(Bloomberg) -- Hollywood screenwriters are firing their agents.

The Writers Guild of America, the representing most major screenwriters, instructed members to sever their ties with Hollywood’s biggest talent agencies due to a contract dispute. The writers can either fire their agents or face penalties. The union has approved representation with a number of smaller agencies, but not enough to handle the thousands of members.

“We know that, together, we are about to enter uncharted waters,” the guild wrote Friday in a letter to members. “Life that deviates from the current system might be various degrees of disorienting. But it has become clear that a big change is necessary.”

Hollywood agents have represented writers since the early days of Hollywood, finding projects, negotiating contracts and consoling clients who are down on their luck. But the top agencies have expanded the scope of their business in recent years, including financing and producing their own projects.

Endeavor, run by agents Ari Emanuel and Patrick Whitesell, operates a leading talent agency and finances movies including a documentary by client Michael Moore. Creative Artists Agency and United Talent Agency have also set up entities to finance and produce projects.

Conflict of Interest

Writers say the companies have enriched themselves at the expense of their clients. The WGA approved a new code of conduct mandating that agencies stop financing and producing their own shows, and that they stop collecting fees for packaging multiple clients into a project.

Agencies have collected so-called packaging fees for decades, and say their growing heft has empowered writers, creating opportunities that otherwise would not have existed. But writers seized on the expiration of their current contract to demand changes.

Writers have a long history of fighting with movie and TV studios for better terms. The WGA walked out for 100 days in 2007, halting the production of dozens of TV shows and movies.

The current dispute won’t bring production to a halt right away, But it could have longer-lasting effects for writers, agents and TV viewers. Many agents could lose their jobs, writers could struggle to find work and production of shows may slow. Hollywood studios had expected the two sides to reach a deal.

Gripes Online

A number of prominent writers have voiced their gripes online, while others expressed their reluctance to fire representatives who’d helped their careers. A brief extension of talks led to optimism that a deal would be in the offing. The WGA has been negotiating a new deal with the Association of Talent Agents, which represents the largest agencies. The ATA offered the WGA a share of future packaging fees, but the WGA said the offer was insufficient.

“Among other unacceptable proposals, the agencies insist on continuing their major conflicts of interest,” the WGA wrote.

Writers who fire their agents can still work on TV shows and movies, but they will need to rely on lawyers, managers and other help to find them jobs. The WGA has created an online portal that writers can use to look for work, and distributed a form letter writers can use to fire their agent.

Sarah Watson, who created the TV shows “Pure Genius” and “The Bold Type,” posted a copy of her letter firing United Talent Agency Friday afternoon.

Famous writer-producers like Shonda Rhimes and Ryan Murphy will suffer the least. They are still represented by agencies as producers, and have the resources to hire additional help if needed. Writers with less clout and fewer connections will now have to look for jobs on their own.

To contact the reporter on this story: Lucas Shaw in Los Angeles at lshaw31@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Rob Golum

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