It's a long post... shocking, I know. đ
Iâve been wanting to write a post about âWhat to do when you receive an offer to option,â for a while now. I donât think there has been one postedâif there has been, my apologies up front. I wanted to give writers, any writer, really, some insight that once someone is interested in your IP it shouldnât be an automatic, âthrow your hands in the air and sign on the dotted line,â unless you donât really care about protecting yourself.
In that case, have at it.
I thought it would be great to open a discussion about the pitfalls of options, and other members can add their experiences, too.
First, if you are in this position, congratulations! Seriously, it is a big deal to have someone want to option your material. I donât care if it is the dreaded $1 option, and if it is, donât do that. The minute you do, they will always expect it. Raise your head to the level of a WGA writerâeven if youâre not.
Second, after youâve celebrated with a night out, get a lawyer. Seriously, you need a lawyer to decipher all the bullshit youâre going to be hit with (if youâre offered a long form option/purchase). Iâve only had long form options, three of them⌠and they can get long, like 26 pages longâyou donât want to be negotiating that on your own.
Why? Because thereâs absolutely no reason for you to give money away when they might agree to your terms and all you have to do is ask. They can always say no. You donât get anything if you donât ask for it. A lawyer will know what to ask for.
Third, refer to the second recommendation, again. Yeah, get a lawyer, itâs that important. Even before you start âconversingâ about numbers because that email is an agreement, too.
So, why listen to me? Donât⌠Or do. Totally your call. Iâm a nobody.
Iâve had three option offers and several people interested in trying to set up my projects. Two with a manager/producer on board, and one without. But⌠all three I had an entertainment lawyer. You just make stupid mistakes that are hard to reverse when you donât have a lawyer, and even when they try to spin it to reverse your disadvantage, sometimes they canât.
And Iâm telling you, thatâs not even with me trying hard to sell my projects, so if it can happen to me, it can happen to you. And all that really means is that someone somewhere loved what I wrote on a few screenplays. I was close at Sony TVâthat would have been nice. A no is a no.
Reality check? Get used to it, rejections donât stop with query letters. Thereâs no softball pitchâthey either want it or they donât. The rejections continue, forever, even if they say really great things about your writing. After all, a no is a no. Even when youâre sent out-- no one remembers who lost, they only remember the winners. Doesnât mean youâre a bad writer.
Iâm not going to talk about a short form option which is basically a one sheet that details the option, option $ amount, the length of the option and the terms for renewal extension and its fee. There can be one extension or twoâdepends on the producer. Perhaps Iâm wrong, because I havenât had one yet. So, a call to members, provide some context, please.
The long form is an option/purchase agreement and has everything included. It talks about residuals, TV spin offs, sequels, prequels, first rights of refusal to write the first draft of a sequel⌠all of it is in there and more. And youâre not going to know what you should ask for and rememberâŚ
This is very importantâŚ
They want to obtain your property for the least amount of money possible. Thatâs their job. Even if theyâre Ron Howard (no offense). Read that again, because itâs important that you understand that they will come at you with the lowest offer possible. Itâs your job to negotiate UP and theirs to negotiate DOWN. First rule of negotiations? Know what your adversary WANTS. Understand it. It will prepare you to be a better negotiator. Itâs not easily known, though.
And that brings up another topic. They are not your friends. They are not your partner. They donât want a partnerâthey want control of your project. The sooner you realize that, the better off youâll be. They want to know that you will do as you are told with respect to rewrites. If you donât do it, or come up with something better, guess what happens? They bring in another writer to rewrite you. They fire you. Yes, some may be more collaborative than othersâjust keep it in mind. Make sure you have all rewrite rights revert to you if the option is never exercised, youâll want to keep their advice and experience in the drafts whether you use it or not. And if youâre doing any free writingâitâs the least they can do. More on that later. Speaking features here, not TV where a writer has more value.
And remember, itâs not personal, itâs business.
