Hollywood Dealmaking

Negotiating Talent Agreements for Film, TV, and Digital Media (Third Edition)

Dina Appleton, Daniel Yankelevits

• Publisher: Allworth
• Year: 2018
• ISBN:
  9781621536598
• Edition: 3
• Topic: Law
• Subtopic: Media & Entertainment Law
• Index: Law

"I wish I could have had this book when I was starting out in the business. An invaluable reference work." —Alan Poul, producer, Westworld The legal resources of studios and networks are legendary, often intimidating independent producers, writers, actors, directors, agents, and others as they try to navigate through the maze of legal details. This invaluable reference presents the interests of talent as well as the point of view of creative executives, producers, entertainment attorneys, agents and managers, and major guilds—making clear the role that each plays in the dealmaking process. Readers will find expert insights to talent and production deals for television, feature film, video, and the Internet, as well as an in-depth overview of net profits and other forms of contingent compensation. Hollywood Dealmaking, Third Edition, also addresses digital and new platforms, changes resulting from new union agreements, and the evolution in feature film back-end (profit participation) deals. In addition, this comprehensive guide includes:

• Explanations of employment deals
• Details of rights acquisition
• Basics of copyright law
• Sample contracts and forms
• Glossary of industry lingo and terminology
• And much more!

Peppered with facts on the deals of superstar players and with summaries in each section to clarify complex legal issues, Hollywood Dealmaking, Third Edition, is an essential resource for industry novices and veterans alike who want to sharpen their negotiation skills and finalize the deals they have been seeking.

CHAPTER 1

Introduction to the Dealmaking Process

Relationships play a key role in the dealmaking process in Hollywood. Not only does a good relationship ensure that a phone call will be returned or that a script will be read, but also it helps cut through difficult negotiations when a deal is ready to be made. Once a level of trust is established between the negotiating parties, each side may more readily accept the other’s bottom line.

THE PLAYERS

The major players in Hollywood routinely take part in power breakfasts, lunches, dinners, and drinks, cultivating their relationships with others in the business. Such principal players include the talent representatives (talent agents, personal managers, and entertainment attorneys), the buyers (studio executives and independent producers), and, at least indirectly, the guilds.

Talent Agents

A talent agent’s primary role is to procure employment for her talent clients (i.e., the actors, writers, directors, producers, or below-the-line crew whom she may represent) and to negotiate such clients’ employment agreements, possibly in conjunction with an entertainment attorney.

In California, talent agencies are regulated by the California Labor Code, section 1700 (also known as the California Talent Agency Act), and are required to be licensed by the State. This legislation requires that talent agencies post a surety bond of $50,000 prior to the issuance of their agency license. The regulations also require agencies to submit agents’ fingerprints and references, to maintain a trust account and accurate records, and to submit the agency’s form of talent representation agreement for approval by the Labor Commissioner. New York and several other states have similar laws relating to talent agents.

Talent agents primarily make their living by commissioning the fees earned by their clients. Customarily, an agent will receive 10 percent of the client’s gross earnings. For example, if an actor earned $60,000 for her acting services on a film, the agent would be entitled to a $6,000 fee. State legislation (mentioned above) and most guild regulations (discussed below) prohibit agents from taking a higher fee. In some cases, agencies will take a “packaging fee” in lieu of its standard 10 percent commission fee. This occurs in cases where the agency has “packaged” (or put together) a number of key elements in a film or television project (such as the writer, the director, a lead actor, or even an underlying property like a best-selling book) and sold the project as a package to a buyer. The package fee for television is typically comprised of: (i) an up-front fee equal to a percentage of the license fee paid by the broadcaster, (ii) a deferred fee paid out of net profits from the project equal to the sum paid in (i) above, and (iii) a back-end participation. Such an agency package fee may be shared by two or more agencies, if more than one agency represents “star” talent on the project and/or other key elements such as a hot underlying property. In recent years, agencies have creatively sought out alternative revenue streams. William Morris Endeavor Entertainment, for example, now represents YouTube stars and VR companies and provides marketing services to television networks and other corporate clients. CAA has been growing its successful sports-agency arm and has launched its full-service event management and marketing division, CAA Premium Experience.

Agencies representing guild members must be franchised by the relevant talent unions or guilds and must abide by the guilds’ agency regulations. In the United States, most established agencies are members of the Association of Talent Agents (ATA), a nonprofit trade union comprised of companies engaged in the talent-agency business. The ATA negotiates the agency regulation agreements with the various talent unions and guilds, including Screen Actors Guild-American Federation of Television and Radio Artists (hereafter, SAG), Actors’ Equity Association (AEA), the Writers Guild of America (WGA), and the Directors Guild of America (DGA). (The SAG/ATA agreement expired on October 20, 2000, and despite extensive negotiations was not renewed due to the inability of the parties to agree on fundamental issues. The two sides continue to work together, despite the absence of a formal agreement.) The various guild regulations not only restrict the terms of the agency representation agreements, but also give talent the right to terminate the agency agreement in the event that the agent is unable to secure any offers of employment during a set period. These guild agency regulations, along with the California Talent Agency Act and similar legislations in New York and other jurisdictions, are the foundation upon which talent agencies operate.

