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Anatomy of the Deal

No two deals are exactly alike, but all deals are under unprecedented pressures in the current marketplace. When it comes to getting the best payday possible, leading agents and managers agree on some time-tested fundamentals.

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You’ve toiled tirelessly to create your commercial cinematic masterpiece. You’ve found good representation. Your spec script has gone out to buyers. You’ve paced by the phone, waiting for a market response. Now, you’ve gotten the big call from your agent or manager—a studio or production company wants your script.

What now? What factors will determine the kind of deal you get? How will the process actually play out? What circumstances offer you the best protection?

“Since I’ve been a manager,” says Kemper Donovan of Circle of Confusion, “I’ve seen the spec script sales process change a lot.” The primary change: a sharply reduced number of spec scripts going out and getting sold. “But except for that,” says Donovan, “the actual process of making a deal hasn’t really changed that much. It’s just gotten more difficult.”

Surprisingly, the market value of a script has little, if anything, to do with genre. “It just comes down to how much the buying entity wants it, so there is always that context behind how a deal gets done,” Donovan says. “But based on that fact, any genre can be in huge demand.”

Another change is what Donovan calls “the packaging craze”—enhanced demand for spec scripts with meaningful elements attached. “That’s the biggest overall trend I see right now in terms of what’s happening with how deals get done,” he says. “And that means the process of getting a deal will take longer.”

Eric Williams, literary manager at Zero Gravity Management, concurs with Donovan’s assessment. “The rationale for the trend is that with attachments, the project is more likely to move forward once there is a sale,” he says. “But, that added value of the attached elements is also a big factor in the sale price.”

Nevertheless, Williams says, a tepid spec market means that “a lot of deals are less lucrative than in the past. And they have more elements attached than they did in the past. But without elements, it’s very difficult to sell a spec script. Even with attachments, purchase prices are still down.”

The Big Number
All of that said, once a prospective buyer expresses interest in making a deal, a smart representative will begin the negotiation process by deciding upon a target price for the script and some fundamental idea of how to get to that number, says Caren Bohrman of The Bohrman Agency. “At the beginning of a deal, I get a total number in my head that I want to see when everything is added up at the end of the deal,” says Bohrman, a widely respected veteran with a long-held reputation for helping new writers break in. “And I’m not just talking about the up-front part of the deal, but the whole picture.”

Of course, the dream among new scribes is the fabled “preemptive purchase,” in which a buyer takes the script off the market—at a premium price—usually before anyone else even has a chance to see it. In one sense, of course, a preemptive deal is the Holy Grail for writers. But, it has a downside, too. “It can also mean someone is trying to take the script off the market because they have a competitive project and they don’t want another studio buying a similar property,” explains Bohrman. “That happens more often than you’d think. But I don’t think any studio is going to admit they ever do that. It’s not a very ethical thing to do, because it can kill a good script’s chances of ever becoming a movie.”

Another reality that often comes as a surprise to new writers is veteran reps agree almost unanimously that when it comes to a maximum payout for a given script, an option-purchase deal is usually preferable to an outright purchase.

Not long ago, says Bohrman, the standard spec deal was based on an option deal with various components, such as the WGA-guaranteed first rewrite or a rewrite and polish. Today, however, buyers typically push for an outright purchase.

Why the change? “I think it’s fear,” Bohrman says. “I think buyers want to acquire scripts and hold on to them forever in the fear that someone else might get a hold of them and get them made and make [they buyers] look like chumps.”

In spite of that current trend, however, Bohrman typically negotiates for an option-purchase deal. “A lot of writers believe that if you sell your script outright, you’re going to see more money,” she says. “But I believe you can option a script and add steps in the deal and see the same amount of money—or even more.”

Despite a controversial current trend among major studios to limit commitments to so-called “one-step deals” for working writers on assignment—meaning there is no guaranteed step beyond the one you are currently being paid for, such as a first draft or a rewrite—Bohrman negotiates aggressively for multi-step deals in spec sales. “I always try to get two or even three guaranteed steps in the deal, at rates well above the WGA minimums,” she says, “because that way the writer is, in effect, grandfathered into the project and that is going to help protect his or her writing credit in the end.”

