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When Hollywood writers began firing their agents en masse this month, their gripes seemed esoteric. They contended that an obscure set of financial arrangements had created conflicts of interest for their agents and squeezed the writers’ earnings.

But just beneath the surface of the standoff is an issue that affects workers across the economy: the increasingly visible hand of Wall Street. The top talent agencies have evolved into large corporations backed by financiers who have pumped billions of dollars into their businesses.

The relationship between private-equity firms and the major talent agencies dates back at least to the last decade but escalated in 2010, when TPG Capital made an initial investment in Creative Artists Agency. That investment grew to $500 million and a majority stake.

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Within a few years, Endeavor, the parent company of WME, the other industry leader, sold a stake worth $200 million to Silver Lake Partners, another private-equity fund.

WME and Creative Artists would later use their cash stockpiles to invest in the production of movies and scripted series.

The writers say the investments have put the agencies or their parent companies in the position of simultaneously negotiating on behalf of writers and hiring them, an arrangement that could hurt their pay. Last week the Writers Guild of America filed suit against the four major talent agencies, and on Monday it delivered over 7,000 termination letters from its members to agencies.

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The agencies declined to comment for this article. They have said that their content arms are separately run entities, and that they cannot lowball writers because they risk losing clients. WME cited what it says are hundreds of letters from clients who are uneasy with the WGA’s stance.

Still, the outside investors did not simply hand the agencies sacks of cash for empire-building. In some cases, they also prompted changes in the way the agencies ran their business.

There was, for instance, cost-cutting – including restrictions on who could dine in fancy restaurants and stay in high-end hotels, long considered a divine right of agents. After TPG bought into Creative Artists, the agency decreed that all but its most senior agents could no longer stay at the luxurious St. Regis in New York, according to “Powerhouse,” a 2016 book about the agency. A senior agency official later said management, not TPG, was behind these initiatives.

The fund, which rose to prominence acquiring companies like Continental Airlines and J. Crew and currently manages a $100 billion portfolio that includes stakes in Uber and Airbnb, was also eager to increase the revenue generated by each employee or asset to maximize its return on investment.

At a company retreat shortly after TPG bought its initial stake in Creative Artists, a top TPG official held up the discount European airline Ryanair as an example. The official said the airline had sought to allow passengers to fly standing up, one of the Creative Artists agents recalled in “Powerhouse,” which would help it pack more people onto each flight.

Some Creative Artists agents did try to pack more passengers onto their metaphorical flights, intensifying efforts to find projects for clients and bring in more revenue.

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The problem is that agents operate in a labour-intensive business and can scale themselves only so much. “The classic story is that an agent at CAA and all the others would take 200 phone calls a day,” said Hal Vogel, a consultant and author of a book on entertainment-industry economics, alluding to Hollywood lore. “But you can’t go to 1,000, 10,000. Up to a point, you can’t stretch it.”

One potential solution to this tension was “packaging” – a decades-old arrangement in which an agency would earn a fee from bundling multiple clients together into a single production.

Packaging fees can result in a substantially larger payout than the standard 10 per cent commission on a client’s earnings. In a packaging deal, the agency typically secures both upfront revenue, through a cut of the fee that the production studio earns, and up to 10 per cent of the show’s profits in perpetuity, as determined by a somewhat arcane formula. This can add up to many millions of dollars for a successful and well-funded show.

Some clients have chafed at these arrangements over the years, arguing that they divert profits to agencies when they should flow to a show’s creator.

The Association of Talent Agents, the agencies’ industry group, has said that writers benefit from packaging because agencies waive their commission when a client is packaged on a scripted television series.

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The Writers Guild of America counters that the agencies’ packaging revenue still offsets what they give up in waived commissions, and that packaging fees have weakened agencies’ incentives to seek higher pay for mid-level and junior writers, which could eat into a show’s profits. It cites survey data showing that weekly pay for the typical writer dropped by almost one-quarter from 2014 to 2016, even as the rise of streaming services has created more bidders for television projects. WME said an analysis of its own clients showed writer pay rising on average in recent years.

And even if private-equity firms are not the only reason agencies chase packaging revenue, the Guild argued in a recent report that the presence of outside investors puts enormous pressure on the top agencies to generate more revenue and profits from existing employees, reinforcing the practice.

“We benefit from package fees from the shows when they get resold and resyndicated over and over again,” a Silver Lake managing partner, Egon Durban, told The Financial Times in 2014.

Whatever the case, the capital-fuelled expansion of the biggest agencies has increased the suspicions of writers, who worry that agencies now care more about their backers’ bottom lines than about the talent they are supposed to represent.

“When you see reports that my former agency, WME, is going to go public, that they have all this private-equity investment, it’s a concern,” said Shawn Ryan, a showrunner and writer on such series as “S.W.A.T.” and “The Shield.” “Managing a writer’s career to the best of their ability may not always mean making the maximum dollar in a given moment.”

The powerful outside investors to whom the agencies now answer often resemble the activist investors that dominate more workaday industries. Rather than upgrade their operations, supermarkets and retailers owned by private-equity firms have diverted profits to their owners and made interest payments on the debt these owners piled onto their balance sheets. Many have succumbed to bankruptcy, erasing thousands of jobs along the way.

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Against this backdrop, many writers say their beef with the agencies transcends their small, rarefied corner of the economy.

“It’s very easy to read about this dispute from the outside and assume it has nothing to do with your everyday life,” said Javier Grillo-Marxuach, a writer on “Lost” and a producer on “The Dark Crystal.” “But the truth of matter is that this dispute mirrors any number of disputes going on between labour and corporations.”

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