Now, at the beginning it may be, what seems an innocuous email that starts the negotiation. The moment you open option/purchase discussions, get a lawyer. It may seem like a friendly email conversation, but at this point, the negotiations have begun and before you know it, you can agree to something you shouldnât have.
Floor and Ceiling:
These two numbers are very important to understand. The first guarantees the very minimum of what you will be paid if they exercise the option. That doesnât mean they start production, it means they want to buy the property rights from you and from that moment on they will own it forever and into eternity (yes, they use absurd language like that) with the single exception of âreversion,â they own it forever. And into eternity. Haha.
So, your offer should be based on a percentage of the budget. Regardless of whether this is studio or indy, you want to language to specify the budget includes all going in costs including pre-production, production and post-production. DO NOT settle for a âproducerâs budgetâ that is unspecific, because they can then turn around and use rebates to reduce the budget and also not include some portion of the budgetâmainly indy producers may attempt this, because they can say âthis is the budgetâ and youâre shit out of luck, because you agreed to the âproducerâs approvedâ budget and âproducerâs approvedâ budget can be SIGNIFICANTLY LOWER than the real budget and can/will significantly reduce your fee.
For example, 3% (that was my offer) of a $3 million budget you earn $90,000 and 3% of a $12 million budget is $360,000.00. You want to have an idea of the budget they are shooting for and/or just figure what you think theyâll make it for and then calculate the floor and ceiling.
Get the floor at the number that you actually want them to pay for your script, because if they exercise the option, they still may never make the film and you just sold your script for the floor and that may be all you ever get (outside the option fees). Make sure you understand this provision well.
The ceiling is your cap. That means that at some point you max out what you can earn regardless of the budget. So, if all the sudden Jennifer Lawrence signs onto your film and it leaps from a $10 million indy film to a $40 million studio film you will always and forever receive ONLY your ceiling⌠what is 3% of 40 million? Itâs $1.2 million. You wonât get that, but you could negotiate a half a million-dollar ceiling (and higher) if they want it bad enough, even if itâs your first sale.
So those two numbers are really important, but fear not, because there are other ways to make more money.
Budget:
The changes we are seeking in Paragraph G.2. are just to clarify that (a) the âBudgetâ that is used to calculate the âPurchase Priceâ has to be the going-in budget at the time of commencement of principal photography, without any implication that rebates, etc., that may later reduce the budget somehow reduce (or require partial refund of) the Purchase Price; and (b) the âBudgetâ comprises the full cost of prep, production and post (e.g., not leaving out later-acquired âfinishing fundsâ for post), without only the usual and customary exclusions.
But first, you need to do thisâŚ
Professional Writer Status:
You need to secure that you will be considered a âprofessional writerâ by WGA standards and that all third parties that they come into an agreement with, will also consider you as a âprofessional writer.â This is really importantâitâs about credit. A lot of our projects may start out and remain in the indy realm, but if at any point it becomes a WGA project, even in distribution this concession will protect your credit rights and allow you arbitration. ď get that in their too. They may not agree to WGA arbitration across the board, but in all three of my negotiations we were able to secure this provision. If I can do it, you can, too.
If you donât protect yourself this way, and it becomes a WGA project they can hire a WGA writer to simply punch up your dialogue and THAT WGA WRITER will get full/sole writing credit even if they change only 10% of the script. Why? Because without the language to protect you, you are not deemed a âprofessional writer,â and until you are, they cannot give you credit.
Credit Bonus:
This is where I made my mistake, because I didnât have a lawyer initially to go over the email âconversations.â In order to get me closer to my ceiling, they offered a credit bonus that paid out $25,000 for every set amount that the budget increased until I reached the difference for what I wanted the selling price to be. Sounds nice right? An additional $100k or two never hurt anyone, right? Well you have actually RECEIVE sole credit, and then itâs reduced if you receive shared credit. If itâs an indy film, have your lawyer (they should do this anyway, if theyâre any good) stipulate that the producer will apply credit in good faith by the WGA standards in force at the time the contract is signed.
