Smaller agents voice concern over proposed SAG pact. (Up Front).

Opposition to the proposed franchise agreement between talent agents and the Screen Actors Guild is emerging from a little-heard quarter: smaller agencies that could lose out to the big boys.

Unanimously approved by the board of the Association of Talent Agents, the tentative agreement is expected to pass the SAG board Monday (March 11) and go before the guild membership in a matter of weeks. If approved -- far from certain at this juncture -- the deal would soften conflict-of-interest rules that prohibit agencies from having any financial relationship with advertisers or companies involved in the production and distribution of film and TV projects.

But smaller agencies say the new rules are not likely to help them and may even increase their disadvantage with the large agencies.

Also, some smaller agencies say that the agreement would impose undue burdens in the form of higher franchise fees and contributions to SAG's so-called "rip-off" fund, which protects actors in case their agency goes out of business or they are the victim of an unscrupulous agent.

"If the bigger agencies are allowed to make these kind of investments and receive outside money it could put us out of business," said Cindy Burditt, an agent at the Screen Actors Agency in North Hollywood. "The production companies are going to go toward the bigger agencies and it will be harder to compete."

SAG's old franchise agreement with the ATA expired in January and has been temporarily extended. (Talent agencies are not required to belong to ATA, but must adhere to the franchise agreement it negotiates).

While prohibiting investment from media giants like Walt Disney Co., Viacom Inc., AOL and Time Warner Inc., the three-year agreement would allow agencies to sell as much as a 20 percent stake to companies involved in production or distribution -- far less than the 49 percent stake the ATA initially sought. Agencies could also take up to a 20 percent stake in production or distribution firms. Advertisers would be able to take a 10 percent stake in an agency during the first year and 20 percent in the second year. Agents also would be allowed to finance up to 15 percent of the cost of a TV or film production.

To protect actors from conflicts, agencies would have to notify actors of such investments and actors would be able to terminate their deals within 30 days.

New era, new rules

During a break from negotiations with the American Federation of Television and Radio Artists on a new franchise agreement, ATA Executive Director Karen Stuart defended the tentative SAG deal, pointing out that agents from small and large agencies sat on the negotiating committee.

"I understand that some people expect more, but this is the most sweeping, comprehensive change to the agreement in 65 years," Stuart said.

Gerry Margolis, a partner in the entertainment practice at Manatt, Phelps & Phillips LLP, said the new pact is clearly more beneficial to larger agencies and could lead to some consolidation among local agencies. But he added that the deal was unlikely to affect smaller agencies working in niche fields too small for larger agencies that focus on front-line talent.

"It extends the advantage of the larger agencies, but not vis-a-vis the smaller agencies," Margolis said. "The paradigm remains the same."

Not everyone agrees. A top executive with a large local agency said the deal was designed with the idea of opening new lines of capital for larger agencies. "The economic impact on the smaller agencies is not going to be enough compared to the huge economic impact on the top 15 agencies," he said.

If approved, the new franchise agreement would replace rules that went into effect more than 60 years ago to protect actors from agents who were also working on behalf of studios or production companies. Virtually everyone agrees the old rules need to be updated, but actors have been reluctant to sign off on a deal that would increase the possibility of conflicts.

Until now, most of the opposition to the proposed agreement has come from supporters of Valerie Harper, who attacked the deal while campaigning in the rerun election for SAG president with Melissa Gilbert. (That election was to be decided March 8.)

"We've built in firewalls and protected actors," said SAG First Vice President Tom LaGrua, a member of the negotiating committee. "I don't think it's going to be as big a change as a lot of people think."

But concerns persist, and not just among actors.

"Many agents have already left the field to go into management so they can get into production and more things," said Burditt, whose two-agent firm represents about 75 actors. "I understand why there needs to be a new deal, but my concern is they haven't considered what the impacts will be on smaller companies like ours."

One source close to the negotiations acknowledged that smaller agencies are unlikely to draw outside investment, but noted that the pact contains other provisions, such as new commissions in a variety of supplemental markets like home video, that will benefit all agents.

"It's a good deal. I have a feeling that those who are being negative are not focusing on all the particulars that will be of benefit to the agency community," the source said.