Books to Film: The Option Versus The Shopping Agreement

Image: graphic of collaged film reels
Photo credit: Carbon Arc on VisualHunt / CC BY-NC-SA

Today’s guest post is by intellectual property lawyer and author Matt Knight (@MattKnightBooks).


Most writers dream about their book becoming a movie. It’s exciting to think about seeing our creative endeavors on the big screen or television. Plus, who doesn’t like receiving more money?

But adapting a book into a movie is a complicated process. Film and TV producers must corral numerous financial, creative, and business components (one of which are your dramatic rights) in order to develop and produce a finished product for the screen. In fact, the process can be so complicated and protracted that a movie industry friend of mine once said, “These things rarely pan out.”

Should that stop us from dreaming? Heck no! So, for you big dreamers in the crowd, there are two agreements used in motion picture or TV deals that a writer should understand—The Option and The Shopping Agreement. 

Side note: If you need a snapshot of the complete start to finish process of book adaptations, see Jane’s article How a Book Becomes a Movie where she breaks down the process into four parts: The Pitch, The Option, Development Hell, and Production.

The Option Agreement

One of the first steps a producer makes when developing a project for the screen is to lock down the story rights. The usual legal vehicle for this is an option contract. The producer options the exclusive rights for a specified time to develop your creative work. During that option period and before the producer commits to purchasing the work, the producer will determine if there is any interest in adapting the work into a film. The option puts money in the writer’s pocket in exchange for putting the book rights on hold during a negotiated time period.

Here are the basic components of a standard option agreement.

1. Term

Typically, an option term is 18 months but it can be as little as 6-12 months. Often the option can be renewed once or twice. These renewable periods are shorter than the original option term, and no more than 12 months.

2. Price

The writer gets paid for each option and renewal. Often the option fees are more than the author received for the book advance and sometimes more than the royalties paid. The option price depends on the material being optioned and the writer. Author notoriety, the popularity of the work, a producer’s desire for the project—these can drive up the price.

While everything is negotiable, an option can range from $500–$500,000. A good gauge is 10% of the purchase price if the story rights are later bought. (More on that below under #5.)

The fees for renewals tend to be higher than the first option. The reason is demand. If there is interest in the project, the renewal option is exercised. Plus, renewals require a writer to put the story on hold for another negotiated term.

3. Dramatic Rights Optioned

The contract language should define with specificity the rights being optioned.

Producers will want as many rights as possible tied into the option, i.e. not just the right to the make the film but also the right to make sequels, TV movies, series, and if they can get it, merchandising and advertising rights too.

For the writer, it would be financially beneficial to option only motion picture and TV rights, and retain other rights like print, electronic, audio, sequel, merchandising, and dramatic stage rights. Any rights retained by the writer can be negotiated for royalties at a later date depending on the project. Some producers might require that you not exercise those retained rights for a specified time period (most likely until after the movie release date). This is called a “hold back.”

Negotiate the option renewals to be contingent on the producer hitting certain markers tied to forward movement in the production of the project. For example, the option may only be renewed if financing has been secured and/or the necessary people are attached to the project (director, actors, and screenwriters).

4. Termination and Reversion

The option should be clear about termination and reversion of rights when the producer decides not to purchase the rights or renew the option within the specified time periods. In addition, it would be beneficial to the writer if the contract language requires an automatic reversion of rights to the author if the adaptation is not produced within a specified number of years.

At the end of the option period and the renewals, the producer must either drop the project or purchase the story rights. If exercised, the rights in the creative work will then be transferred via a purchase agreement.

5. Purchase Price/Purchase Agreement

Usually, the purchase agreement will be negotiated in tandem with the option agreement. Budgets are producers’ worst nightmare. If producers believe a project has potential, they need to be certain how much the project will cost, which includes the cost of the option and purchasing the story rights. The last thing producers want when making a film is to have large, unforeseen costs that ramp up expenses and blow out their budgets.

The purchase price will vary considerably depending on the project. Usually, it will be based on a percentage of the film’s budget with a cap. A good gauge is 2–4% of the production budget. If the budget grows, the producers have the insurance policy of the cap. So, if the budget is $5 million, then the purchase price might be $150,000 (or 3% of the budget) with a cap of $275,000 should the budget grow.

The fee for films will be larger than television, which ranges between $25,000–$50,000. If the project becomes a series, payment is usually per episode (lucky you). The option fee is usually counts toward the purchase price. The renewal fees, however, usually are not.

