Is it "standard procedure" for a Producer to buy screenplay rights?

Futchibon

Futchibon

Well-known member
Hi,
A friend of mine is a writer, and he's written a screenplay which an established producer has expressed interest in. The producer wants to buy the script rights for a "nominal amount" and then represent it to obtain funding. He says that is "standard procedure".

Any advice? My friend also wants to direct, but has limited directorial experience, and was perhaps wanting to wait another 6 months or so when he's completed a couple of short films.

Does anyone have any experience in matters like these?

Any help would be greatly appreciated.

THANK YOU.
 
Well, no producer who has a clue what he's doing, would proceed with a screenplay he didn't control the rights to. That'd just be foolishness. Of course the producer has to have the rights to the screenplay.

But outright buying of all rights for a nominal amount? That's where you have to raise the question. If the writer has no experience and hasn't sold anything before, then the screenplay may only be worth a nominal amount to the producer. But I guarantee you that Aaron Sorkin doesn't sell the rights to his scripts for a "nominal amount" -- he sells the rights to his scripts for millions of dollars. A professional writer who's earned his way into (and paid his way into) the Writer's Guild of America, should be guaranteed at least guild minimum for his screenplay, which is about $40k. A total newbie who's never sold a script before might get $100 and be happy to get it.

So if the question is one of relative worth, then you would have to figure out what the worth of the script is. If nobody else in the world is bidding on it, then the producer's offer of a nominal amount would be an accurate valuation of what its real worth is. Worth is determined by what a willing buyer will pay for it, and if he's the only willing buyer, then that's all it's worth.

So now it's up to your friend to decide what it's worth to him. There's no rule that says he has to sell it for a nominal amount, he can keep it and proudly display it on his bookshelf, or he can try to sell it to others and see if anyone else will bite. Or he can go take it to a literary agent and say "such-and-such producer has made an offer on this screenplay, but I don't know enough about the business to know if it's a good offer -- would you like to represent me in the transaction?" Of course, involving an agent may just kill the producer's interest entirely, at which point your friend loses any opportunity. And, to further extend the discussion, it may turn out that if the producer had so little interest in the screenplay that the involvement of an agent kills the deal, then ... it probably wasn't going to go very far anyway.

But - okay - back to the original question. Is it "standard procedure" (at least in the US) for a producer to buy a screenplay outright for a nominal amount? No. But it is standard procedure for a producer to OPTION the screenplay rights for a (typically) nominal amount. The producer pays the screenwriter an option fee, which gives the producer a set amount of time (whatever you agree upon, but usually a year) wherein the producer controls the rights of the screenplay and has the exclusive right to develop the screenplay. While the producer holds that option (meaning, until the time period expires) your writer can't go make another deal for that screenplay or sell it out from under the producer. The producer has the exclusive option to buy that screenplay from your friend, at a predetermined price. So let's say the producer wants to go raise a million bucks to make the film. And you and your friend decide that the screenplay sale price will be $50,000. You may decide to negotiate that he will pay you $1,000 now for the option to purchase the screenplay for an additional payment of $49,000 any time during the next 12 months. If he raises the money, he pays the purchase fee, owns the screenplay free and clear, and goes and makes the movie. If he fails to raise the money and the full 12 months elapse, then the option expires, your friend keeps the $1,000 option fee, and is now free to go sell it to someone else (or option it to someone and start the process all over again).
 
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Thanks a lot for your response Barry. I was wondering if you could elaborate what "having the rights" means exactly? Would the producer then be able to change the script at will and hire another director, despite telling my friend he is happy for him to direct? Is it possible to "share rights" so to speak? The producer has mentioned setting something up so that my friend is a co-producer with him, so that if it does make money, he will get a share, but I wouldn't imagine he would pay more than a few thousand dollars for the rights.

