Agents’ Digital Dance

Mar 6, 2006  •  Post A Comment

Sooner rather than later, revenue from television content played on new platforms is going to start piling up, and representatives throughout Hollywood, in classic agent style, are trying their darnedest to ensure their clients are properly compensated for their creations.

Despite the image of the all-powerful Hollywood agent, talent firms take a back seat to artist unions like the Screen Actors Guild, the Writers Guild of America and the Directors Guild of America when it comes to renegotiating the basic fee templates and overall compensation structures for their clients-the writers, directors and actors who create television programming.

Agents have lined up with the creative guilds’ position that new platform residuals should not be paid at the same rates as home video, but the two groups are taking different public approaches.

While the guilds took shots at ABC for its formula for residuals off of iPod downloads, releasing pointed statements Feb. 28 calling into question the current financial setup for the new platforms, the agency trade group Association of Talent Agents issued measured words earlier that month.

In what it called a resolution, the ATA called any deals currently being made involving the repurposing of content in new platforms “nonprecedential.”

Unlike the guilds, which have been direct, even aggressive, on the issue, many agents are speaking softly and optimistically.

“It’s great,” one agent said of all the emerging platforms. “Anytime you can monetize an asset and bring more money into the flow, [it] is a positive.”

One partner at a major literary agency suggested the conflict over new platforms “isn’t a strike thing yet.”

“Let’s talk this through and figure out a way,” he added. “You’ve got to make sure people feel they can make a living doing this.”

Still, agents are quietly honing in on two levels of compensation when it comes to new platforms: one for the artist for hire, who has somehow contributed to a piece of content and will be eligible for some sort of residual; and the other for the artist who created the content, who is considered a profit participant.

Lacking the collective bargaining power of the unions, agents are doing what they can to hold off deals that give buyers the upper hand or establish precedent when it comes to revenues and ownership regarding new platforms.

“We’re trying to do a little bit,” one agent said. “We’re trying to leave the door open. We seldom have the bargaining strength.”

In the meantime, studios are moving forward in establishing a new digital world order. This development season, test-option agreements for actors signing on to pilots explicitly included wordage spelling out the right to use material for digital use.

That kind of move is not reflective of any great change, one studio executive said.

“When you’re a studio and you acquire rights to a writer or an actor, even prior to this new world, the rights were all media, worldwide, in perpetuity,” he said. “If anything, all this is doing is making everyone realize owning the content gives you maximum flexibility. You’ve already got those rights [as a studio].”

That’s certainly true, one talent agent said, particularly in the case of using their clients’ work or image in terms of promotion, but with the opportunities offered in the new digital age, in which studios can sell content online directly to users, “It’s no longer promotion if they start making money from that promotion.”

Studios are also dictating that a talent’s image can be used for commercial tie-ins, a condition that limits actors’ ability to make their own deals with advertisers.

“Most take this position and will not negotiate one word of it,” another agent said. “It’s not fun.”

Like the guilds, what agents do not want the studios to do is account for new platforms the same way they account for home video royalties, in which only 20 percent of revenues go back into a pot to be split by the creative entities that made the content and 80 percent remains with the studios, ostensibly to defray production and distribution costs.

The model, which was developed in the early 1980s, before the home video market took off and long before the birth of the DVD industry, has been a sore spot for decades with agents, who argue their clients are severely short-changed by the system. Using that same model for digital distribution is unacceptable, one agent said.

“It’s too little,” he said of the 80/20 split, noting that when the compromise was created there was a significant cost in creating videocassettes. “That’s gone.”

“There is no cost of goods,” another agent said of digital distribution, by which he meant his clients should be able to enjoy a larger percentage of revenues.

Studios Happy With Split

The studios, however, feel there are costs involved, and the 80/20 split makes sense for some digital distribution models, such as the purchase of episodes through iTunes, one senior executive at a major studio said.

“The studios have all taken the position that this form of exploitation-electronic sell-through-you are purchasing a digital copy for permanent storage,” the executive said. “We are saying that is the digital equivalent of DVD or home video, therefore it gets treated as if it was home video.”

An executive at another major studio agreed. “It’s the evolution of the home video business,” he said, noting there is a difference between the purchase-to-own business and the digital equivalent of renting or having access to content for a limited time.

Even with all the debate over compensation, there’s been far more talk about emerging platforms than actual change to the entertainment business, another agent said.

“Everyone is on an announcement kick,” he said, noting that hardly a day goes by without a distributor trumpeting a deal to provide content in some new way. “The bottom line of it all is financially there is no real business.”

With no real business model, how and what creatives are entitled to is still unclear.

“It’s like the Wild West,” said Lee Dinstman, a partner at the Agency for the Performing Arts, “and nobody yet has determined how this revenue is going to be defined. Is it defined as a residual? Is it home video? Is it merchandising? Or is it something completely different? The studio has to account for it.”

How exactly compensation gets back to his clients is not a concern as long as it actually happens, another agent said.

“It’s not going to exact apples to apples or direct pass-through,” he said. “I just need them to make sure it flows to the pool available [to clients] in some form or another.”

For now, a template agreement has not been set, one agent said, regardless of what networks and studios are hoping to establish. “They are trying to apply the precendent from video to this, but it is still too nascent,” he said, echoing the ATA resolution.

But at this point, networks and studios have the advantage in setting the terms for compensation, another agent said.

“It’s 100 percent stacked for the buyer, and it’s how much you can get back from them,” he said. “For the most part, since nothing has proved to be good, bad or indifferent, the buyers can take a very strong position.”

Even with resistance from agents and the studios’ desire to keep the old model in place, coming up with a solution that leaves everyone satisfied is the ultimate goal, Mr. Dinstman said.

“There’s room for everybody to make money, and hopefully wise people will negotiate an appropriate revenue-sharing structure so we don’t kill the golden goose,” he said.

On that point, there is a consensus between agents and the companies that hire their clients.

“Everybody has an interest in figuring this out and making this work,” a studio executive said.

James Hibberd contributed to this report.