Hereâs a stipulation:
Credit Bonus. We are willing to accept that the up-to-$100K bonus is tied to your earning writing credit, but we donât want it to be a hard step down by 50% even if the other writers sharing credit arenât receiving any analogous bonus based on credit. So, for shared credit, we are seeking agreement that you are reduced on a $-for-$ basis by any such later writer bonus, down to a floor of 50% of the sole credit bonus.
I would say to use this only IF you have previously negotiated a HIGH-BUDGET BONUS.
High Budget Bonus:
This is a better deal for a writer that might most likely be replaced. For me, my concept and premise are very unique so they wouldnât have been able to write me out of credit because of its originality. But I could lose credit if I didnât ask for the protection of being considered a âprofessional writerâ by WGA standards for all parties involved.
So, another way to get more money for your spec is to write in a provision for a high-budget bonus if the budget suddenly skyrockets due to additional talent being attached of it becoming a high budget studio project. You only get paid this IF the film goes into production. I would opt for the High Budget Bonus over the credit bonusâthis was my mistake and good for my lawyer trying to get it changed, but they would not change the credit bonus.
Writing Credit Determination:
While we wonât press for all WGA credit arbitration rules be applied in all respects, we think it is fair and reasonable to ask that WGA-style credit arbitration be required automatically in the specific situation where (blank) proposes writing credit be given to an employee or other person receiving âproducerâ or âexecutive producerâ credit on the picture.
Chain of Title:
If your screenplay is an original work you should never need to agree to this because it doesnât apply. Itâs for when there has been another contributor to the workâa novel, story, another writer. This particular producer wanted this provision and I would NOT agree to it, because they wanted me to pay for it, which would cost me upwards of $1,000. This was the argument from my side:
âChain of Titleâ Conditions. Simply, this is not relevant where the property being optionedâas is the case hereâis an original screenplay. It would be different if the property were a book, or if your screenplay is based on pre-existing, third-party IP which you are representing to (blank) you own/control. Especially since the language (blank) has here includes a requirement that you obtain a copyright report at your expense (which could easily cost upwards of $1,000 or more, and simply wonât show anything), there is no reason to include Paragraph B.1. and the language in E.1. that references that provision.
If you agree to this and then donât do it, you will be in breach of contract and you can lose money, if the contract is written in a way that has a provision to that effect. READ the damn contract. You should understand it fully.
Protective Language:
What I noticed right away is that the language that referred to the producers was exceedingly flexible, accommodating for errors and just ambiguous enough that you couldnât really hold them to any breach of contract expectation. They even had a provision that in no cases could I actually claim ANY breach of contract on their part. However, when it came to my warranties and expectations on the deliverables it was a hard-line against me, where they could literally claim âbreachâ for something totally unintentional on my part. This was the language we requested be inserted, which only elevated me to the SAME standards they were being held toâŚ
Language Comments ThroughoutâEspecially modifiers like âmaterial(ly)â, âreasonab(le)(ly)â, âsubstantial(ly)â, âuncuredâ, âto the best of knowledgeâ, etc. I know that all these sorts of language comments strike non-lawyers as annoying, minor quibbles. But all these ensure that innocent, minor or merely technical defaults, where no one could honestly say (blank) interests are truly and meaningfully compromised, are not seized on to leverage you into giving up rights or benefits under the agreement. There should be a difference between saying that you could be denied writing credit or forfeit compensation because you delivered a draft two minutes late, vs. because you infringed someoneâs copyright in writing the script. Having the producer agree to these sorts of changes facilitates a respectful atmosphere of comity and collaboration between the parties, as opposed to a more draconian relationship constantly on the knifeâs edge.
Make sure you protect yourself. Otherwise, if thereâs additional language it can cost you your fees.
