What is a fair option agreement?

Question

Hey Group,What is considered a fair option agreement for a first time writer?Coming from essentially a first time producer.The offer was a twelve month "free" option with 5 points on the back end. No up front money, if they exercise the option.The producer I'm dealing with has no produced feature film credits. The producer has done some line producing, extensive acting and modeling, has seeming limitless energy and contacts, and frequents social circles I don't.The producer is courting a billionaire, trying to get about $20 million for a film slate of about three-four features. Since it is a single investor, essentially throwing the dice, I can understand the producer trying to protect the investor by having a multiple film slate and keeping upfront costs very low.I feel this producer has a serious shot of getting all the films made and five points on the back seems wonderful.But if only few get distribution and the one I wrote doesn't, there goes years of work.Vic

Usenet · Accepted Answer

[nq:1]The producer is courting a billionaire, trying to get about $20 million for a film slate of about three-four features. ... back seems wonderful. But if only few get distribution and the one I wrote doesn't, there goes years of work.[/nq]
If he's getting $5mil per to make a film, the writer should be getting paid.
Period.
For him to suggest you take nothing upfront in this situation is absurd and insulting.
Here's a fair option: 10% of a purchase price, against that purchase price, for a year, with a 10% renewal for a second year which doesn't count against the purchase price.
Oh, yeah, but that's against a fair purchase price. Which for a $5mil movie is, honestly, probably over $50k.
If you want to cut him some slack on the option, because he's just getting started, that's your choice. Asking for less or only a token payment, well, look, there are reasons why you might do that.

But to take 5% of the back end in lieu of payment in these circumstances is akin to taking your check and investing it in lotto tickets. Actually, it's not that good, since even if the film makes money, you probably won't.
-Ron

Usenet · Answer

@reader2.panix.com:
[nq:1]Hey Group, What is considered a fair option agreement for a first time writer?[/nq]
The most you can possibly get without looking greedy. This is a business.
[nq:1]Coming from essentially a first time producer. The offer was a twelve month "free" option with 5 points on the back end. No up front money, if they exercise the option.[/nq]
As has been said by others far wiser than I: If the producer can't afford to pay for the option, the likelihood of him being able to get a real deal together is less than nothing.
[nq:1]The producer I'm dealing with has no produced feature film credits. The producer has done some line producing, extensive acting and modeling, has seeming limitless energy and contacts, and frequents social circles I don't.[/nq]
Take the risk if you want, but you better make **** sure that anything you sign reverts rights back to you after a determined length of time, and under no other circumstances.
[nq:1]The producer is courting a billionaire, trying to get about $20 million for a film slate of about three-four features. ... understand the producer trying to protect the investor by having a multiple film slate and keeping upfront costs very low.[/nq]
I can e-mail George Soros and say that I'm trying to get $20 million for a film slate of whatever, and it'd be absolutely true but it doesn't mean a **** thing.
[nq:1]I feel this producer has a serious shot of getting all the films made and five points on the back seems wonderful.[/nq]
*See below.
[nq:1]But if only few get distribution and the one I wrote doesn't, there goes years of work.[/nq]
*From "The Complete Book of Scriptwriting", by J.Michael Straczynsky:
"Here's one of those stories: A friend of mine was contacted by an independent production company I shall refer to as the DoubleCross Corporation. He had a few produced plays under his belt and was thrilled at the prospect of being in the Movie Biz. So he agreed to and signed a contract for one percentage point of the profits, what was then Guild minimum for a screenplay. But the payments were to be made on a deferred basis, the terms of which are given here verbatim: "Producer agrees to pay Employee the sum of $14,000, which shall be distributed in the following manner: Ten percent on the date whereon the budget for the motion picture is allocated to the Producer; forty percent on the date of the Employer's commencement of principal photography of a motion picture based on said property; and fifty percent to be paid on the last day of actual photography.

In addition to this fee, Producer agrees to pay to Employee one percent of the net profit from the motion picture. Producer agrees to use its reasonable efforts to effect production of a motion picture based upon said property. In the event, however, that Producer is unable to begin or complete production of the Photoplay, Producer shall provide to the Employee the compensatory sum of $1,000." (This kind of arrangement, by the way, is patently forbidden by the Writers Guild.)
"It was", my friend has said on many occasions, "the biggest mistake I ever made in my entire life." Here's what happened: The DoubleCross Corporation was never able to receive financial backing for the project, since the alleged producer had never worked in the industry before and was recognized as a less-than-reliable character. That took care of the $14,000. So the writer tried to get his $1,000 kill fee. But the producer had an out, a loophole: The contract specified that the kill fee only went into effect after all reasonable efforts to secure production of the script had been made.

