How Private Equity Ate Hollywood—and Why Writers Are Fighting Back (2024)

Hollywood is smoldering this week, after the 13,000 members of the Writers Guild of America (WGA) prepared to fire their agents, the upshot of the termination of a 43-year-old agreement between the union and the Association of Talent Agents trade group. On Saturday, the WGA ordered members to part ways with agents who didn’t subscribe to a revised code of conduct, which rank-and-file writers approved with 95.3 percent support. The form letters informing agents of their firing, which well-known writers have been posting on Twitter, will be delivered later this week.

This isn't a strike or lockout; as much as you might like your favorite television shows to pause to catch up on your DVR, they will in all likelihood continue with minimal disruption. But the battle between writers and agents represents another example of the monopolization and financialization of our economy, and how organized, unified workers can fight back.

While the lead antagonists on the stage are talent agents, the villains behind the scenes are private equity firms.

The WGA laid this out in a remarkable report last month, showing how institutional investors—mainly private equity—have bought into the three largest talent agencies, to the tune of billions of dollars. These three agencies—Creative Artists Agency (CAA), William Morris Endeavor (WME), and United Talent Agency (UTA)—are responsible for 70 percent of WGA members’ earnings.

Private equity firm TPG Capital now has a 53 percent stake in CAA, investing $340 million in the agency. Another $100 million in investment comes from a consortium of Chinese and Singaporean sovereign wealth funds and the telecommunications firm Taiwan Mobile. Silver Lake Partners, another private equity firm, has invested $750 million in WME, with another $1.8 billion in WME equity stakes passed around to the sovereign wealth funds of Saudi Arabia and Singapore, a Canadian pension fund, Chinese investor Tencent, Japanese fund SoftBank, and more. UTA gave a 40 percent stake to the private equity firm Investcorp and Canadian pension fund PSP Investments for $200 million last August.

Previously, these organizations were partnerships under the control of the agents themselves; today, “the top three agencies now operate under the pressure of private-equity-level profit expectations,” the report explains.

That translates into an affinity for something known as “packaging” fees, direct payments from studios to talent agencies as a kind of commission for employing their clients. “Packaging” is a bit of a misnomer, as even one client of an agency can trigger this studio fee. The WGA estimates that about 90 percent of the 2016-2017 television season's scripted programs were packaged. WME earned $138 million from packaging fees in 2013 alone, according to financial statements.

Clients do not share in these packaging fees, though the fees substitute for the agent's usual 10 percent commission. However, packaging fees are considered part of the budget of a television or film production, and can stretch into the millions of dollars. That means that the agent is bartering with the studio over a fee that comes out of the same pot of money as the writer's pay.

Because agencies bring with them actors, directors, and other premium talent, they can bargain for higher packaging fees. Maybe all those clients aren't packaged in one project, but the studio would want to keep an agency happy for future considerations. “Agency success is severed from client income,” the WGA report states, which undermines the entire purpose of writers hiring agents to operate in their interests.

The Association of Talent Agents has claimed that writers make more money because of packaging fees, but the WGA doesn't buy it. The union has cited surveys that median weekly earnings of television writers and producers fell 23 percent between 2014 and 2016, at a time of “Peak TV” production (nearly 500 shows were produced in the United States last year) when writers' services are needed more than ever. In recent negotiations, agents offered cutting writers into the deal, barely, by granting them an almost insulting 1 percent of packaging-fee profits. The WGA rebuffed that.

Agencies have cultivated other revenue streams apart from client fees as well. WME and CAA in particular have focused on purchasing content, which their private equity owners have encouraged.

For example, WME and Silver Lake have purchased the mixed martial arts company UFC, the Miss Universe pageant, the Professional Bull Riders association, and IMG, which produces and distributes sports and nonfiction entertainment. WME also now has its own film and TV production arm, built through acquisitions of other production companies, which has sold shows and films to Paramount, Apple, and Amazon. The company’s revenue has increased sixfold over the past four years. Under TPG’s leadership, CAA has also moved into producing programming for Apple and Facebook. The agency has also created a $500 million investment fund for content called Evolution Media.

Again, these are talent agencies that are supposed to be operating in the best interest of their clients. Having moved into production, they now often serve as their clients' employers, which the WGA calls an “indefensible conflict of interest.” Typically producers want to lower labor costs, while agents sign clients with the intention of maximizing their income.

The agencies have made out well from private equity investment and expansion. TPG's stake in CAA has tripled in valuation in a matter of years, and top executives at the agency have earned more than $250 million from the TPG deal. Silver Lake has nearly doubled its investment in WME, with valuation of the company exploding to $5.7 billion at the end of 2017, up from $833 million just five years earlier.

Some minor agencies have signed the WGA’s code of conduct, which basically restricts the agencies to representing their clients. With the major agencies rejecting this, however, many writers will probably try to have their managers and lawyers negotiate contracts for them. The large agencies have threatened to sue if writers go forward with this, saying that the managers and lawyers would be performing agent duties without a license.

No walkouts are scheduled, and the whole mess will probably end up in court. But it does resemble the plight of so many other industries when private equity decides to enter. Workers end up suffering with lower wages and more insecurity while the top managers make out like bandits. The combination of consolidation of the talent agent industry with the desire for Wall Street–sized profits and the entry of Wall Street investors has divorced whatever logic undergirded the writer-agent relationship. Clearly it has devolved into a predatory capitalism, where the agents are out for themselves, despite being the hired hands of the writers.

While the agents have the guys with billions in capital and Manhattan penthouse apartments on their side, they'll never have the major bargaining chip at writers' disposal: scripts, stories, and ideas on paper. It's one thing for private equity to pillage a non-union business like retail. But Hollywood has long been a labor town, and if the writers stick together, they will show how solidarity can transcend the power of big money.

David Dayen

David Dayen is the Prospect’s executive editor. His work has appeared in The Intercept, The New Republic, HuffPost, The Washington Post, the Los Angeles Times, and more. His most recent book is ‘Monopolized: Life in the Age of Corporate Power.’

Read more by David Dayen