Many writers dream that someday their story or script will garner interest from someone who wants to develop it into a film or TV project. Usually, the first step is where that someone, maybe a producer or a production company or even a studio, offers the writer a contract known as an option agreement. As with all such matters where art meets commerce, every writer should have a literary agent and an informed lawyer advising them about their business dealings once they get to this stage of the process, where the creative spills over into the business world.

An option agreement at its most basic is a contract whereby the writer grants to a producer, production company or studio, for a period of time and for a payment, the right to make a film of the writer's book, story or screenplay. The three main material issues that usually arise in negotiating such a deal are the length of the option period, the amount of the option payment and the purchase price if the project comes to fruition. How each of these issues will be resolved will vary depending on the negotiating leverage of the respective parties (i.e., whether the writer is a beginner or has had prior success in the industry and whether the producer is an experienced player or just a fledgling production company trying to get traction).

Period of Time

An option agreement will designate an “option period” or length of time granted to a producer or studio to commence production of the project. It can range from six months to two years or longer, depending on the negotiations. Such agreements frequently include additional periods of time for the producer to extend the length of the agreement in consideration of additional payments to the writer.

Option Payment

The option agreement will also set forth an “option payment,” which is the amount to be paid to the writer as consideration for allowing the producer the privilege of utilizing the writer's story for development purposes. Again, depending on the negotiating strength of each side, this could range from a very small amount (e.g., a few hundred dollars or even one dollar) to a larger payment (tens of thousands of dollars). Then, if the other party wants to extend the option period for an additional length of time after the initial term, provision would be made for additional payments to the writer. In most cases, this additional payment will be negotiated to be more substantial even if the first payment is small.

The amount of the option payments will vary depending on the negotiation process and other factors such as the writer's track record in the industry and the potential budget of the film or TV project. Some industry insiders have said that as a rule of thumb, option payments are frequently equivalent to 10 percent of the purchase price, but these amounts are always negotiable and lawyers need to advise their client's to be careful and not allow themselves to be taken advantage of in the rush of excitement that surrounds interest in their story.

Purchase Price

Another material term in an option agreement is the “purchase price,” which is the amount of money that the writer will receive in the event the screenplay is made into a feature film or TV project. The purchase price is often calculated on a sliding scale as a percentage of the budget. In other words, as the budget of the film grows, so will the purchase price, although as with all negotiated terms this too can vary greatly.

Conclusion

When properly negotiated, an option agreement can be a win-win situation for both the writer and the producer. The writer is paid to lease his or her book, story or screenplay for a limited period of time, while the producer attempts to get the project “green-lighted” by a studio or production company. If this happens, the writer will receive a nice purchase price for his work. If it does not happen during the option period, then the writer keeps the option payment or payments paid to date and all rights to the story revert back to the writer. The writer could then decide to option the script again to another producer.