An End, Squabbles Over Grandfathered Projects Likely To Continue

It has been a long goodbye for packaging since the WGA and the major agencies’ new franchise agreements, signed in 2020-21 after an epic fight, included a “phase-in of packaging fee prohibition” period that ends tonight. But while for the WGA “it’s the end of new packages on guild-covered projects going forward,” per WGA West assistant executive director Ellen Stutzman, I hear that WME, CAA and UTA may not feel that way. Different interpretations of the language in the agreement could trigger dozens of arbitration proceedings, with studios stuck in the middle of potential disputes.

After a 22-month standoff, the WGA’s campaign targeting what the guild referred to as “conflicted agency practices” of packaging and affiliated production come to a successful end in February 2021 when the last holdout, WME, signed a franchise agreement stipulating that an “agent’s right to negotiate packaging fees shall terminate on June 30, 2022,” while limiting agencies’ ownership in production companies to 20%.

In the weeks leading to tonight’s deadline, I hear WME has sent letters to studios where their clients have existing overall deals that allow packaging, notifying them that future projects developed under the deals would also be packaged per the clause in the overall pacts should the writers choose to do so. A rep for WME declined comment.

Because the franchise agreement states that “agent’s right to negotiate packaging fees” ends today, I hear agents also have been seeking to pre-negotiate with the studios’ business affairs and set packaging rates for the various types of TV series that they could use in the future.

I hear some studios have reached out to the WGA — Deadline did too — and the guild’s position is that the packaging provisions in overall deals do not extend to projects that come together after June 30.

But having just that one line in the agreement — about agent’s right to negotiate packaging fees terminating on June 30, 2022, without further clarification — seems to be opening the door to potential legal tussles.

Noting that the WGA had proposed that language, one insider said, “This could come back to bite the guild,” adding, “It is now a matter of interpretation.”

The aforementioned line in the agreement also has spurred activity, with agencies trying to close as many deals as possible ahead of the deadline, setting up packaging fees for projects whose fruition may be years down the line.

Stutzman confirmed to Deadline that the termination of packaging is a “going-forward provision” and that “the agreement doesn’t unwind” existing packages. But interpreting what projects would be grandfathered in by the new agreement has become a legal conundrum that may send the WGA and agencies to arbitration per the deal’s arbitration clause. The potential proceedings would be watched closely as the first ruling would become a precedent that could influence dozens of other shows vying for exemptions.

“Whatever the outcome of the initial arbitration, it won’t be binding on other disputes, but it will carry a lot of heft,” a well-placed source told Deadline.

There also have been questions about potentially continuing to package projects around big-name acting, directing and producing talent who have long been part of packages alongside writers, with multiple agencies, including CAA, reportedly exploring that possibility early on but I hear they have all come to the conclusion that this would not be possible going forward, with overall deals becoming the main focus of efforts to extend packaging.

The WGA is firm on packaging non-writing talent too.

“The franchised agencies can’t receive packaging fees for representing other talent on WGA-covered projects,” Stutzman said in an interview with Deadline tied to the packaging termination deadline. “It’s not limited to receiving packaging fees for just representing writers. So any agency franchise with the guild, which includes all the major agencies, as well as many others – they can’t negotiate and receive packaging fees guild-covered projects, which is scripted programming, by virtue of representing other talent.”

Still, based on conversations I’ve had with sources, many studios seem to be in the dark, thinking that there are no restrictions to packaging non-writing talent but would take their cue from what the talent’s agencies and guilds agree upon. A rep for SAG-AFTRA declined comment. A rep for the DGA did not reply to requests for comment.

The end of packaging would significantly change compensation for top actors who command fees of $500,000+ an episode and have not paid commissions in years, with their agencies taking a packaging fee instead. Now they will have to pay commissions that could cross the $1 million per season of a TV show for the biggest names.

That would likely lead to actors pressing their agents to negotiate them a higher salary, above their current quote, to compensate for the 10% commission they would have to pay going forward; the packaging fees studios would be keeping starting Friday would potentially go toward rising talent costs across actors, writers and directors.

The WGA also is encouraging agents to step up their efforts and get more money for their clients. 

“The studios get to keep [packaging fee] in the first instance, and our view is that agents, properly incentivized to drive up their clients’ pay because what their clients make is now what the agent’s make their commissions on, we’re hoping that those proper incentives leads agents to demand that that money come back to writers and others working on all these projects,” Stutzman told Deadline. She was quick to note that “we’ve been clear that there is no guarantee that the elimination of packaging fees will necessarily result in the rise of writer income, but the alignment of agency and writer interests is a necessary precondition for writers to get the fair value for their writing services.”

While packaging fees are being discontinued, the practice of packaging, aka putting key pieces of a project together, can continue. “The franchise agreement prohibits agencies from receiving packaging fees, but they can still service their clients by putting projects together,” Stutzman said.

From what I hear, studios are trying to keep as far away from a potential agencies-WGA scuffle as possible while they try to balance their collective bargaining agreement with the guilds and their business relationship with the agencies. However, the studios may face a dilemma if a writer they have a deal with asks for/consents to a package and their contract allows for that. That is not considered very likely, as 95.3% of the WGA membership voted in 2020 to impose an Agency Code of Conduct, which included the end of packaging. Still, I hear a number of writers have requested packages during the sunset period after the franchise agreement was enacted by the various agencies.

While the WGA assumes that there isn’t a lot of wiggle room in the definition on ending packaging, “my suspicion is that there will be an attempt on the part of some agencies to wiggle around and find a little bit of room for ongoing overall deals or, this IP was purchased two years ago and we had a package on when it was purchased and it’s now getting done, whatever,” one industry veteran said. “But, I think that’s all just kind of leftover bits and pieces that will over a relatively short period of time disappear.”

Industry sources also downplay the importance of the potential squabble because, as one insider put it,  “I think packaging was heading out the door anyway,” pointing out that the cost-plus model introduced by Netflix and gradually adopted by other streamers as well as traditional Hollywood studios has upended the traditional profit-participation model that included sizable packaging fees for the agencies, raising questions about the future of the industry.

“The thing which is much more complex is what’s next for the agency business,” the source said. “The cost-plus deals were putting an end to the old packaging deal businesses anyway. And there’s less backend available because of foreign sales disappearing, much less domestic distribution, cable. We’re in this huge transitional period where we’re going to have to see where these revenue streams come and where the various entities that dip into after something is made — which would include the agencies and managers, lawyers, profit participants — what that looks like. I don’t think anybody knows.”

Dominic Patten contributed to this report. 

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