With an Option Agreement, the producer is likely to want to take an option on what the writer has already written (e.g. a book or script). Thus entitling the producer to exclusivity for an agreed period of time, during which no one else can acquire the rights in the material for the purpose of making and exploiting a film or programme (s). The option usually states how much the producer pays for the exclusivity to acquire the rights, what rights are being optioned, how long the producer has the option for and how the option can be renewed or extended.

Assignment of Rights

Usually, attached to an option agreement is the second part of the contract. Called the 'Assignment', it states the purchase price, the grant of rights and all the other details necessary to transfer the rights to the producer so that he or she can make and exploit the film to be based on the rights acquired.

If, before the expiry of the option, the producer 'exercises' the option in the way prescribed in the option agreement, then the rights granted by the Assignment will pass to the ownership of the producer, subject to the producer paying the exercise price. This payment is known in contracts as 'consideration' and some consideration is required for a contract to be legally binding. It is usually but not necessarily money. Make sure the rights don't pass unless you have been paid.

During the option period it must be made clear what the producer is entitled to do in relation to the Work. Raising money in order to be able to make the film is perhaps the most important activity that the producer must have the right to do. Actually starting production of the film, however, should not be possible under an option agreement. Only once the option is exercised, can the production begin.

Commissioning v Optioning

It is worth noting again here the difference between commissioning a Work and optioning a Work, because when a producer commissions a writer, the producer will usually own the Work to be written and all the accompanying rights, such as sequel and remake rights. There will therefore not be anything in the contract about these, as all rights in the Work are owned by the commissioning producer. But where the Work existed prior to the producer's offer to acquire an option, some of the ancillary rights may have already been sold, such as publishing rights, stage or radio rights.

So where there is a commissioning, and the producer requires the Writer to assign the copyright, the producer will usually want the right to make 'films in general', not just one film (as they might acquire in a one-picture licence). But this raises the issue of what payments should be made to the writer if more than one film is made, or if a spin-off television series is made, and so on.

There are therefore commonly provisions for such additional productions as sequels and remakes or television series, in addition to the feature film rights being bought under the agreement in question. For sequel and remakes it is usual for producers to offer 50% of what the Writer received for the first film. For a television series there will usually be a fee per episode (depending on the running time of the episodes). The fees for television spin-offs do not always carry residuals, though you can try to obtain them. All these additional fees or percentages are dealt with in the Assignment at the time that you sell the Work.

The amount paid for the rights to make the first film will be an agreed sum paid on exercise of the option (at which point the rights usually pass to the producer) plus an additional top-up payment on the first day of principal photography. This is usually measured by reference to the size of the budget. In other words a fee of £50,000 may have been agreed or say 2% of the budget, whichever is the higher. So on the first day of principal photography the difference between £50,000 and 2% of the budget will be paid if the latter is greater than £50,000.

The Writer will usually receive what is known as 'profit participation', commonly between 0.5-5% of 100% of the film's profits. Writer's profits should be assessed on the same basis as the financiers' definition. The reason for this is that the Writer won't be able to know how the financiers are defining profits, so having Writer's profits defined by reference to financiers' profits ensures that the Writer does not receive a less-favourable calculation of profits.

In the commissioning situation, because the producer is 'at risk' the writer therefore tends to have to sell all rights, but gets top-up or residual payments depending upon the performance of the production (s). When dealing with an existing novel union agreements do not apply (although agents try to mirror them, obtaining for example residuals when selling a novel to a broadcaster), but it usually is possible to reserve some of the rights, negotiate provisions for remakes and sequels, determine who will write the novelisation, and so on.
Residuals are usually seen as a way of topping up a basic fee. With an option the producer buys time because he/she cannot or does not want to pay the purchase price at the beginning of the relationship, or anyway not until they have established that they can raise the money for the production of the film. So the option is often thought of as time for the producer to go out and raise the money.

It is not easy to generalise about what sums of money should be paid for commissions or options, except by reference to the WG minimum. Detailed information on deals can often be acquired by the sharing of experiences between writers.