Force Majeure Terminations for First Look, Overall Deals at Struck Companies Coming as Early as Aug. 1 (EXCLUSIVE)

Force Majeure Terminations for First Look, Overall Deals at Struck Companies Coming as Early as Aug. 1 (EXCLUSIVE)

Major Hollywood studios and streaming platforms are considering terminating some of their first look and overall deals with writers as soon as Aug. 1, more than half-a-dozen sources with knowledge of various term agreements and talks inside these companies told Variety. The deals would be torn up under contractual force majeure clauses, as SAG-AFTRA and the Writers Guild of America continue to strike.

Decision makers could begin ending these pacts as soon as next week, said insiders from both the creative community and their corporate counterparts. Many of these deals were suspended only a week into the strike in May, by producers including Amazon, HBO, Warner Bros. TV, NBCUniversal, Disney and CBS Studios. The writers strike is also rapidly approaching the 90-day mark when, historically, dealmakers have the option to kill agreements in the face of an “act of God,” the common show business interpretation for how the phrase “force majeure” applies to these type of labor shutdowns. Overall deals typically pay overhead for a writer’s company and fund the development of projects. First-look deals also provide financial padding and, in return, guarantee that the studio or company has favored nation status when it comes to determining potential distribution of a series or film. The deals being considered for termination are almost exclusively in television, numerous insiders noted. 

Sources at top agencies representing writers said they had not received any official notice regarding the Aug. 1 date, but many expect to start receiving word next week. The studios notified them of deal suspensions in writing or on phone calls in May, Variety reported at the time.  

The move to terminate, which many consider drastic but necessary as labor conflicts drag on, is more complicated than in previous strikes (namely the conflict in 2007-08, which many industry watchers are using as a measuring stick). Since that time, streaming has exponentially increased the volume of content being produced, which has made first-look and overall deals more common in the ecosystem. As a result of the 2007-08 strike, when term deals were shredded almost immediately, top talent now have safeguards in their contracts to protect against force majeure, two sources with knowledge of two such contracts said.

The deals for major creators – at the level of a Ryan Murphy, Shonda Rhimes, Taylor Sheridan or Tyler Perry – stipulate that their pacts cannot be jettisoned unless a given studio enacts that clause for all of the term agreements they hold. This could lead to significantly less bloodshed if terminations go into effect, said insiders.

“In other words, you can’t cherry pick,” said one individual with knowledge of high-level contracts. Briana Hill, partner and co-chair of the media and entertainment group at law firm Pryor Cashman, said those kinds of deals allow for “no selective suspension of termination.”

David Goodman, co-chair of the WGA negotiating committee, echoed this in an interview with Variety this week. “They have a legal problem unless you’re gonna force majeure all the deals,” he said. He argued that an “act of God” cannot be invoked selectively, and that studios are unlikely to wipe out all of their deals, because that means they might lose some creators to their rivals when the strike is over. He also noted that studios are already saving money because they have suspended deals.

“They’re not paying people now,” Goodman added. “They’ve suspended very big deals. My assumption is that’s all they need.”

More than one literary agent found this kind of protection for mega-deal holders ironic. The WGA has been lobbying for a better contract on the message that the streaming economy has led to a disappearing middle class of TV writers. With the big names shielded by better terms, this leaves mid-range creatives with first-looks and overalls more vulnerable to force majeure (mid-range deals are considered those that pay out around $850,000 to $3 million per year, agency sources estimated, which many writers on the picket lines would tell you is far beyond a “middle class” writer).

Contractual terms are not all that might keep force majeure at bay. The money saved by a studio would be negligible, especially compared to the potential public relations headache those kind of terminations could present, noted one top content executive. The producers, represented in both Hollywood union strikes by an alliance called the AMPTP, have been painted as bloated, greedy and eager to replace human workers with artificial intelligence in order to keep costs down and streaming customers inundated with more and more content. 

Also, not all deals were suspended early in the strike, as some producers — particularly on the non-writing side — continued work on projects that had already written and were able to continue production. But as the SAG-AFTRA strike put a halt to most remaining projects that were still shooting, and post-production work wrapping up on the last projects in the can, those lingering deals may soon also be suspended as work runs out.

“These strikes haven been so strange in so many ways, in terms of how things are playing out in the court of public opinion,” Hill said. “There are a lot of things in entertainment that are strictly contractual, and a lot of things that are not. Ultimately, it’s going to come down to relationships and the culture at each individual studio or platform.” 

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