What is a Script Option Agreement?
An option agreement is a contract between a production company and a writer which grants the producer the exclusive right (the "option") to purchase the creative/intellectual property rights to the script (or underlying material like a book) at a later date. This agreement is on an exclusive basis, purchased for a specific price, and it provides a timeframe before the agreement lapses and the production company no longer has the right to purchase the script.

How does an Option Agreement work?
Three of the most important clauses in the option agreement are the grant of option, option period, and option fee. The grant of option grants the exclusive right to the production company to make a film based on the script. The option period specifies the term of the agreement. Lastly, the option fee’s purpose is to provide the writer with a portion of the purchase price for signing over an exclusive right.

The option period is typically one to two years, which allows the production company to raise financing for the film. This period can be used to determine whether the script is worth the purchase price. The option period can also be extended in exchange for extension fees which operate similar to the option fee.

Advantages of a Script Option Agreement

An Option Agreement provides significant benefits and safeguards for both the production entity and the creative rights-holder (the Author or Writer).

Advantages for the Production Company

The core advantage for a production company is risk mitigation and control.

• Exclusive Rights: The agreement immediately grants the company exclusive creative rights to the script for the entire option period. This effectively takes the script off the market, ensuring no competitor can acquire it while the company develops and raised funding for the project.

• Low Financial Commitment: The company pays only a non-refundable Option Fee upfront, which is a fraction of the final purchase price. This allows them to spend the option period trying to attach key talent (directors, actors) and secure financing without committing the full budget for the acquisition.

• Flexibility to Purchase: The company has the freedom to exercise the option (purchase the script) at any time during the agreed-upon period once they are ready to proceed, securing the property instantly under the pre-negotiated terms.

Advantages for the Author/Writer

The primary advantages for the author are immediate compensation and the protection of their intellectual property rights.

• Immediate Compensation: The author receives a non-refundable Option Fee from the outset. This is guaranteed income, regardless of whether the film is ever produced.

• Retention of Rights and Fee: If the production company fails to exercise the option by the expiration date, the agreement lapses. The author is then able to retain the entire Option Fee and have the full creative rights to their script revert back to them, allowing them to option or sell the script elsewhere.

• Defined Terms: The Option Agreement typically locks in the full sale terms, including the Purchase Price, upfront. This ensures that if the option is exercised, the author knows exactly what they will be paid and all the surrounding terms of the final sale.

If you are a production company or an author considering an option agreement, it is highly advisable to contact an Entertainment Lawyer for a detailed consultation.