Jordan Bayer of Original Artists, another of the most respected and successful literary agents in Hollywood, agrees with Bohrman that a savvy rep’s goal is generally an option-purchase instead of an outright sale. “The basic reason,” says Bayer, “is you want to be able to get the project back as quickly as possible if the studio decides there is no longer interest in making the movie, or alternatively force them to keep spending money provided there is interest in an option extension or eventual purchase. A lapsed option 12 to 18 months from the start of the deal will provide you with the opportunity to sell the project to another buyer, whereas an outright purchase can keep your project tied up for five years until WGA rules take effect and give the writer a chance at an official reacquisition of his or her property.”

However, Bayer cautions, in his experience an option-purchase will not always bring in as much total compensation as a purchase. “I’m only referring to the amount of the guarantee,” he says. “The total size of the deal when the movie gets made could be more or less in either scenario, but since most projects do not get made, a purchase deal with an outright sale price, plus additional writing services, typically is greater than the total of the option fee, plus additional writing services, in an option-purchase deal. In the option scenario, your script may or may not get purchased, which accounts for the disparity in the size of the deal initially.”

Although an option-purchase structure can have advantages, Bayer says, “when the price gets into mid or high-six figures for a guarantee, a studio is more likely at that point to insist on a purchase structure that includes a sale price plus additional writing services. In that event, while you lose some flexibility, the size of the deal typically overwhelms those considerations.”

If the script is really hot and in great demand right now, the cash register is likely to ring up big numbers, regardless of how the deal is structured.

Doing the Math
Another important element of how a deal gets structured is how a loosely agreed-to total price is actually broken down and allocated to various steps. ��Let’s say we know we have a deal that’s going to total $500,000 up front,” Bohrman says. “Generally, if the agent or manager has a good relationship with the business-affairs people, you then just sit down and decide how that $500,000 gets divided up. And as a general rule, I try to put most of it against the writing steps, as opposed to the option fee, because those numbers are the ones that are going to influence the writer’s initial quote for future work.” A quote is a working writer’s established price for a specific function, such as a first draft, rewrite or polish, as part of an assignment.

In addition to basic elements such as an option price, an ultimate selling price, and payment for individual steps such as one or two rewrites and a polish, a well-packaged deal will also include bonuses.

In every negotiation, Bohrman seeks as many sweeteners as possible. “For example,” she says, “if I can get a sole-writer credit bonus, that could be worth as much as $350,000 in a $2-million deal. By the same token, you can structure a series of box-office bonuses that start at $25 million or $50 million in grosses, then provide additional payouts at increments of $5 million or $10 million.”

Just how lucrative can box-office bonuses be? “In one deal, I had box-office bonuses that totaled $4 million,” Bohrman says. “That was a unique situation because of attachments, but it does happen.”

Finally, other bonuses can include cash payments for Golden Globes® or Academy Awards®.

The Ticking Clock
The nuts-and-bolts process of making a deal takes time. Contrary to the mythology of the “overnight” millionaire from a first script sale, you can expect to wait no less than eight weeks to have a signed deal after the buyer first informs your rep he or she wants your script, Bohrman says. After that, it will take, on average, another 30 days to get your first check in the mail. But those developments can take longer, too. It all has to do with the heat your script has generated and how genuinely enthusiastic the buyer is.

In the meantime, the real fun—and practical education beyond economics—begins.

In today’s market, that means the buyer will begin extracting as much work from you for free as possible. That free work usually takes the form of “unofficial” rewrites, such as ones asked for by the producer attached to oversee the project for the studio. Like it or not, such uncompensated exploitation is now a part of the process.

“New writers need to understand that there is a certain amount of leeway you have to give,” says Donovan.

Williams agrees: “There’s just less work out there, so writers at all levels are having to do more work across the board,” he says. “To an extent, there is some abuse of the writing steps. But there’s also the fact that, particularly for new writers, it’s just a reality of the marketplace now. If you aren’t willing to do what buyers want, they’ll find someone else who is.”

The other reality new writers need to understand is that the ultimate value of a script in any given deal is largely based on a fundamental decision the writer made before the first word was ever committed to paper—the commercial appeal of the concept.

To find success in an anemic spec market, “write the kind of material that buyers are asking for,” Williams counsels. “And don’t just write for the domestic market. Write for the worldwide market. Know what the trends are for material that is successful in the international market. That’s because the domestic market isn’t as important as it used to be. Today, you have to write movies that people will want to see worldwide. That’s when you’ll get a big deal and have a career—if you keep writing that kind of material.”