So whenever my friend tried to get his money, all the producer had to say, truthfully or otherwise, was that he had shuttled the script to yet another studio and that they were looking at it. This constituted reasonable effort. Translation: It would be impossible for the writer to ever collect his kill fee, since the producer could claim indefinitely that reasonable efforts were being made to produce the screenplay. And since no time limit was attached, the reasonable efforts could go on forever.

The result of all this? The writer wrote a very good script, for which he never received a single penny and probably never will. He cannot market the screenplay as is because even though he was never paid for his work, it contractually belongs to DoubleCross. Now, he could almost certainly break the contract in court, given the circumstances, but at first, the cost was prohibitive. Finally, the producer, along with the DoubleCross Corporation, simply vanished.

Telephone disconnected, no forwarding address and a solid year of work down the drain.
The writer, of course, has said that he harbors no grudges. "But if I ever find that guy," he added in a recent conversation, "I'm gonna chew on his eyes."
Moral: Whenever dealing with an independent production company, check it out with the Writers Guild and the Better Business Bureau, unless, of course, it has some kind of track record or is known personally by you. Do not sign any contracts until you have talked to an attorney. A little caution can save you years of heartbreak."

pwt

Usenet · Answer

net or gross points? net points = monkey points (you never get them, they only offer them to "monkeys" people naive enough to believe in film net profits)
gross points? He hasn't the authority. 5 gross points could kill the deal with a studio.
If you really believe in this guy, you could give him NON exclusive option for free, exclusive six month option for token payment where token payment is $5k. You can even let him make payments or sign a promissory note if you're feeling generous. But there isn't any real reason why you should give a way a valuable property right. Would you let an ambitious well-connected guy start camping on your front lawn for free? Would you start to wonder how he could be so well connected if he couldn't afford his own lawn?
By the way, have you done a background check on the guy? Really know where he lives? Verified that he runs in, and doesn't just hang onto, the circles you mentioned? Has he demonstrated some kind of deep understanding of your story that makes you think he's the only guy in the world who could produce your film properly? Is there ANY reason to give away something to him other than that he asked?

here's something that writers often forget if the story is good, the producer needs you more than you need him (i.e. you have a valuable property, he's got ambition and maybe connections).

If this is a last resort for your script, that's different. Has it been pitched to agents or other producers? Is it difficult material to sell?

These are just my opinions, based on the anecdotal evidence that while I know many people who have been ripped off in deferral situations, I don't know a single living soul who passed up a free option or deferral and lived to regret it. Your mileage may vary.
Mysti
P.S. The producer my husband is working with HAS credits, and isn't asking for a free option, this is for a t.v. project.

Usenet · Answer

[nq:1]I can understand the producer trying to protect the investor by having a multiple film slate and keeping upfront costs very low.[/nq]
I can understand the producer trying to gauge how dumb you are by how low you'll go on the option.
Right now, your product is the only thing he has to sell, and this "investor" is his customer.
[nq:1]I feel this producer has a serious shot of getting all the films made and five points on the back seems wonderful. But if only few get distribution and the one I wrote doesn't, there goes years of work.[/nq]
Exactly why you should get paid up-front.
Multiply the value of 5% on the back-end by the probability that it will happen. 1 in 10? 1 in 50? somewhere in between? So that's
0.5% to 0.1%. Of what? $5 million profit? The expected value ofhis proposition would then be between 0 and 25 thousand dollars.

Get cash for the option. When he needs to own the script get more.

Unless you think the mere connection and the aggravation of a multi-year ****-shoot with a large probability of failure is worth a $5-25,000 wager against $250k in payment, maybe more, maybe less...
Blair

Usenet · Answer

The more I think about this the more I'm certain this guy is asking you to invest the value of your screenplay.

That makes you a risk-taker in the enterprise, a part-owner, not just a writer. A co-producer.
Whether you're confident enough to demand that status and get to own a piece of the gross according to your contribution (the value of the option as of when you sign up, plus the value of the screenplay once the investor's money comes in, less whatever you two consider to be the value of his effort closing the deal...yes, this *** is complicated which is why law requires professionals to untangle it and make up lies about the facts that look like a different way of untangling it) is up to you.
And could scare the *** out of him. He's hoping you're not smart enough to think of it. Forget I said anything.

Get a lawyer. It's cheaper now than later when you're wondering how you could've got scrod.
Blair

Usenet · Answer

[nq:1]Unless you think the mere connection and the aggravation of a multi-year ****-shoot with a large probability of failure is worth a $5-25,000 wager against $250k in payment, maybe more, maybe less...[/nq]
Well, it's that "maybe less" that makes the whole thing so dodgey. A $5 million dollar film could be very successful - by the standards of $5 million dollar films - and not return a dime of back end.