To give you more of a background, the producer is actually a teacher at the film school my friend has started going to. About 10 years ago he produced a 100K short on 35mm, and has since worked at numerous museums and art galleries in Australia, producing films for them, some ranging in the hundreds of thousands of dollars. So he seems like a great contact to make and wants to make the leap into features. He thinks he could make the film for about 250K, which he believes could be raised via several government funding bodies here in Oz. It's an arthouse styled film, sort of a cross between ADAPTATION, LOST IN TRANSLATION and PI. I'm a DP and have free access to a Red One to shoot it with.

I guess my friend is concerned that the script and film might be taken out of his control, since he has little experience in the legal/producing side of filmmaking.

Any advice would be greatly appreciated.
Thanks.
 
If it's not in writing, it doesn't exist. Get any promises the producer makes incorporated into the agreement.
 
Futchibon said:
Thanks a lot for your response Barry. I was wondering if you could elaborate what "having the rights" means exactly? Would the producer then be able to change the script at will and hire another director, despite telling my friend he is happy for him to direct? Is it possible to "share rights" so to speak? The producer has mentioned setting something up so that my friend is a co-producer with him, so that if it does make money, he will get a share, but I wouldn't imagine he would pay more than a few thousand dollars for the rights.
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It's all spelled out in the option/purchase agreement. Anything that they both agree to, you put it in the agreement. The option agreement says that the producer has the right to buy the script within a specified time period, for a specified amount of money, part of which is the option fee and the rest of which is the purchase amount. Any royalties or anything else would be spelled out in the agreement from the beginning.

And yes, when a producer buys a script, it's his script and he can change anything he wants to about it. If the writer doesn't want their script changed, then they shouldn't sell it, period. They should raise the money themselves to make it their way, if that's what they want to do. When someone buys it, it becomes their property - period.

I guess my friend is concerned that the script and film might be taken out of his control, since he has little experience in the legal/producing side of filmmaking.
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Of course it would be taken out of his control. That's the whole point of why he gets money. You can have one, or the other, but not both.
 
Thanks very much. Greatly appreciated.

Are there any websites you'd recommend for further information?
 
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Check the Done Deal forums, you might also find some agreements to see what some clauses you might come across might be.
 
An option contract will typically have:

  • Rights granted and reserved
  • Right to make changes (shooting script/film doesn’t need to stick to manuscript)
  • Duration and extent of rights (can be a set time, or in perpetuity)
  • Consideration (how much for the option – could be $1 AND how much if it gets produced)
  • Representations and warranties (by author to producer, regarding author’s ownership)
  • Indemnification (typically by both parties to cover each other)
  • Right to protect the asset (right of producer to sue on behalf of author, naming author as a plaintiff or defendant if needed)
  • Copyright issues
  • Credits (as in those things that appear on the screen…. Normal practice is to follow the WGA Minimum Basic Agreement)
  • Rights of first negotiation and last refusal
  • No obligation to produce
  • Assignment of rights (Producer may transfer his option rights to someone else)
  • Confidentiality
  • And a bunch of standard contract language about notices, remedies, waivers, severability, governing law, merger….
Where are you located? US or somewhere else? And where is the producer located?
 
We're all located in Australia.

So could you set up a contract whereby the writer and producer could have equal control?
 
Barry_Green said:
But it is standard procedure for a producer to OPTION the screenplay rights for a (typically) nominal amount. The producer pays the screenwriter an option fee, which gives the producer a set amount of time (whatever you agree upon, but usually a year) wherein the producer controls the rights of the screenplay and has the exclusive right to develop the screenplay. While the producer holds that option (meaning, until the time period expires) your writer can't go make another deal for that screenplay or sell it out from under the producer. The producer has the exclusive option to buy that screenplay from your friend, at a predetermined price. So let's say the producer wants to go raise a million bucks to make the film. And you and your friend decide that the screenplay sale price will be $50,000. You may decide to negotiate that he will pay you $1,000 now for the option to purchase the screenplay for an additional payment of $49,000 any time during the next 12 months. If he raises the money, he pays the purchase fee, owns the screenplay free and clear, and goes and makes the movie. If he fails to raise the money and the full 12 months elapse, then the option expires, your friend keeps the $1,000 option fee, and is now free to go sell it to someone else (or option it to someone and start the process all over again).
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What happens with chain of title? ie., wouldn't the producer still own the rights to any derivative work (eg. changed draft) even after the option has lapsed? I've never really understand how COT works...
 
