You’ve finished your screenplay and quite frankly, it’s great. As a matter of fact, it’s such a terrific piece of writing that your buddy passed it on to a producer he knows, and the producer is interested in optioning it. She sends you the option agreement. She wants an eighteen-month option, and in return she’ll pay you five thousand dollars. You sign the option agreement and receive a check for $5K.
Hopefully you spent at least a hundred of that five-thousand on a bottle of champagne to celebrate. Most writers never option a script in their lives, let alone for thousands of dollars (there are lots of $1 options floating around out there but I’ll get to those in a bit). As you sip the bubbly with your roommate, Lex, he asks, “So, what does that mean to option your script? Is she going to turn it into a movie or what?”
Good question, Lex.
You explain that an option is basically this:
“The producer has agreed to pay me $5K to “rent” my script for 18 months. She doesn’t own the rights to the script, at least not until she pays me the predetermined purchase price also set forth in the option agreement, which is $20K. If she pays me that money at any point during the eighteen months, I’ll transfer rights to the screenplay to her. That’s called a spec sale. At that point, she can do anything she wants with the screenplay—produce it, hire someone else to completely rewrite it, sell it to another producer, or let it collect dust in her virtual in-box. In the meantime, I’m not allowed to shop it or show it to anyone else.”
“What if she doesn’t pay you the $20,000?” Lex asks, helping himself to more champagne.
“Then the rights return to me. I own all versions of the script, including any revisions she asked me to make, and I can shop it or sell it anywhere I want. Plus I get to keep that $5K she already paid me.”
Fast forward one year. You get a call from the producer saying she wants to exercise her option to buy the script and she sends you a purchase agreement. Your lawyer looks it over, gives you the legal thumbs up and you sign the contract. You receive your check for the purchase price, deposit it in the bank, and sit down to start your next script.
A year passes and Lex asks when your movie’s coming out. You email the producer and ask if it’s slated for production yet. Bad news. She tells you, “Well, the project has stalled because it’s a thriller and the distributor that she has an output deal with only wants rom-coms now. Do you have any finished rom-coms you can send me?”
“I don’t,” you tell her honestly, “But I’ll come up with some concepts to pitch you. In the meantime, do you mind if I show the script you bought as a writing sample?” Surprisingly, she gives you permission, even though she’s not obligated to and producers rarely give permission until after a film is made.
You contact Producer #2 who you met last week at a film festival. He’s looking for thrillers so you pitched him a couple of ideas then and there, and he’d asked to see a writing sample. You explain that the project you’re sending has already been sold but it’s a good example of your style and skills. “Send it over,” he says.
Three months later, you get a call. Producer #2 loves the script you sent and wants to know who is making it. You relay what Producer #1 told you and he says, “If it’s in turnaround, I’d be interested in picking it up.”
“What’s turnaround?” Lex asks, having overheard your end of the conversation as he lingered a little too long microwaving his pizza.
“When a screenplay goes into turnaround, the producer who owns it is willing to sell it to either another producer, or back to the writer, for the cost of development plus interest,” you explain. “Typically the interest is ten percent.”
“So, the lady producer would sell it to this guy for $22,000?”
“Maybe. If she knows she’s not going to make the project, she can recuperate her money.”
“Why don’t you buy it back for $22,000 and then sell it to this new guy for more than that?” Lex asks.
It’s a valid suggestion. You personally know a writer who successfully bought back one of her own projects and re-sold it for more money. But it took her over a year to find a producer who wanted it. “Number one, I’m a writer and don’t have $22,000 extra dollars lying around,” you tell him. “And second, why risk losing $22K just to make an additional five to seven thousand?”
You decide to put the two producers in touch and let them work it out. They do and Producer #2 is now the proud owner of the script you wrote, and slates production for the fall.
Fast forward seventeen months. You’re at the red carpet premiere of your little indie film, sipping champagne that someone else paid for, and you meet Producer #3. He says he adored the film and says he has a project he’s working on—it’s based on a concept he pitched to his distributors, they love it and now he’s looking for a writer to write it on spec. He pitches you the concept, which you find compelling, and asks if you’re interested.
“So, he’s guaranteeing to buy this project from you once you write it?” Lex asks after you tell him the good news.
“Not exactly,” you explain. “Selling a spec is different from writing on spec. When you ‘sell a spec,’ you own the rights until a producer purchases the screenplay from you. But this is based on a concept that’s his idea so he owns the concept. He’s essentially asking me to develop the project with him for no pay, and when he makes the movie, we’ll both make money.”
“So, you basically take all the risk and do all the work in hopes that he does his part and you eventually will get paid? Why would a writer ever do that?”
You know writers who have done that and did make good money when the film got made. But you also know writers who developed a project on spec and got screwed. “Well, because theoretically, I'd make more money than if I simply sold it. Deferred pay can either come as a pre-negotiated amount or a percentage of the profits. The more money he makes from his distributor, the more money I also make.”
“So the pre-negotiated amount would be more than if you just sold him the script?”
“Exactly. Because I’m taking the risk.”
“And what if he doesn’t set up the project?” Lex asks. “Can you go sell it to someone else?”
“In this case, no,” you say. “Because the script is based on a concept that he came up with, he and I would both own the rights to the script. If the concept were solely my idea, then yes, I include a clause in our partnership agreement that after a certain period of time, all rights come back to me.”
That night, you give it some thought. The producer seems to have a pretty good track record of getting projects made, and you really do like the idea. The next day, you call him and propose an alternative. “Instead of a partnership, I’ll do this work on assignment,” you suggest. He essentially employs you for your writing services, and he retains all rights to the project.