(cont...)
Iâve been wanting to write a post about âWhat to do when you receive an offer to option,â for a while now. I donât think there has been one postedâif there has been, my apologies up front. I wanted to give writers, any writer, really, some insight that once someone is interested in your IP it shouldnât be an automatic, âthrow your hands in the air and sign on the dotted line,â unless you donât really care about protecting yourself.
In that case, have at it.
I thought it would be great to open a discussion about the pitfalls of options, and other members can add their experiences, too.
First, if you are in this position, congratulations! Seriously, it is a big deal to have someone want to option your material. I donât care if it is the dreaded $1 option, and if it is, donât do that. The minute you do, they will always expect it. Raise your head to the level of a WGA writerâeven if youâre not.
Second, after youâve celebrated with a night out, get a lawyer. Seriously, you need a lawyer to decipher all the bullshit youâre going to be hit with (if youâre offered a long form option/purchase). Iâve only had long form options, three of them⌠and they can get long, like 26 pages longâyou donât want to be negotiating that on your own.
Why? Because thereâs absolutely no reason for you to give money away when they might agree to your terms and all you have to do is ask. They can always say no. You donât get anything if you donât ask for it. A lawyer will know what to ask for.
Third, refer to the second recommendation, again. Yeah, get a lawyer, itâs that important. Even before you start âconversingâ about numbers because that email is an agreement, too.
So, why listen to me? Donât⌠Or do. Totally your call. Iâm a nobody.
Iâve had three option offers and several people interested in trying to set up my projects. Two with a manager/producer on board, and one without. But⌠all three I had an entertainment lawyer. You just make stupid mistakes that are hard to reverse when you donât have a lawyer, and even when they try to spin it to reverse your disadvantage, sometimes they canât.
And Iâm telling you, thatâs not even with me trying hard to sell my projects, so if it can happen to me, it can happen to you. And all that really means is that someone somewhere loved what I wrote on a few screenplays. I was close at Sony TVâthat would have been nice. A no is a no.
Reality check? Get used to it, rejections donât stop with query letters. Thereâs no softball pitchâthey either want it or they donât. The rejections continue, forever, even if they say really great things about your writing. After all, a no is a no. Even when youâre sent out-- no one remembers who lost, they only remember the winners. Doesnât mean youâre a bad writer.
Iâm not going to talk about a short form option which is basically a one sheet that details the option, option $ amount, the length of the option and the terms for renewal extension and its fee. There can be one extension or twoâdepends on the producer. Perhaps Iâm wrong, because I havenât had one yet. So, a call to members, provide some context, please.
The long form is an option/purchase agreement and has everything included. It talks about residuals, TV spin offs, sequels, prequels, first rights of refusal to write the first draft of a sequel⌠all of it is in there and more. And youâre not going to know what you should ask for and rememberâŚ
This is very importantâŚ
They want to obtain your property for the least amount of money possible. Thatâs their job. Even if theyâre Ron Howard (no offense). Read that again, because itâs important that you understand that they will come at you with the lowest offer possible. Itâs your job to negotiate UP and theirs to negotiate DOWN. First rule of negotiations? Know what your adversary WANTS. Understand it. It will prepare you to be a better negotiator. Itâs not easily known, though.
And that brings up another topic. They are not your friends. They are not your partner. They donât want a partnerâthey want control of your project. The sooner you realize that, the better off youâll be. They want to know that you will do as you are told with respect to rewrites. If you donât do it, or come up with something better, guess what happens? They bring in another writer to rewrite you. They fire you. Yes, some may be more collaborative than othersâjust keep it in mind. Make sure you have all rewrite rights revert to you if the option is never exercised, youâll want to keep their advice and experience in the drafts whether you use it or not. And if youâre doing any free writingâitâs the least they can do. More on that later. Speaking features here, not TV where a writer has more value.
And remember, itâs not personal, itâs business.
