7 Tips to Avoid Pitfalls in Motion Picture/TV Rights Option Agreements

24 August 2017 7

You have just published your first novel and you are justifiably excited. It won’t be a best-seller but it is out on Amazon and in select bookstores and you are already getting some sales. Then someone calls you and tells you that they're an independent film producer and they want to option the motion picture and TV rights to your book. Your pulse races as you envision red-carpet premieres and bags of money! But you need to put on the brakes. Before you leap, you must carefully look at both the producer and the proposal.

Motion picture and TV rights option agreements can be complex and I advise you to retain an entertainment lawyer experienced with this type of deal to negotiate on your behalf. In the meantime, however, here are 7 tips that may help you avoid a bad deal:

Vet the producer

These days it seems like anyone with a business card and a smooth pitch is willing to call themselves a producer. You must ask the producer what actual motion picture and/or television producing credits they have and then vet them by going to imdb.com (the Internet Movie Database) and checking under both their name and the individual production titles. While IMDB is fairly accurate, you should also do a Google search to check if the credits come up on other film sites.

There are exceptional cases where an individual has attained real prominence in another artistic field and can cross over into film production, but, in general, if the producer doesn’t have at least a few respectable motion picture and/or TV producer credits under their belt, you are likely better off waiting for another offer. A principle of Hollywood is that movies get made because someone with power wants to make them. You don’t want your rights tied up by someone who lacks the clout to produce the movie.

Reject the free option

Independent producers sometimes seek to persuade the vulnerable author to grant them a “free” initial option period (usually 12-18 months) in exchange for the producer using good faith efforts to obtain a development deal for the picture. Don’t agree to this. First, you put your blood, sweat, and tears into writing your book and you deserve to get paid for the option. Second, you want the producer to demonstrate that they are committed enough, and financially solvent enough, to invest in this project and put their own “skin in the game”.

Condition option extensions on progress to production

Because raising financing for a film, or obtaining a production commitment from a studio or TV network, takes so long, producers will generally ask for the right to extend the option for at least a second 12-18 month period and sometimes a third 12-18 month period. I advise authors to require that, in addition to paying for the extensions, the producer must demonstrate “progress to production” in order to extend the option.

This means that they must achieve certain definite development goals by that point. Examples of such goals are having a completed screenplay, attaching (getting a written commitment from) a lead actor or director, or entering into a development agreement with independent financiers, a studio, or TV network. While it is best to limit the producer to one option extension, if you are willing to grant two extensions, you can condition the first extension on one development goal and the second extension on additional development goals.

Tie the purchase price to the budget

The producer may offer a purchase price for the motion picture and television rights (the price they must pay if they exercise the option) that is one flat payment regardless of the budget of the picture. It is preferable for you to tie the purchase price to the budget of the picture. One common formula is that the purchase price will be equal to 2.5% of the final written approved budget of the picture (excluding contingency, completion bond fees, and financing fees).

However, it is customary to put both a “floor” and a “ceiling” on the price to protect both parties. For example, for a book at this level, you might state that the price will in no event be less than USD $75,000 (GBP £57,100) or more than USD $250,000 (GBP £190,325) (I’m an American lawyer so I’m used to dollar figures). These figures are negotiable.

NEVER assign rights to a producer before they purchase them

This is an iron-clad rule! You must never assign motion picture and television rights to a producer before they have paid the negotiated purchase price! Unscrupulous producers will sometimes convince an unwary author that, instead of granting an option to purchase the rights, they should simply assign the motion picture/TV rights to the producer so the producer can feel more “secure” when they shop the project to studios.

Guess what? The producer may refuse to give the rights back even after they have accomplished nothing with them! Furious and desperate authors have sued producers to get their rights back and failed. Remember that the beauty of an option is that it gives the producer a finite period to try to get a production commitment and pay the purchase price, and, if they fail, the option expires and no rights are transferred.

Remember your reserved rights

If the producer exercises the option and pays the purchase price, they generally acquire all motion picture, television, and customary allied (distribution rights such as DVD, pay-per-view, VOD, internet, etc.) and ancillary (usually remake, (original) prequel/sequel, TV series, merchandising, and commercial tie-in) rights to the book. But the author should always reserve all publication (print, electronic, and audiobook), radio, live stage, and author-written prequel/sequel rights.

“Author-written prequels/sequels” are books which the author writes after the current book which show some of the same characters participating in new and different events which take place either before (prequel) or after (sequel) the events described in the current book. Such rights can be enormously valuable in a book series (like “Harry Potter” and “Twilight”) especially if the first motion picture is a success.

It is customary to allow the producer, if they exercise the option and buy the motion picture/TV rights to the first book, a first negotiation/matching right to buy the same rights to your author-written prequel/sequels if and when you want to sell them. But you should not be obligated to do so if you don’t like their offer.

Ask for Consultation Rights

Unless you are literally JK Rowling or E.L. James, no producer or studio is going to give you the right to approve the screenplay used for the picture, but you should be able to get the right to be consulted in good faith regarding the script as long all creative decisions rest with the producer. This should include the right to meet with the screenwriter and to read each draft of the script and give input. While you can’t entirely prevent the producer from mucking up your book, you can at least try to reduce the damage!

Robert Zipser is an entertainment attorney in California specializing in motion picture/TV rights deals for books. He represents authors, publishers, film and television producers, and production companies. Prior to starting his practice, he worked for MGM Studios, Carolco Pictures, and the law firms Skadden Arps and Stroock Stroock and Lavan. His articles have appeared in Filmmaker Magazine, Los Angeles Lawyer, and West’s 2014 Entertainment, Publishing & The Arts Handbook, and he has published the e-book The Independent Producer’s Guide to Optioning Motion Picture Rights to Books.