An option contract in its most basic form is a contract in which the author grants someone the right to film the author`s script for a certain period of time and in exchange for payment. The three main issues that usually arise when negotiating such an agreement are the length of the option period, the amount of the option payment, and the purchase price when the project comes into play. How each of these problems is solved depends on the bargaining power of the respective parties (i.e. whether the author is a beginner or has already had success in the industry and whether the producer is an experienced player or just a young production company trying to get traction). While everything is negotiable, an option can range from $500 to $500,000. A good benchmark is 10% of the purchase price if the story rights are purchased later. This is called the “optional payment”. The payment option could be for a dollar, hundreds of dollars, or tens of thousands of dollars. If the producer or studio wishes to extend the option, the writer will receive another option payment.
Some of the main benefits of writing an option include: Matt Knight is an intellectual property attorney, a freelance writer for the New York Times, and the author of The Writer`s Legal GPS: A Guide for Navigating the Legal Landscape of Publishing. He is currently working on two novels in the genres of the near future and women`s literature. You can learn more about him, his writings and books on Sidebar Saturdays (a blog about publishing rights for writers) and Matt Knight Books. At the end of the option period and renewals, the producer must either abandon the project or acquire the rights to the story. When exercised, the rights to the creative work are then transferred via a purchase contract. Keep the full premium for expired options out of money: When the written option expires from the money – which means that the share price ends below the strike price for a call option or above the strike price for a put option – the author retains the entire premium. The producer can offer a purchase price for the film and television rights (the price he must pay if he exercises the option), which is a lump sum regardless of the budget of the film. It is better to link the purchase price to the budget of the image. A common formula is that the purchase price is equal to 2.5% of the final approved written budget of the image (excluding contingency fees, completion obligations and financing costs). Should this prevent us from dreaming? Damn it, no! So, for you big dreamers in the crowd, there are two agreements used in film or television contracts that a writer should understand – The option and the purchase agreement.
Purchase contracts do not negotiate the purchase price in advance. If there is interest in the project, the author can get a higher purchase price, which is certainly better than the pre-negotiated option/purchase price. As a general rule, the above rules also apply to the option contract for a completed play between playwrights and theatre producers. A key difference is that the playwright can refuse to have their product changed in any way without their consent and without involvement. Option agreements for film and television rights can be complex, and I advise you to hire an entertainment lawyer experienced in this type of business to negotiate on your behalf. In the meantime, however, here are 7 tips that can help you avoid a bad deal: This script option agreement template is a contract that allows a producer or studio to acquire the film rights to a screenwriter`s script for a period of time, with the aim of turning it into a movie. There are three main elements of an option agreement that an author needs to be aware of. By Jonathan Treisman The term is often used as a verb in Hollywood. For example, “Paramount has news of Philip K.
Dick.” Under the purchase agreement, the author agrees that if the author negotiates an agreement with a buyer for the dramatic rights, the author will bind the producer to the project during these negotiations. The producer will usually negotiate separately with the buyer. Typically, the purchase contract also includes language to prevent the author from bypassing the producer and creating an agreement directly with the buyer once interest in a project has been demonstrated. From the producer`s point of view, an option agreement gives the producer the ability to keep an exclusive script for a while without having to spend a lot of money upfront while trying to get the project off the ground. The duration of a purchase contract is valid for a short period. If the producer can`t deliver, the writer can move on to another potential deal. But if the producer has largely committed to the project, the likelihood of other possibilities can be significantly reduced. This process can last longer called development hell. When all this preliminary planning is done, which means that real agreements are signed and funding is secured, the producer can start the pre-production phase.
Some of the funding is usually used to exercise the option. Even if an options writer receives a fee or premium for selling their options contract, there is a chance of suffering a loss. For example, let`s say David believes that shares of Apple Inc. (AAPL) will remain stable until the end of the year due to a lackluster launch of the tech company`s iPhone 11, so he decides to write a call option with an exercise price of $200 that expires on December 20. Alternatively, you can expect the airline to announce its purchase in the coming days and Boeing stock to rise to $450. In this case, Tom exercises his option to purchase 100 shares of Boeing from Sarah at a price of $375. Although Sarah received a $1,700 bonus for taking out the call option, she also lost $7,500 because she had to sell her shares worth $450 for $375. Unexpectedly, Apple announces that it plans to ship an iPhone with 5G capacity earlier than expected, and the share price closes at $275 on the day the option expires.
David has not yet delivered the stock to the buyer of the $200 option. This means he will lose $75 per share because he will have to buy the stock on the open market for $275 to deliver it to his option buyer for $200. When the producer exercises the option and pays the purchase price, he usually acquires all the usual film, television and related rights (distribution rights such as DVD, pay-per-view, VOD, Internet, etc.) and ancillary rights (usually remake, prequel/sequel (original), TV series, merchandising and commercial binding) to the book.. .