Entertainment Lawyers Blog

An option agreement is one of the most common contracts by which producers secure rights to a story or concept from the screenwriter, novelist or owner of the intellectual property that is being considered for a film or television show. In an option contract the producer obtains exclusive right to shop or "option" the contract to production companies, networks, venture capitalists, or any other corporate body that can or will bankroll the production of the story. This exclusive right is usually short term, generally a year or less, and if the story is not financed at the end of that time, the rights revert back to the owner without any change. Usually a small fee is paid to the owner of the story for the right to the option. Let me attempt to clarify with an example. You are a screenwriter (regardless of your experience or credentials) and you have a script that has garnered some interest. A producer may offer you an option contract while he or she performs the necessary background work to try and have the film greenlighted. The producer has not purchased the screenplay from you or any rights to the screenplay, he or she has only purchased the exclusive right to use the story if proper funding is made available. This can be a lengthy process for the producer who has to "package" the idea in a format pleasing to possible investors. For this reason, option contracts are generally at least one year in length. The producer has to identify potential directors, actors and financiers for the project. If a well known actor or director agrees in principal to participate in the film it may help financing. The producer can then take the package to studios for potential distribution. If the stars all align for you and the project makes financial sense, the option will be exercised and you will then sell all rights to your screenplay to the producer. If the producer is unable to obtain financing, the option will lapse (after the agreed length of time) and the rights to the screenplay will return to you. You can then option it again at your pleasure. The option contact should identify the amount to exercise the option. In other words, if the project is sold and the option is exercised by the producer, the amount owed to you for the screenplay should already be pre-determined. Unfortunately, screenplays from relatively unknown writers are likely to earn very little, but the money is always a help and it is a bright star to a new career. The fee paid to you for the year option is generally based on the option to buy price. In other words, if the option to buy the screenplay is set at $50,000 you may expect an option price (for the one year to try and sell the project) of 5,000 to 10,000 or 10 - 20% of the total. You should be aware, however, that with the huge number of story ideas and screenplays on the market, producers are paying less and less for option contracts, particularly from unknown or emerging writers. It is possible that the producer may ask you for a free option or a very low-fee option. This is particularly true of the television market. If you are a producer looking to option a story or a writer who has been offered an option contract, contact my office right away for a free consultation. Let me help protect your rights and ensure a smooth process from story to pre-production!