Brough,
I checked the links you provided; kinda confusing stuff some people have written. And kinda frustrating.
The term "backend" refers to money that comes in after the picture is released. A writer's backend is his share of profits, and/or bonuses based on box-office performance.
Standard profit participation for most begining writers is 5% of the net. If another writer is involved, you each get 2 1/2%. (And due to the nature of studio accounting, on many pictures -- certainly on one with a major star who's got a percentage of the gross -- you really can't expect to see this money because the studio numbers will indicate that there is no net.)
The purchase price must be exercised before the picture can be shot; thus, the first day of principal photography is the deadline used contractually. (Whether this is a WGA deadline or just custom, I don't know.)
If a writer is entitled (via negotiation) to a production bonus, the first day of principal photography will usually be the trigger for that, too.
Let's say I'm a studio. I option your script for 1 year for $150,000; I (typically) negotiate for an option extension (a 2nd option period) -- for another year -- for $100,000. The purchase price we agree on is $700,000. Your option agreement specifies these amounts.
The deal is likely reported in the press as $150,000 against $700,000. Why? Because you're getting a minimum of $150,000 and the total you're going to get for the rights is $700,000.
(Actually, if you've negotiated for a production bonus, sometimes that will be added to the $700,000 for the purpose of a press release. It's me saying "Hey, I'm paying really big bucks for this, because it's soooooo great, don't all of you other studios out there feel just awful that I've got it and you haven't?" And your rep might like it reported that way, too, to build your reputation. But, in fact, since the bonus will depend on production, and I may never actually shoot your script, it's kinda cheating to include it this way.)
As soon as you sign your option agreement (and the accompanying paperwork; i.e., Simpson-Rodino, tax form, writer's certificate, etc.), you get a check for $150,000.
A year goes by. I haven't yet greenlit the project, but I will as soon as I get a commitment from a director and star I want to go with. So I exercise the option extension, because I want to hold onto the option. The letter with which I formally exercise the option, includes a check for $100,000. That buys me another year to get this thing in front of the cameras.
I get the actor/director pair I want; I greenlight. We go into pre-production. If the 2nd option period is about to be up, I will exercise the option to buy; otherwise, I loose your script. But if the end of that 2nd option period isn't nearing, I may wait until 1st day of principal photography, so I don't have to take that money out of my revolving credit fund just yet; this minimizes the interest I'll pay on that money.)
When I exercise the option to purchase, I send you the $700,000 minus the $150,000 I've paid you for the 1st option period; i.e., you now get $550,000. I am deducting that 1st option amount because like most option agreements, yours deems that 1st option money "applicable against the purchase price." However, if I've exercise the extension, the amount for that (here, the $100,000) is, in your agreement as in most of them, deemed "not applicable," so I can't deduct that. Thus:
If, at the end of the 1st option period I decide I no longer want your script, I drop the option (i.e., I neither purchase it nor exercise the extension); you have pocketed $150,000, and you still have all the rights.
If I exercise the extension but then decide I no longer want your script, I drop the option (i.e. don't purchase); you have now pocketed $250,000 and still have all the rights.
But if I want to go ahead and shoot it, I've got to pay you your production bonus by the commencement of principal photography.
If I want you to re-write, your writing fee may or may not be included in the option amount. It depends on the numbers. To include the writing fee, an option amount would have to be large enough to include both WGA minimum for the option (which used to be 10% of the purchase price, don't know if that's changed) plus your at-least-WGA-minimum writing fee. Enormous option amounts almost always include the writing fee -- unless, of course, the spec writer is not being engaged to re-write, but was able to get that huge sum up front just because his script is that hot. Sometimes when figures are released to the press, the "option" money will include the writing fee. So, you can't necessarily tell from the "x against y" quoted in the trades what exactly has been included in that "x."
Lots of times writers will say they've "sold" a script when they've really sold just the option. They're thinking positively. Similarly, studios or producers will say they've "bought" a novel or script but they really have just optioned it. That's one of the reasons why it's hard to pin down actual fact from press releases, stories in the trades, etc. And in fact, occasionally you'll find a piece in one of the trades written by someone who's got his numbers screwy -- someone who apparently doesn't understand how this works, or who has gotten the numbers switched around. And you know that when he interviewed the producer his notes must have been a mess.
That's one of the problems of trying to figure out how much other people are making,and why when a producer/studio does a deal with a writer, someone in Business Affairs gets "quotes" for him -- they don't rely on what's been reported, or on his agent. They call the other companies he's worked for recently and get the actual contractual terms; i.e., not just the option amount, but whether that included writing; triggers for bonuses, if any, etc.
Sorry to be so long-winded. I've gotta get out more.
