My previous article in this series examined how to fix the television side of Hollywood’s flawed business models. This article addresses those people everyone loves to make sport of: the agents.

Agents have a difficult job, believe it or not. They represent a multitude of clients. Very often, they represent several clients that would each be right for a specific job that comes along. In addition, there are a finite number of producers and a very small number of employers. The ugly truth is that conflicts of interest abound. It’s inevitable. Certain horse-trading must occur in order to get deals done. There are too many crosscurrents for this not to happen. It’s really no different that state or federal politics. It won’t change, simply because there are too many people seeking employment, too few jobs, and billions of dollars at stake.

Agents have it tough. There, I said it. I don’t know of any agent that doesn’t want to see all of their clients working — not just because they want to book commissions, but because they don’t want to feel that they’ve let their clients down. And while jokes abound about the utter inhumanity of agents (and I’m sure there are plenty that are, in fact, not human), many of them have families, just like their clients. They know their clients need to support their families. They know they need employment. Agents must deal with absurd amounts of client insecurity, while also handling deals that are literally worth millions. Competition is intense within many agencies. There’s a lot of work involved. Think Mamet’s Glengarry Glen Ross times ten and you start to understand.

Both state law and various Guild agreements effectively prevent agents from owning productions or production entities. The concept is that this protects the artists by preventing conflicts of interest — by only procuring employment for clients in the productions the agency owns, and therefore limiting fees paid to the client in order to maximize the production’s profit.

I think this is ridiculous, for two primary reasons. 1) conflicts of interest already exist, and 2) artists would actually benefit by a lifting of this restriction. I’ll tell you why in a moment, but first I’ll admit that this part of my model is much dicier. There are more variables at play here. Distribution and exhibition can be complex and it is not a zero-sum game. This analysis is not exhaustive or predictive as my other efforts were. It’s more train-of-thought. Here goes:

Presently, Hollywood studios are an oligarchy. Besides being able to use their own capital to finance films, they control the vast majority of the distribution pipeline. A few smaller distributors do exist, but for the most part, it’s the big studios that own the game. On top of this, the most recent trend had been for studios to partner with hedge funds (read: suckers) to co-finance some of these films. Some $5 billion has been committed by hedgies to the studios.

Imagine if the agencies had been permitted to raise some of that capital (or could actually find capital now, in this awful economy). Suddenly, the number of entities capable of producing films on decent budgets would double. With a bit more diligence, both distribution and marketing infrastructures could be added to these agency-studios. And suddenly we have far more entities financing, producing, and distributing films. Exhibitors have a wider selection to choose from. It’s called competition and one thing we know from basic economics about competition: it creates higher quality product. Now studios would have to be far more careful about what movies they choose to make. I suspect we’d see some of them specialize in various niches. I believe that some would discover that significant ROI’s could be generated from lower-budgeted or specific fare. I think we’d see a wider variety of films made. I think that what we call “independent” films would find wider acceptance.

Would we see more films get made, or would exhibitors continue to grab the big blockbusters and crowd out everything else? One thing is certain: the number of theatre admissions over the past decade has been flat to down.

(Domestic Theatre Admissions in Billions; Source: MPAA)

1999 1.439
2000 1.385
2001 1.437
2002 1.597
2003 1.520
2004 1.484
2005 1.378
2006 1.395
2007 1.400
2008 1.364

One possible interpretation of this trend is that people are not impressed by the content they are being provided. Perhaps, if diversification of content were increased, that might change. It means blockbusters still get made, but perhaps fewer of them get made, or they either play on fewer screens and/or for shorter periods of time to make room for other types of films. Or, perhaps, overall demand will increase, and more screens will come on-line.

I believe this would increase employment across all sectors. More films made mean more employment.

As for conflicts of interest, though, I think that would decrease. To be sure, agencies that own productions will be more inclined to convince their clients to work for less in order to maximize profit. Therefore, artists will be enticed to work for other agency or studio productions if offered higher quotes. In this event, the other studios are not penalized for not representing the artists. If they want the artists badly enough, they’ll pay for them, just as they do now. If the artists don’t want to be low-balled by their own agency, they don’t have to take the work since there are other players.

It also encourages the studios to hire as many writers as they can per my suggestion. The more writers they have, the more leverage they have in terms of controlling the best material. Therefore, agencies will respond in kind and employ as many of their own clients within their own production entities as possible.

Will this plan work? I can’t say it would with as much confidence as my other proposals have. At the very least, however, removing this restriction makes sense not just because conflicts of interest already exist but also because a little entity known as Media Rights Capital is effectively a studio controlled by agency powerhouse WME Entertainment.

Next time: Wrapping it all up.

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