Some producers will offer a writer a share in the film’s “net profits” in lieu of a set purchase price. A percentage of profits sounds enticing, but net profits in the movie industry will always be less than zero. A better option, if you can get it, would be a percentage of “gross profits,” between 2–5%. Everything is project-specific and negotiable, so you might find that a percentage of gross profits are twined with an upfront purchase price.

Authors usually are required to give up creative control once the work has been purchased. Hollywood sticks with their own screenplay writers (although it is not unheard of for an author to write the screenplay … dream big). Rarely does an author get final approval over the creative content in a film. Such creative control is left to the big fish authors (again, dream big). Some contracts allow authors to consult with the adaptation process, but this is not typical either.

The Shopping Agreement

While the usual vehicle for obtaining control of story rights is the option agreement, a trend with producers is to use a new legal vehicle for putting a writer’s creative rights on hold. Enter stage right—the shopping agreement.

No, it’s not a free trip down Rodeo Drive with an arm full of bags from Dolce and Gabbana. It’s more like a free ride for the producer.

Under a shopping agreement, the writer grants the producer the exclusive right for a limited period of time to use his best or good faith efforts to obtain a proposal or interest in the project from a studio, network, distributor, financier, or some potential buyer. If the producer is able to show interest during the shopping agreement period, the writer agrees to negotiate a more permanent deal with the buyer for the dramatic rights in the creative work. Whether that more permanent deal is an option agreement or purchase agreement is up to the parties, including the buyer.

Under the shopping agreement, the writer agrees that, should the writer negotiate a deal with a buyer for the dramatic rights, the writer will attach the producer to the project during those negotiations. The producer will usually negotiate separately with the buyer too. Typically, the shopping agreement will also contain language to prevent the writer from circumventing the producer and creating a deal directly with the buyer once interest has been shown in a project.

Why the switch from option to shopping? Cash.

There’s no money exchanged in a shopping agreement like there is in an option agreement. For the producer, this is a big benefit. He doesn’t have to spend development funds to put a hold on the dramatic rights. He gets, for free, a short window of time (generally 6–9 months) to secure a potential deal.

Pros and Cons: The Shopping Agreement vs. The Option Agreement

While at first glance the shopping agreement doesn’t sound so grand for the writer, there are some benefits.

Shopping agreements do not pre-negotiate the purchase price. If there is interest in the project, the writer can command a higher purchase price, one that most certainly will be better than the pre-negotiated option/purchase price.

The term in a shopping agreement is for a short period of time. If the producer can’t deliver, the writer can move on to another potential deal. But if the producer has pitched widely with the project, the likelihood of other opportunities may be greatly reduced.

Shopping agreements give the writer more say in who the producer pitches the project to and if the buyer is acceptable. Option agreements tend to give producers free rein when it comes to who picks up the project.

Shopping agreements give writers more control over their rights. In the option agreement, the producer gets an exclusive option to purchase the dramatic rights to the book (i.e. film and motion picture rights) during the option term. This means the producer has exclusive control over these rights and cannot be circumvented during the option period (by anyone). A shopping agreement, however, allows the writer to keep full control and ownership of the dramatic rights. The producer can only shop the project to selected buyers.

Sadly, most book–movie projects never see the light of day. So, if a writer has signed a shopping agreement, the writer has zero certainties that a project will be made and has zero leverage to shop the book to other producers during the shopping agreement period. The writer’s hands are tied. An option agreement at least puts cash in the writer’s pocket.

Every deal is different, but if the producer has a strong track record of getting projects made, then a writer may want to give the producer a little bit of free shopping time.

In my opinion, an option is often better for the writer because there’s money upfront. Plus, with an option, the producer has skin in the game and more reason to make the project. It does mean that a writer will have to be comfortable with the longer option period where the dramatic rights are under the producer’s control. But hey, you have to give a little to get a little. Hopefully, the payoff will be seeing your book on the silver screen.

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Posted in Business for Writers, Guest Post.

Matt Knight is an intellectual property lawyer, a New York Times freelance writer, and the author of The Writer’s Legal GPS: A Guide for Navigating the Legal Landscape of Publishing. He is currently at work on two novels in the genres of near-future and women’s fiction. You can learn more about him, his writing and books at Sidebar Saturdays (a publishing law blog for writers) and Matt Knight Books

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Sara Hermann

Excellent, to-the-point article on such an important subject for authors. Places the dreams on more solid grounds.

Neil S. Plakcy

Since I’m in the process of negotiating with a producer, this was a very helpful article. I didn’t know about the shopping agreement prior to reading this, and I’m glad the guy I’m working with didn’t suggest it!