Because first the distributor gets his money back, then the investor gets his money back, then anybody with deferred payment gets his money back, and then (and only then, and only if you have a good lawyer do your contract for you - you do have a good lawyer, don't you?) does the register start turning over on your 5%.
Unlike Blair, I understand why you might want to cut the guy some slack on the option price. But the sale price? Fuhgettaboutit. A $5 million movie can afford to pay its writer a living wage.
-Ron

Usenet · Answer

I hate to agree with Blair on ... on ... on anything.

He's right.
A deal like this massaged my ego. I made some money. I should have passed.

Spark

Usenet · Answer

[nq:1]Hey Group, What is considered a fair option agreement for a first time writer? Coming from essentially a first time ... back seems wonderful. But if only few get distribution and the one I wrote doesn't, there goes years of work.[/nq]When you're starting out, you're usually screwed. If you give it away for free, they will never give you anything. If they're the type who won't pay, you won't get paid. I know plenty of screenwriters who still get only a couple of grand for a script, when they're lucky enough to get that, and they all hold out the hopes that there'll be more coming but there never is. Once in a while a new writer gets a break, and if you read "donedealpro" for example, you'll see that 1-5 people a day are getting something somewhere but have a look at the agencies that are linked to virtually every sale...

These writers are already at the best agencies and most of those deals are based on underlying source material anyway. Once in a blue moon an indieguy will actually option your work. If so, have your lawyer negotiate a contract that specifies at least the wga minimum numbers, etc. Take a grand or two and don't plan on getting any more, but you never know. In this case, it sounds like the "producer" is shopping your material already, in the hopes of raising money.

If you allow him to do this, before you sign anything, his non-exclusive shopping may work out for you if he raises money from the source with their interest in using your script. That gives you a slight amount of leverage, maybe, but I'm not certain the money people ever actually read, or care, what the scripts are in scenarios like these. It's more about genre, budget and casting. For my money, the best way to see your work produced is for you to find some meaningful elements and attach them to your project, then go and find the money yourself.

Usenet · Answer

[nq:1]Hey Group, What is considered a fair option agreement for a first time writer? Coming from essentially a first time ... seems wonderful. But if only few get distribution and the one I wrote doesn't, there goes years of work. Vic[/nq]
I can only reiterate what other people have been telling you in various ways.
Here is the industry standard.
Deferred pay = No pay.
It makes no difference what the terms are. Net points. Gross points. Happy points. Sad points. If the offer is "deferred" you will never see it. Nothing. Ever. The movie is made. It makes a hundred billion trillion quadillion dollars. You hire the best team of lawyers in the history of the universe.
You will never see a single dollar.
When a producer tells you, "It's deferred pay" the translation is, "I intend to take your work and pay you nothing, ever. Period. Oh, and we want lots of free rewrites, and also come by this weekend and paint my house."
The only reason that producers pull this stuff with anybody is because they can get away with it. And when they can get away with it with whomever then they do and there are bottom-feeding producers who worm their way through a lot of writers and lot of actors and a lot of crews promising a lot of stuff and never paying off and making a lot of movies on the cheap by doing that.
You want to give somebody a free option there's only one way to do it. It's got to be for a very short of period of time maybe a few months because they're just about to close a deal. No rewrites involved in that. The terms of the sale have to be fixed and that has to be for the exercise of the option that is, at the end of the three months (or six months if you're feeling really generous), they have to buy the script at guild minimum or ten percent of the approved budget, whichever is more and if they can't do that, they either have to pay to extend the option (ten percent of the purchase price) or the script has to come back to you *completely unencumbered.*

Now, when I say completely unemcumbered, when screenplays normally go into turnaround, there are generally contractual encumbrances two most notably. One, that if somebody else buys the script, they have to pay back the development costs associated with the earlier option. Generally, that includes the cost of the earlier option, but also can be bloated to include things like overhead, transportation, the salary of the execs who generated notes and it can expand pretty quickly.

But if they're not paying you anything, you shouldn't have to have your project encumbered with that kind of ***. You should get it back free and clear. Totally.
Second, they generally include some kind of language to the effect that if somebody else makes an offer on the screenplay you have to go back to them and allow them to match the offer.
Ditto you're giving them a free bite at the apple now. You shouldn't have to give them another one.
Finally it's nice to talk to us smart strangers here on line especially since what we're really telling you is that this is not a good deal.
But if you should decide to move forward with it what you really need to do is to talk to an entertainment attorney. Not just any old kind but an attorney specializing in entertainment law.

They can be pricey, however most states have what is known as a Volunteer Counsel for the Arts where lawyers provide free or inexpensive legal services for members of the Arts Community. Check and see and by all means give them a call and talk to a lawyer before you move forward with a deal like this.
Remember.
Deferred pay = No pay.
Producer flying in to offer deferred pay = Snake on a Plane

NMS

Usenet · Answer

[nq:1]What is considered a fair option agreement for a first time writer?[/nq]
When the check clears.

What is a fair option agreement?

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