The Option Agreement

Byron Pascoe, Entertainment Law at Edwards PC, Creative Law

Disclaimer: The following is legal information, not legal advice. The following legal information is no substitute for sound legal advice from a lawyer or paralegal. 

Once a scriptwriter completes a feature film script, and gets interest from a film producer, what happens next?

Generally speaking, a scriptwriter (let’s call her the “creator”) with interest from a film producer would enter into an option agreement with the producer.

Under an option agreement, the producer would not immediately purchase the rights necessary to produce the feature film (among other rights which should be clearly defined). Rather, the creator would provide the producer an exclusive amount of time (the “option period”) in which she may exercise her option to purchase those rights at a pre-determined purchase price. This “purchase price” would likely be a set dollar amount, or a formula relating to a percentage of the budget.

Between the times the option agreement is entered into and the producer exercises the option, the producer has the rights secured, but not yet purchased.

If the option period ends before the producer has exercised the option, the producer no longer has the right to purchase the script.

This structure is put in place because, while the producer may be interested in the script, she wants to ensure she can finance the film before agreeing to pay the creator for the script.

Some of the other key components of an option agreement include the following:

  • The fee that the producer pays the creator up front for the opportunity to enter into the option agreement (the “option fee”);
  • The fees and time frames of term extensions if the producer wants to extend her option period;
  • Clear guidelines regarding what the producer must do in order to exercise the option; and
  • In addition to the purchase price, the other rights and compensation to be provided to the creator if the producer produces the film (for example, specific credits in the film, box office bonuses, profit participation, etc.).

Also important for the creator is ensuring that the option agreement clarifies the creator’s rights, should the producer exercise the option, pay the purchase price, but not make the film for a set number of months or years (referred to as a reversion). In that case the creator would like to have the script back, to try her luck with someone else.

For a first-time scriptwriter, the fee to enter into an option agreement might be $1. This might be worth it for the possibility of getting the script produced. The lower the option fee, generally speaking, the greater latitude to negotiate for a shorter term and/or greater extension fees.

Before negotiating an option agreement, the first step is to find the right partner. A good source for producer partners is Invest Ottawa’s production resources page