TUESDAY'S BIZ TIP:

WHAT ARE MY OPTIONS?


Hey, we all know what selling a script is all about, right? That's when some producer gives you six figures for 110 pages of typing - and you get to tell off all of those people who told you that you were a dreamer and to get a real job. But what exactly is optioning a script? Who can you tell off? If you option a script, do you still need to get a real job?

An option is renting a script to a producer. It's just like renting an apartment - but you are the landlord. Someone pays you an agreed upon amount for an agreed upon time - then they move in. They have temporary ownership of your script. While that script is under option it is not yours - you can't sell it, you can't show it to other producers, you can't complain about what the producer does with it. The script isn't yours for as long as the option lasts.

The purpose of an option is to "rent" the rights to a producer so that he can take the script to a studio or other financial source to obtain funding. Producers usually do not have any money of their own and MUST go to studios or financial sources to get the money to pay you for the script. In the old days a producer on a studio lot had "discretionary funds" to buy scripts on their own. The studio would give them a allowance to buy scripts with... but in today's economy a producer is lucky to get office space out of a studio. Producers have to submit scripts to the studio the same way we submit scripts to the producers... then cross their fingers and hope the studio wants to buy the script. If a studio passes, the producer can take it to another studio or even an outside financial source (unless they have an exclusive with one studio - then it's dead). An independent producer may have contacts at various studios or with several outside funding source and they need to "shop" the script until they find someone willing to fund the film. The producer needs to option the script to prevent the studio from circumventing them and cutting them out of the deal. If the producer owns the script (even if it's just a rental) the studio or third party financial source has to deal with them.

An option is not some sort of booby prize - it is a step in the purchase of a script. Most option agreements spell out the purchase price of the script - it's all about buying the script! You'll want to make sure that purchase price is on a sliding scale by film budget. On TREACHEROUS my option deal was designed for a low budget theatrical, but when the producer set it up at Hemdale (TERMINATOR) and stars signed on, the budget quadrupled but my pay rate stayed exactly the same. The director would have been payed more with the new budget, but not the writer! I learned my lesson - from then on my contracts have been set up so that my pay goes up when the budget goes up. This is stuff your lawyer will deal with when the time comes - but you'll probably have to remind them.

OPTION TIME

There is no average option time... but I always try to get the shortest period of time possible. Usually four months (with another four months for twice the original option money). The last thing I want is for a producer to have the project get turned down... and still have MONTHS AND MONTHS left on the option. It'll be sitting on the producer's shelf collecting dust... and dozens of other producers will then come out of the woodwork and want to buy it from me... but I can't sell it because it's still under option. That's what happens every time! A couple of years ago a producer optioned a brand new script of mine for 6 months... and no sooner had I signed the contract than three other producers called me asking about the script. The guy who optioned the script couldn't get it off the ground, and I couldn't sell it to the other guys who were interested. By the time the option period was over, the other companies were no longer interested. If the option period had only been 4 months I might have been able to stall the other companies until the rights reverted back to me. Keep the option period short!

SHOPPING AGREEMENTS

Another method is to limit the studios or financial sources that the producer can go to - this is called a "shopping agreement". This can either be used in conjunction with a time limit or without. My option contract on THE PRICE OF FEAR limited the producer to 10 networks and studios - they couldn't take the script to anyone else. That way I knew who had read the script, and had many other places to take it after the option had expired. The script hadn't been read by everyone in town (as it might have been under an option based on time alone). Though I agreed not to market the script for the four month period of the option, and never to market it to their 10 companies. If one of those 10 companies later expressed an interest in the script, the producer had to be part of the deal (even if the four months was up). Basically, the producer "rented" my script forever for those 10 companies. One of the companies on the list was TBS - who wanted to make the film. My lawyer and their lawyer put together a deal... which fell apart when NBC announced they were going to make the same true story. I got my script back - and I can sell it to anyone in the world except those ten companies on the list.

Under WGA rules "Shopping Agreements" may be granted without compensation - but the writer is in the driver's seat, here. If a producer claims poverty but loves your script, you might decide to allow them to take it to ONE studio for whatever they can afford... and maybe even come up with an escalating deal for each subsequent company they go to ($50 the first company, $100 for the second, $150 for the third, $200 for the fourth). According to WGA rules a producer can not shop a script to a company without permission from the writer. These rules don't apply to non-signatory companies, but contracts do - so get your agreement in writing!

SHOW ME THE MONEY!

There's a tip in rotation that talks about free options... have you ever found an apartment building where rent was free? There is no standard option amount - everything is negotiable... but Writer's Guild has minimums that signatory companies must adhere to - no less than 10% of the WGA minimum for each option period up to 18 months. That makes $5,848 for 18 months the minimum option. This doesn't apply to non-signatory companies, but you want to be paid a fair amount for giving up ownership of your script for a couple of months. 1% - 1/2% of the (lowest) purchase price per month is probably fair... so you'll end up with at least a couple of hundred dollars for four months even on a dirt cheap low budget film. A normal low budget film will probably pay you at least $750 for a 4 month option.

If you option your script for 4 months, you want to make it renewable for another 4 months... but at about twice the price. Why? You want to create an incentive for the producer to get off their butts and get to work. If they know it will cost them more money the longer they take to get your project off the ground, they're gonna get a move on! Again - all of this is negotiable. You may option your script for half a percent of the purchase price for the first 4 months and 1% per month for the next 4 months... and maybe even create a third option period for 2% per month. Producers understand money, so you want to create financial penalties for foot-dragging.

How much any company pays gives you a pretty good idea of what they think your script is worth - back in the late 80s my TREASURE HUNTER script was optioned for $5,000 for 4 months. If someone offers you a free option or a $1 option they probably don't care enough about the script to spend much time trying to find financing. You're better off setting up a VERY limited shopping agreement in that case.

The purpose of an option ISN'T to tie up material, it's to "rent" a script for a limited period of time so that a producer can take it to a studio or third party financial source. It's a step in the purchase of the script... not a destination.

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