“Interesting,” the producer says. “What terms were you thinking?”
“Instead of a percentage of the back end, I’d like a little good faith money up front. Seven thousand. And then a production bonus of $35,000.”
In this scenario, you’re both taking a risk. He’s risking $7K that he’s required to pay you, but you’re risking not making the full $25K you’ve made in the past. And he’ll be more invested in doing his part. Ideally, if he spends $7K, he’ll be more invested in getting the movie made and recuperating that money than if he invested no money at all. Plus, if he does ultimately distribute the film for a lot of money, all the profits come to him. He’s already paid you your fee and doesn’t owe you a percentage of the back end. Lastly, he’ll own all the rights to the script and any sequels because when you write on assignment, you are providing services and don’t retain any ownership in the project.
It’s a less-risky deal for you. In addition to the little money you’ll make upfront, you’ll receive the balance when the movie is produced instead of when it’s distributed. Distribution can happen months or even years after a film is produced, so you’ll receive payment much sooner. And in the end, you’ll have made $10K more than you did when you sold your script to producer #1.
The producer is amenable to this but wants to change the terms slightly. He’ll pay you the upfront fee of $7K, but it will be split into three payments—a commencement fee of $1K to be paid the day you sign the contract, $3K to be paid upon delivery of your first draft, and $3K to be paid upon delivery of your rewrite. You tell him that sounds fair.
The second change is that he wants to change the $35,000 production bonus to a $40,000 distribution bonus. He needs to keep his production budget low to ensure the film gets made. If you’re willing to wait until the film is distributed, you’ll make an extra $5K.
After some careful consideration, you agree to his terms and he sends over a Work Made for Hire contract. You sign it and begin working, but halfway through that project, you receive an email from your sister’s boyfriend’s film school colleague you met at a graduation party six years ago. She says he got your contact info from your sister and hopes you remember her. You do. As a matter of fact, you two spent half the night talking about obscure films that no one else had heard of.
She mentions that you sent her one of your scripts—and she wants to know if you ever sold it. If not, she’s interested in shopping it. Her email goes on to say that after graduation, she went to work in development at an indie production company and now she’s out on her own, trying to produce her own projects. She made a lot of contacts while she was at the production company, and she always loved your script. Unfortunately, she doesn’t have much money—but if you’re willing to sign a shopping agreement, she’s happy to take it out for you and attach herself as a producer.
“So, she wants you to tie up your script for six months, but she doesn’t want to give you any money for doing that?” Lex asks over a round of coffee stouts at the pub near his house. “Why doesn’t she just option it for a dollar? People do those one-dollar options, right?”
“Some do,” you explain, semi-impressed with how much Lex has learned over the years. “But creating an option agreement, even a one-dollar option agreement, requires lawyers and a lot of effort to negotiate the purchase price and other terms. Shopping agreements are less formal and in some ways, they’re better for the writer.”
“How is it better? If she can’t put in one dollar to option it properly, she doesn’t deserve your script.”
“Typically, producers opt for shopping agreements when they don’t plan to ever buy the script themselves. They need to partner with a financier or production company in order to make the film. She probably has an agreement with a few production companies that if she brings them a script they like, they’ll option it and she’ll get a producer credit and some money for bringing it to them. If those production companies pass on my script right away, it’s better that it isn’t tied up for a year under an option with her. Shopping agreements usually have shorter terms than option agreements.”
“So, why does she need a shopping agreement at all?”
“It just prevents me from shopping it myself while she’s shopping it. If she found a production company that’s interested, and I’ve already sold it to someone else, she’d look like an idiot. So, it protects her.”
“Then why do producers do a one-dollar option at all? Why not save the dollar and just sign shopping agreements?”
“Because if they plan to set up the project themselves, they want to make it clear in advance what the purchase price will be. A shopping agreement typically doesn’t set forth terms of the actual sale. That’s all negotiated in good faith later on. I actually prefer a shopping agreement to a one-dollar option agreement. I don’t find producers very invested if they’re only going to pay me one dollar.”
“No kidding. At the very least, it should be enough to buy yourself a venti latte,” Lex says.
Option agreement – A contract in which a producer ‘rents’ a script for a designated length of time with an option to buy, in exchange for money.
One-dollar option agreement – An option agreement in which the producer pays the writer only one dollar.
Purchase agreement – A contract in which a producer purchases the rights to a screenplay from a writer.
In turnaround – The point in which a producer who has purchased a script decides not to make it, declares the expenses in connection with the project a loss, and can sell it back to the writer or to another producer.
Purchase price – The amount a producer pays a writer for the rights to her screenplay.
Spec sale – The sale of a script in which the writer writes the screenplay on her own and then takes it out into the marketplace.
Work Made for Hire agreement – the agreement in which a writer is hired for assignment work.
Writing on assignment – Writing a screenplay for a producer in which the producer owns the concept/material/copyright and is paying solely for the writer’s services.
Writing on spec – Writing a screenplay for no money upfront.
Deferred pay – Payment received after the film is produced or sold.
Production bonus – A payment made to the writer at the time the film is produced.
Distribution bonus – A payment made to the writer at the time the film is distributed.
Back end percentage – A percentage of profits from the sale of the completed film, if there are any.
Commencement fee- Under a WMFH agreement, a fee paid to the writer at the time the contract is signed.
Venti latte – A drink from Starbucks that keeps most writers going even when they’re too exhausted to write. 😉
More articles by Christine Conradt