Now, at the beginning it may be, what seems an innocuous email that starts the negotiation. The moment you open option/purchase discussions, get a lawyer. It may seem like a friendly email conversation, but at this point, the negotiations have begun and before you know it, you can agree to something you shouldnât have.
Floor and Ceiling:
These two numbers are very important to understand. The first guarantees the very minimum of what you will be paid if they exercise the option. That doesnât mean they start production, it means they want to buy the property rights from you and from that moment on they will own it forever and into eternity (yes, they use absurd language like that) with the single exception of âreversion,â they own it forever. And into eternity. Haha.
So, your offer should be based on a percentage of the budget. Regardless of whether this is studio or indy, you want to language to specify the budget includes all going in costs including pre-production, production and post-production. DO NOT settle for a âproducerâs budgetâ that is unspecific, because they can then turn around and use rebates to reduce the budget and also not include some portion of the budgetâmainly indy producers may attempt this, because they can say âthis is the budgetâ and youâre shit out of luck, because you agreed to the âproducerâs approvedâ budget and âproducerâs approvedâ budget can be SIGNIFICANTLY LOWER than the real budget and can/will significantly reduce your fee.
For example, 3% (that was my offer) of a $3 million budget you earn $90,000 and 3% of a $12 million budget is $360,000.00. You want to have an idea of the budget they are shooting for and/or just figure what you think theyâll make it for and then calculate the floor and ceiling.
Get the floor at the number that you actually want them to pay for your script, because if they exercise the option, they still may never make the film and you just sold your script for the floor and that may be all you ever get (outside the option fees). Make sure you understand this provision well.
The ceiling is your cap. That means that at some point you max out what you can earn regardless of the budget. So, if all the sudden Jennifer Lawrence signs onto your film and it leaps from a $10 million indy film to a $40 million studio film you will always and forever receive ONLY your ceiling⌠what is 3% of 40 million? Itâs $1.2 million. You wonât get that, but you could negotiate a half a million-dollar ceiling (and higher) if they want it bad enough, even if itâs your first sale.
So those two numbers are really important, but fear not, because there are other ways to make more money.
Budget:
The changes we are seeking in Paragraph G.2. are just to clarify that (a) the âBudgetâ that is used to calculate the âPurchase Priceâ has to be the going-in budget at the time of commencement of principal photography, without any implication that rebates, etc., that may later reduce the budget somehow reduce (or require partial refund of) the Purchase Price; and (b) the âBudgetâ comprises the full cost of prep, production and post (e.g., not leaving out later-acquired âfinishing fundsâ for post), without only the usual and customary exclusions.
But first, you need to do thisâŚ
Professional Writer Status:
You need to secure that you will be considered a âprofessional writerâ by WGA standards and that all third parties that they come into an agreement with, will also consider you as a âprofessional writer.â This is really importantâitâs about credit. A lot of our projects may start out and remain in the indy realm, but if at any point it becomes a WGA project, even in distribution this concession will protect your credit rights and allow you arbitration. ď get that in their too. They may not agree to WGA arbitration across the board, but in all three of my negotiations we were able to secure this provision. If I can do it, you can, too.
If you donât protect yourself this way, and it becomes a WGA project they can hire a WGA writer to simply punch up your dialogue and THAT WGA WRITER will get full/sole writing credit even if they change only 10% of the script. Why? Because without the language to protect you, you are not deemed a âprofessional writer,â and until you are, they cannot give you credit.
Credit Bonus:
This is where I made my mistake, because I didnât have a lawyer initially to go over the email âconversations.â In order to get me closer to my ceiling, they offered a credit bonus that paid out $25,000 for every set amount that the budget increased until I reached the difference for what I wanted the selling price to be. Sounds nice right? An additional $100k or two never hurt anyone, right? Well you have actually RECEIVE sole credit, and then itâs reduced if you receive shared credit. If itâs an indy film, have your lawyer (they should do this anyway, if theyâre any good) stipulate that the producer will apply credit in good faith by the WGA standards in force at the time the contract is signed.
