If you are an indie producer, director, or screen writer, you absolutely have to understand the power of options. It’s rare that movies get made these days without the script first being optioned.
So what is an option exactly? Well, an option is simply a type of contract that says “I want to buy something”. You can have options in real estate, stock, writing, or just about any type of property that could be classified as unique and illiquid (meaning it isn’t easy to buy and sell). The basic idea is you “lease” the exclusive right to buy the property for a period of time. In other words, you haven’t bought it, but no one else can buy it for as long as your option exists. When it comes to filmmaking we usually speak of options in terms of either literary or script options.
A literary option is for licensing books, comic books, graphic novels, etc. Here, you are basically buying the right to be the first person to license an author’s work, and adapt it into a screenplay. Steven King often lets indie filmmakers option his short stories for as little as a dollar. However, aside from an indie friendly author such as King, usually literary options are out of the grasp of indie budgets.
For indies, the more important form of option to understand is a script option. Here you are optioning the right to take a screenplay and produce a film. The beautiful thing about an option for indie producers is that it essentially gives you the right to use the script to find financing. The great thing about options for writers is that its often just free money, because the option doesn’t get exercised (bought), because the producer fails to find the budget in time. It also always seems to work out that the producer, while shopping the script around, drums up interest in the script from some other producer or studio, thus making it possible for the writer to option the script a second time.
How it works
An option basically has three major components:
- What is being sold
- The price to option it
- The price and agreements to be made in order to buy – called exercising the option
An option usually turns out to be the contract before the contract. What I mean by that is that, if you leave out something in the option, or fail to have some sort of “catch all” clause…then theoretically you don’t have an option. If there is something left to be negotiated, then the writer can refuse to let you exercise the option. This is why its really important to have a lawyer draw up this kind of paper work. A properly written option, is nearly the exact same contract as a literary purchase agreement, because the option will spell out every single part of the deal.
Transferability
Options can be either transferable or nontransferable. If it is transferable, then the producer can option the script, and then sell the option itself and the writer doesn’t make a dime. All this does is transfer the right to purchase the script from one person to another. The option could be transfered several times, but until its bought or the option runs out, the writer won’t see another penny.
Sometimes studios option scripts that are similar to the script they want to write, just to avoid a similar film coming out at the same time as what they are trying to release (trying to avoid another Armageddon/Deep Impact scenario). Producers know this, and usually won’t see anything wrong with making a quick $2000 off your script selling their option to someone they know won’t ever produce it. They make $2000, and your script is officially considered a “shelved” property, making it very difficult for you to sell again.
On the other hand, sometimes a producer needs transferability for legal reasons. They may buy it under their own name, or company name, but then need to transfer it to its own separate entity in order to do specific methods of financing.
Applicability
An option can be defined as applicable or non applicable. This pretty much just means whether or not the price of purchase includes the amount of the option or not. In other words, if the purchase price is $50,000, and I payed you $5000 for the option, if my $5000 is applicable I only owe you $45,000. If not, I owe you the full $50,000.
Advice on optioning
For the producer, the object is usually to get the option as cheaply as possible, with as long of terms as possible. Remember, you’ll be spending investor money on the actual purchase of the script so you aren’t really worried about the final price, except to insure it isn’t outrageous. But the option…that’s your own money your spending. You will lose it if the option runs out. Also, if your option is too short, and you approach a studio to finance the project, if they want to do the script they’ll wait out your option and buy it out from under you.
For writers its a bit more complicated. You want as short of a term as possible, but the price is somewhat difficult to determine. You could easily option your script for a dollar, then two days later the producer call you back, ready to purchase your script at full price. Or you might take your dollar, go to the coke machine, and all your windfall profits as a professional screenwriter are shot in one transaction. May I recommend that if you are going to drink away your career, get enough for a beer…and a tip.
On the other hand, holding out for some outrageous option price isn’t going to help you much if the producer can’t afford it. Like I said above, the option is usually bought with the producers own money. If if its an indie producer, chances are they don’t have much, but that doesn’t necessarily mean they don’t have the drive and ambition to get financed and make a first class film.
My advice for writers is to only accept an amount that ensures the producer is serious. If its a very young person in college, that may be as little as $250. For someone with a job, or someone whose been in the business for over a year $1000 is probably a better number. I’m not a wealthy person to say the least, but I could easily put $1000 down on a movie if I really believed in it…but if I do you better believe I don’t intend to waste it and let that option expire without doing everything in my power to get it financed. But over $5000 is usually pushing it. I may really really love a script, but if I can’t get an option on it for less than a few thousand its just not worth the risk.
A final note for producers, wait to exercise your option until the day before production begins. Until that day, you really don’t know if your movie is really happening or not. Financing falls through, insurance papers get screwed up, permits get denied, and so on. Anything can happen, so unless your option is about to expire, don’t exercise it until the cameras start rolling.