In Canada, while agents are not franchised by their unions—e.g., Alliance of Canadian Cinema, Television and Radio Artists (ACTRA) and Union of British Columbia Performers (UBCP)—in British Columbia agents must be licensed by the British Columbia Ministry of Labour, and regulations govern the fees and commissions such agents may take (i.e., no more than 15 percent). Many reputable Canadian agencies are also members of the Talent Agents & Managers Association of Canada (TAMAC).

Being represented by an agent provides legitimacy to the talent, and the more prestigious the agency, the better. Many production companies and studios will not accept literary materials unless they are submitted through an established agency, entertainment attorney, or producer with whom they have a business relationship. The theory is that if the project is represented by an agent, it must be of a certain standard, and hence worth the investment of time needed to evaluate the material. Policies restricting access by studio personnel to so-called unsolicited submissions can also help to shield studios from liability in claims alleging idea theft. Claims of this nature will be discussed further in Chapter 10.

There are numerous talent agencies in Los Angeles and elsewhere (most notably, New York City), some representing several different types of talent and some that focus representation on a particular niche (such as television writers or commercial actors). Moreover, some clients have more than one agent for different areas of representation. For example, an actor client may be represented by one agency for film and television and another for commercial or modelling work. The branching out of agencies, noted earlier, has formed alternative divisions that encompass such areas as sports, fashion, branded entertainment, hospitality, games, new media, film finance, and sales. Furthermore, mergers and acquisitions, such as the 2009 Endeavor/William Morris Agency merger and the 2016 William Morris Endeavor/IMG acquisition, have consolidated power in the entertainment industry. Representatives are finding that their clients are looking to them to provide more services and create more opportunities, and agencies are responding by changing their business models.

Talent Managers

Unlike agents, managers (or “personal managers,” as they are often called, so as not to be confused with business managers) are not required to be licensed or bonded by the State of California, nor must they be franchised by the guilds. In fact, anyone can, in theory, be a manager, since neither a license nor specific experience or training is required. In addition, managers are free to take as high a commission as their clients are willing to pay, since, unlike agents, they are not bound by state or guild regulations. Some shady or fly-by-night managers have been known to take up to 50 percent of their clients’ earnings. Most reputable managers, however, take a 15 percent commission fee, and some charge just 10 percent.

In recent years, the line between agent and manager has blurred substantially. Traditionally, the manager’s role was to provide day-to-day and long-term career advice for actors (and, less commonly, writers) and liaise with the client’s other representatives, while the agent’s role was to procure employment and negotiate the employment deal. Many managers, however, commonly solicit employment on their clients’ behalf and, in effect, act as unlicensed talent agents. In fact, some actors and directors, such as Clint Eastwood, Leo DiCaprio, and Sharon Stone have, reportedly, dropped their agents to work solely with their personal managers and entertainment attorneys. This trend has triggered significant controversy, as many agents are concerned that managers are encroaching upon their territory and threatening to make their role obsolete. The birth of Mike Ovitz’s Artist Management Group (AMG) in 1999 added fuel to the fire, particularly after some talent agents as well as talent clients left Ovitz’s former agency (which he cofounded) and then nemesis, Creative Artists Agency, for AMG (which is now defunct). As a result, there are frequent pending proposals in the California legislature (and much lobbying on both the agent and manager side) to regulate personal managers and impose the same restrictions upon managers that agents face.

Personal managers are not legally permitted to deal with the solicitation and procurement of their clients’ employment, unless they become licensed “talent agents” pursuant to California, New York, and other jurisdictions’ talent agency legislation (although the legislation doesn’t prevent managers from counseling and advising artists). In fact, until 1982, the California talent agency regulations subjected persons acting as unlicensed talent agents to criminal liability. Under the current law, the California Labor Commission has the power to declare management contracts void and to possibly order restitution of commissions earned under such contract if the artist can demonstrate that the manager acted as an unlicensed talent agent. Thus, unlicensed agents still stand the very real risk of having their management contracts declared illegal and unenforceable and losing all of their commissions. This is true even if the talent agent services were only incidental to other services—such as directing and advising clients—provided as a manager. However, the labor code does permit managers to negotiate employment agreements on behalf of clients if done “in conjunction with, and at the request of, a licensed talent agent.”

Though talent managers are not subject to state regulation, the Talent Managers Association (TMA) has created a Code of Ethics that its members are expected to uphold. Pursuant to such Code, managers’ commissions should not exceed 15 percent of the client’s gross income from the entertainment industry (excluding music and modeling, where commissions cannot exceed 20 percent). The Code also provides that the duration of the Personal Talent Management Contract shall not exceed three years (except in the music industry, where it shall not exceed five years). While the Code does not specify that managers will not engage in the procurement of employment, it does state that “a personal manager is engaged in the occupation of advising and counseling talent and personalities in the entertainment industry.” Notably, talent managers, unlike agents, are allowed to produce, often attached as nonwriting executive producers to their clients’ projects, and entitled to (sometimes hefty) executive producer fees and credits. For example, Erwin Stoff, a manager at 3 Arts Entertainment who represented Keanu Reeves for over 30 years, is credited as an executive producer on The Matrix. Similarly, Dave Becky (Kevin Hart’s manager) is accorded an executive producer credit on the series Making It and Kevin Hart’s Guide to Black History.

Entertainment Attorneys

The final member of the representation team (aside from the publicist, which certain higher-level talent retain) is the entertainment attorney. While not all talent engage lawyers to represent them, those involved in high-level deals are wise to do so. Entertainment attorneys may charge an hourly rate or, more ...