Hereâs a stipulation:
Credit Bonus. We are willing to accept that the up-to-$100K bonus is tied to your earning writing credit, but we donât want it to be a hard step down by 50% even if the other writers sharing credit arenât receiving any analogous bonus based on credit. So, for shared credit, we are seeking agreement that you are reduced on a $-for-$ basis by any such later writer bonus, down to a floor of 50% of the sole credit bonus.
I would say to use this only IF you have previously negotiated a HIGH-BUDGET BONUS.
High Budget Bonus:
This is a better deal for a writer that might most likely be replaced. For me, my concept and premise are very unique so they wouldnât have been able to write me out of credit because of its originality. But I could lose credit if I didnât ask for the protection of being considered a âprofessional writerâ by WGA standards for all parties involved.
So, another way to get more money for your spec is to write in a provision for a high-budget bonus if the budget suddenly skyrockets due to additional talent being attached of it becoming a high budget studio project. You only get paid this IF the film goes into production. I would opt for the High Budget Bonus over the credit bonusâthis was my mistake and good for my lawyer trying to get it changed, but they would not change the credit bonus.
Writing Credit Determination:
While we wonât press for all WGA credit arbitration rules be applied in all respects, we think it is fair and reasonable to ask that WGA-style credit arbitration be required automatically in the specific situation where (blank) proposes writing credit be given to an employee or other person receiving âproducerâ or âexecutive producerâ credit on the picture.
Chain of Title:
If your screenplay is an original work you should never need to agree to this because it doesnât apply. Itâs for when there has been another contributor to the workâa novel, story, another writer. This particular producer wanted this provision and I would NOT agree to it, because they wanted me to pay for it, which would cost me upwards of $1,000. This was the argument from my side:
âChain of Titleâ Conditions. Simply, this is not relevant where the property being optionedâas is the case hereâis an original screenplay. It would be different if the property were a book, or if your screenplay is based on pre-existing, third-party IP which you are representing to (blank) you own/control. Especially since the language (blank) has here includes a requirement that you obtain a copyright report at your expense (which could easily cost upwards of $1,000 or more, and simply wonât show anything), there is no reason to include Paragraph B.1. and the language in E.1. that references that provision.
If you agree to this and then donât do it, you will be in breach of contract and you can lose money, if the contract is written in a way that has a provision to that effect. READ the damn contract. You should understand it fully.
Protective Language:
What I noticed right away is that the language that referred to the producers was exceedingly flexible, accommodating for errors and just ambiguous enough that you couldnât really hold them to any breach of contract expectation. They even had a provision that in no cases could I actually claim ANY breach of contract on their part. However, when it came to my warranties and expectations on the deliverables it was a hard-line against me, where they could literally claim âbreachâ for something totally unintentional on my part. This was the language we requested be inserted, which only elevated me to the SAME standards they were being held toâŚ
Language Comments ThroughoutâEspecially modifiers like âmaterial(ly)â, âreasonab(le)(ly)â, âsubstantial(ly)â, âuncuredâ, âto the best of knowledgeâ, etc. I know that all these sorts of language comments strike non-lawyers as annoying, minor quibbles. But all these ensure that innocent, minor or merely technical defaults, where no one could honestly say (blank) interests are truly and meaningfully compromised, are not seized on to leverage you into giving up rights or benefits under the agreement. There should be a difference between saying that you could be denied writing credit or forfeit compensation because you delivered a draft two minutes late, vs. because you infringed someoneâs copyright in writing the script. Having the producer agree to these sorts of changes facilitates a respectful atmosphere of comity and collaboration between the parties, as opposed to a more draconian relationship constantly on the knifeâs edge.
Make sure you protect yourself. Otherwise, if thereâs additional language it can cost you your fees.
(cont...)
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