You wanna know how agencies really make their money in the TV arena? Two words: PACKAGE FEE.
As you may already know, one of the main distinguishing factors between agents and the rest of the industry is that agents, by law, are not allowed to produce. Meaning they can’t receive producer credit and they can’t receive producer fees. That being said, being the clever business-minded suits that they are, the agencies have come up with a way around that in order to make huge financial gains from the sale & distribution of a television series. Instead of producer fees, the agency takes what they call a package fee (which can some times amount to more than actual producer fees). By its purest definition, this is the fee that agencies get for finding all the creative auspices for a tv show and attaching them to the series before selling. In other words, it’s what they get paid for packaging a TV show with writers, directors, actors and shopping the show to studios. The studio will then pay the agency an upfront package fee, along with a percentage (usually 10%) of the profits. So, to put some context into this, on a typical network hour drama, we could be talking about $30,000 per episode going to a talent agency for every episode produced plus, in success, another $30,000 per episode that had been deferred.
Initially, this looks great to the clients because they don’t need to pay the agency their typical 10 percent commission. The studio compensates basically takes care of that for them. But what they often don’t realize is the fact that they, along with their agency, take an off-the-top percentage of gross profits. This means that since their agency takes a good chunk of the profits, there’s less profits available for the client to exercise his/her percentage points.
Agencies are literally making millions of dollars off television series from which they attached their clients to (and do basically nothing for the show after it’s been sold) and all the studios/networks have agreed to pay these fees to the agencies instead of contributing them to production or additional talent. Does this seem fair and pragmatic to the industry as a whole? I’ll let you decide.