Futchibon said:
We're all located in Australia.

So could you set up a contract whereby the writer and producer could have equal control?
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You could, but I can't imagine any producer ever doing that. Makes everything much more difficult to do, especially financing.
 
dvxhutch said:
What happens with chain of title? ie., wouldn't the producer still own the rights to any derivative work (eg. changed draft) even after the option has lapsed? I've never really understand how COT works...
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Forget about an option contract for the moment and consider your question under copyright law. Let's say you love the movie Star Wars so much that you go and write your own version. Who owns the script you wrote? You do. Does Lucas own it? No. So Lucas gets his hands on a copy of your script. He loves it to and decides it's time for a reboot. Can he turn your script into a movie? Not without your permission. Can you turn your script into a movie? Not without his permission. Can you publish your script? Not without his permission.

Copyright in the derivative work belongs to the person who created the derivative work, but only to the extent that the work contains new material. Those things in the new work which are not original are not covered in the derivative copyright; they remain the property of the original copyright holder.

So ownership of derivative works has nothing to do with option contracts, unless of course you want it to. You can certainly agree to transfer ownership of your derivative work to the author if you want. But if you don't exercise your option to produce before the option expires, you won't have the right to do anything with the derivative unless you get permission (through some future negotiation).

As far as option contracts go, what you're essentially buying is an option to buy the rights to make a film, tv movie, tv mini-series, tv show... out of whatever it is you are optioning. The option will last for a specific period of time. This could be for 1 year, 10 years, forever.... You can pay an upfront fee, like $100, or no fee at all. It all depends on how you negotiate the option. Then, if you get to the point that the movie is actually going to get made, you buy the rights to do so at the price agreed at the time of optioning. So the option contract will specify something like, "$50,000 upon commencement of shooting" or "$50,000 upon receipt of 80% of financing" - whatever makes the most sense.
 
dvxhutch said:
What happens with chain of title? ie., wouldn't the producer still own the rights to any derivative work (eg. changed draft) even after the option has lapsed? I've never really understand how COT works...
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If the option expires, the producer has zero rights whatsoever. He never bought the script, so he has no rights. If he made derivative works, he did so at his expense and at his peril. The copyright owner of the original work owns the rights to all derivative works. And when a script is optioned, copyright still vests with the original owner until the point at which the producer executes the option and buys the rights.

An option doesn't give the producer the rights to the script. It gives him "control" of the rights -- but until he executes the option and fulfills the contract, he doesn't own it.
 
How many time do you find quite big names in the writing world fuming over what has been done to their product? It's amazingly common, and for the producer to have control, it's just the way it has to be. I remember reading Ian Flemming wasn't very pleased with what they were doing with James Bond - but he just had to bite his lip!
 
Barry_Green said:
The copyright owner of the original work owns the rights to all derivative works.
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To clarify, so there is no confusion:

The person who created the derivative work owns the rights to the derivative work. (Or to state it more accurately, the author of the derivative work owns all new original content appearing in the derivative, while the owner of the original work retains rights to the original content.) The owner of the original work could not take the derivative work and use it unless they got permission from the owner of the derivative work. The opposite is also true. The owner of the derivative work would need permission from the owner of the original work from which it was derived in order to do something with it.

The option contract is what would have given the permission, but if that has expired then the derivative owner will need to go back and renegotiate the right.

Edit: The one exception, which I have NEVER seen nor heard of being done, is that the option contract could contain a provision transferring ownership of any derivatives to the owner of the original upon expiration or termination of the option. I don't know why anyone would ever do that though....
 
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I don't think that was what Barry meant. I think he just meant that the copyright holder of the original work has sole authority to authorize any derivative work and has a claim if a derivative work is made without permission.
 
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