In the motion picture industry, whether the producer wishes to obtain the life story of an individual, or a book, article or screenplay (collectively and generally known as literary property) for the purposes of making a motion picture, an option is used as a cost saving measure. From the producer’s perspective, the goal is to pay the least amount of money possible in order to allow the producer the maximum amount of time to finance the Picture and once financed, purchase the life story or literary property. This is accomplished by using an option.
An option agreement (whether for life story or literary property) is an agreement whereby the purchaser (the Producer) pays a small amount of money so that the purchaser/producer may have the exclusive right to later purchase the movie rights associated with the life story or literary property. An option period could last from months to years. As a general rule, the producer will negotiate for an option for a period of six months to one year and pay the option payment to exclusively “tie up” the life story or literary property for that period of time. This means that the owner of such rights cannot give, sell or option the rights to anyone else during the option period. The option payment could be anywhere from one dollar to thousands of dollars. The producer may exercise the option by paying the purchase price for the life story or literary property pursuant to the option agreement. The purchase price may be based on a percentage of the budget (usually with a floor and ceiling of the amounts that the holder of the rights may receive). The purchase price may also include any combination of deferred fees (cash payments), contingent (back-end) profit participation, etc. If a screenplay is the subject of an option, the agreement may require the owner to prepare rewrites, polishes, etc., subject to the “notes” of the purchaser/producer.
The producer may also wish to extend the option for a further period of time by making an additional option payment (e.g. second option period, third option period). This is inserted into the option agreement when initially drafted. As a general rule, the initial option payment is applied to the purchase price whereas the subsequent extension option payments are not applied towards the purchase price.
Once the option is exercised and the life story or literary property is purchased, the producer is free to produce a film based upon the optioned life story or literary property.
For more information regarding life story options and screenplay options, see website sections entitled Deal Point Checklists for Life Story Option and Screenplay Option (which also applies to any other type of literary property which may be being optioned).