THE OVERVIEW
As the WGA strike continues, major production studios and streaming services might resort to invoking force majeure clauses to terminate agreements with writers, with actions potentially commencing from August 1. The practice of terminating contracts during industry labor strikes is not rare, but the advent of streaming has added a layer of complexity. Canceling these agreements could invite negative publicity, legal complications, and the danger of losing writers and creators to competing entities, providing limited financial benefit for the studios.
Amidst the ongoing WGA strike, leading Hollywood studios and streaming services, impacted by the strike, might be considering ending their relationships with numerous creators. According to a report by Variety, backed by information from over half-a-dozen anonymous insiders, these companies might resort to applying force majeure clauses on the first look and overall agreements with writers to cancel them. This course of action could kick-off as early as August 1, and most threatened deals are likely to be related to television.
A force majeure clause, otherwise known as an “act of God” clause, permits the termination of contracts between writers and studios due to unpredictable circumstances that hinder the writer from fulfilling their commitments. With the writers’ strike nearing its 90th day—a typical threshold when contract termination becomes an option—these agreements could start being cancelled next week. This move would eliminate a financial security blanket for many writers, though it hardly impacts studios financially as their deals are currently paused.
Ending contracts en masse during industry strikes is not an unusual occurrence. The last strike in 2007-2008 saw a similar situation with numerous writers’ agreements being scrapped as soon as it was legally permissible. However, the rise of streaming has complicated matters, as studios increasingly attempt to secure creators with overall deals funding their projects, or first-look agreements, granting them priority for new projects. Many larger overall deals have safeguards against force majeure to prevent selective termination by studios. Unfortunately, the majority of smaller deals and mid-tier writers might face termination if studios pursue this route.
Image via SAG-AFTRA
Turbulence Ahead for Hollywood with Mass Contract Cancellations
Even if high-profile creators like Rhimes and Murphy are unlikely to have their contracts terminated, any termination would tarnish the studios’ public image. The potential financial savings are negligible since many contracts are already on hold. In addition, studios could lose writers, producers, and showrunners to their competition. There are also legal repercussions to consider. David Goodman, co-chair of the WGA negotiating committee, argued in an interview with Variety that unless they’re planning to invoke force majeure on all deals, studios face a legal predicament. There are hardly any justifiable reasons to proceed with this move, apart from piling pressure on writers.
Big studios and streaming platforms have been ruthlessly strategizing regardless of the logic. Executives confessed in a widely-publicized report that the objective of the strike was to exhaust the striking workers financially. Disney CEO Bob Iger didn’t hold back on criticizing writers and actors for demanding fair pay and working conditions, labeling their requests as “very disturbing” and unreasonable. Instead of negotiating, these studios are creating new AI-centric jobs that could potentially eliminate the need for human intervention in content creation.
Stay connected with FilmSweep for more updates on whether studios will proceed with force majeure contract cancellations. As the dual strike continues, delve into our in-depth analyses of the WGA and SAG-AFTRA strikes and their implications for you.
Frequently Asked Questions (FAQs) about Force majeure contract terminations
What is a force majeure clause in the context of writers’ contracts?
A force majeure clause, also known as an “act of God” clause, is a provision that allows contracts between writers and studios to be terminated due to unforeseen circumstances that prevent the writer from fulfilling their obligations.
When are studios and streamers likely to start invoking force majeure clauses due to the WGA strike?
The process of invoking force majeure clauses could begin as soon as August 1, traditionally the 90th day of the strike, when the option to terminate contracts typically kicks in.
Why would studios and streaming platforms consider terminating these deals?
The main reason to terminate these deals would be to put more pressure on the striking writers. However, it could also remove a financial safety net for many writers, even though it has little financial impact on studios since the deals are currently suspended.
What could be the potential consequences if studios and streaming platforms terminate contracts?
Terminating contracts could lead to negative public relations, legal complications, and the risk of losing writers and creators to competing companies.
Do all writers’ contracts have the same protections against force majeure?
No, larger overall deals often have protections against force majeure to prevent studios from selectively terminating contracts. However, mid-tier writers and smaller deals are more likely to be terminated if studios invoke force majeure.
More about Force majeure contract terminations
- What is a Force Majeure clause?
- Hollywood Labor Strikes: A Brief History
- Understanding the Writers Guild of America
- What is a First Look Deal?
- Hollywood’s Top Overall Deals