I checked the links you provided; kinda confusing stuff some people have written. And kinda frustrating.
The term "backend" refers to money that comes in after the picture is released. A writer's backend is his share of profits, and/or bonuses based on box-office performance.
Standard profit participation for most begining writers is 5% of the net. If another writer is involved, you each get 2 1/2%. (And due to the nature of studio accounting, on many pictures -- certainly on one with a major star who's got a percentage of the gross -- you really can't expect to see this money because the studio numbers will indicate that there is no net.)
The purchase price must be exercised before the picture can be shot; thus, the first day of principal photography is the deadline used contractually. (Whether this is a WGA deadline or just custom, I don't know.)
If a writer is entitled (via negotiation) to a production bonus, the first day of principal photography will usually be the trigger for that, too.
Let's say I'm a studio. I option your script for 1 year for $150,000; I (typically) negotiate for an option extension (a 2nd option period) -- for another year -- for $100,000. The purchase price we agree on is $700,000. Your option agreement specifies these amounts.
The deal is likely reported in the press as $150,000 against $700,000. Why? Because you're getting a minimum of $150,000 and the total you're going to get for the rights is $700,000.
(Actually, if you've negotiated for a production bonus, sometimes that will be added to the $700,000 for the purpose of a press release. It's me saying "Hey, I'm paying really big bucks for this, because it's soooooo great, don't all of you other studios out there feel just awful that I've got it and you haven't?" And your rep might like it reported that way, too, to build your reputation. But, in fact, since the bonus will depend on production, and I may never actually shoot your script, it's kinda cheating to include it this way.)
As soon as you sign your option agreement (and the accompanying paperwork; i.e., Simpson-Rodino, tax form, writer's certificate, etc.), you get a check for $150,000.
A year goes by. I haven't yet greenlit the project, but I will as soon as I get a commitment from a director and star I want to go with. So I exercise the option extension, because I want to hold onto the option. The letter with which I formally exercise the option, includes a check for $100,000. That buys me another year to get this thing in front of the cameras.
I get the actor/director pair I want; I greenlight. We go into pre-production. If the 2nd option period is about to be up, I will exercise the option to buy; otherwise, I loose your script. But if the end of that 2nd option period isn't nearing, I may wait until 1st day of principal photography, so I don't have to take that money out of my revolving credit fund just yet; this minimizes the interest I'll pay on that money.)
When I exercise the option to purchase, I send you the $700,000 minus the $150,000 I've paid you for the 1st option period; i.e., you now get $550,000. I am deducting that 1st option amount because like most option agreements, yours deems that 1st option money "applicable against the purchase price." However, if I've exercise the extension, the amount for that (here, the $100,000) is, in your agreement as in most of them, deemed "not applicable," so I can't deduct that. Thus:
If, at the end of the 1st option period I decide I no longer want your script, I drop the option (i.e., I neither purchase it nor exercise the extension); you have pocketed $150,000, and you still have all the rights.
If I exercise the extension but then decide I no longer want your script, I drop the option (i.e. don't purchase); you have now pocketed $250,000 and still have all the rights.
But if I want to go ahead and shoot it, I've got to pay you your production bonus by the commencement of principal photography.
If I want you to re-write, your writing fee may or may not be included in the option amount. It depends on the numbers. To include the writing fee, an option amount would have to be large enough to include both WGA minimum for the option (which used to be 10% of the purchase price, don't know if that's changed) plus your at-least-WGA-minimum writing fee. Enormous option amounts almost always include the writing fee -- unless, of course, the spec writer is not being engaged to re-write, but was able to get that huge sum up front just because his script is that hot. Sometimes when figures are released to the press, the "option" money will include the writing fee. So, you can't necessarily tell from the "x against y" quoted in the trades what exactly has been included in that "x."
Lots of times writers will say they've "sold" a script when they've really sold just the option. They're thinking positively. Similarly, studios or producers will say they've "bought" a novel or script but they really have just optioned it. That's one of the reasons why it's hard to pin down actual fact from press releases, stories in the trades, etc. And in fact, occasionally you'll find a piece in one of the trades written by someone who's got his numbers screwy -- someone who apparently doesn't understand how this works, or who has gotten the numbers switched around. And you know that when he interviewed the producer his notes must have been a mess.
That's one of the problems of trying to figure out how much other people are making,and why when a producer/studio does a deal with a writer, someone in Business Affairs gets "quotes" for him -- they don't rely on what's been reported, or on his agent. They call the other companies he's worked for recently and get the actual contractual terms; i.e., not just the option amount, but whether that included writing; triggers for bonuses, if any, etc.
Sorry to be so long-winded. I've gotta get out more.
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