Basic Moves for Movie and TV Deals

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January 2014
by Kay Murray and Tad Crawford
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Kay Murray, formerly general counsel and assistant director of the Authors Guild, is assistant general counsel at Tribune Publishing. Tad Crawford, the founder and publisher of Allworth Press, is an attorney and the author of several books, including Business and Legal Forms for Authors and Self-Publishers and a novel, The Floating Life. This article is derived from their new edition of The Writer’s Legal Guide. To learn more: allworth.com.


ReelNo matter how thrilling it seems to have a film or television producer express interest in your book, you need to bear in mind that movie and TV deals are highly complex, with plenty of pitfalls. If you are contemplating any such deal, you cannot do without retaining an agent or attorney who specializes in the field.

Still, it is always helpful to have at least a general understanding of any deal you might make. What follows can serve as a starting point for understanding the basic terms and structure of transactions about movie and TV rights. Before you do anything else, make sure the relevant rights belong to you.

The Two-Part Process

Producers in the film and television industries must draw many financial and creative elements together to create a final product. Their development phase includes optioning the rights to buy a particular book, script, or treatment. An option gives a producer the exclusive right to shop and develop the work to determine whether there is sufficient financial and creative interest before deciding whether to purchase the work outright.

If you are offered an option, you will, in effect, need to negotiate at least two contracts at the same time: one or more for the length of the option period and any extensions, and another for the purchase of the work if the buyer exercises the option.

In other words, the process of turning your story into a motion picture or television program involves: (1) the option, which puts your rights on hold and guarantees the optioning party the right to purchase the rights in the future; and (2) the related purchase agreement, through which the rights to the work are actually transferred. And the optioning party usually presents the two contracts in tandem.

Option and purchase agreements for film and television productions generally include the following terms:

Grant of Rights

Be aware of the potential scope of what might appear a simple grant of rights. The words “all allied” or “ancillary” rights, for example, can be interpreted to include just about anything—not just the right to make a film based on your work, but the right to make sequels, television movies and series, the right to publish a special “movie version” of your book, even merchandising and advertising rights. The seemingly narrower phrase “motion picture and television rights” is in reality similarly broad.

Most option buyers will try to get all rights for one price, but sellers with leverage and good representation can retain some rights and negotiate additional royalties for them. For example, you should seek to retain the rights to print and online textual publication, novelizations, author-written sequels, audio rights, live TV and radio rights, and dramatic stage rights.

For any rights you reserve, the option purchaser might request a “hold back,” which entails your agreement not to exploit any of your reserved rights for a specified period of years after the film release date. The purchaser might also require that you refrain from writing more than one sequel to the story in a particular time period.

In addition to understanding and limiting the scope of your grant, you should explicitly reserve all rights not granted. Also, be aware that granting any of these broad rights can conflict with rights you might already have granted; again, you should have professional help in negotiating these agreements.

Granting film or television rights will necessitate giving up creative control over the final product. If you are also agreeing to write the screenplay, you might have a bit more control, but only the most powerful players in a film—the director or a major star—will have final approval over the product. The best you can hope to achieve is the right to remove your name from the billing credits, and possibly, if the film is based on your memoir or a biography, the right to require a change in the film’s title, or a change in the main characters’ names.

Term

The length of an option may vary considerably and is subject to negotiation. Many options range from six to eighteen months, with or without specified renewal terms. To make sure there is no confusion over the exact end date, provide expressly that “the term shall expire at midnight, on [X date] or [X] calendar months after the date of execution of this agreement.”

Option terms can be, and frequently are, extended or renewed automatically. Under an automatic renewal, all the purchaser has to do to extend or renew an option is give you notice and the specified payment. If the optioning party has made enough progress in development to want to continue to keep your story on hold, the rights must have grown in value, so the fee for the second term should be higher than the original amount.

It is generally better not to lock yourself into more than one automatic renewal, and to make renewal periods successively shorter. It is also a good idea to provide that renewal of the option is contingent on the demonstration of specific steps actually taken toward exercising the option—for example, having secured financing and/or the participation of a director, screenwriter, or actors.

Price

Working closely with an experienced agent or lawyer, you may be able to negotiate a combination of initial option price, renewal price(s), purchase price, bonuses, and a percentage of something real. More likely, the option price is all you will earn, since the odds are that the option will never be exercised. It pays to negotiate accordingly.

Prices vary according to a number of common-sense factors: your reputation, bargaining power, and the scope of the rights you are granting.

On average, the option fee for the standard term of one year probably falls somewhere around $10,000 (closer to $50,000 for authors with powerful representation). But the range goes from almost nothing to hundreds of thousands of dollars. A good ballpark figure is approximately 10 percent of the full purchase price.

Much like an advance against future book royalties, the initial option payment is usually applied against the purchase price if the buyer exercises the option. However, extension or renewal fees are commonly not credited against the purchase price.

A producer may purchase an option, and several renewals, with no intention of exercising the option, perhaps to keep a story from hampering a project already in development, so be careful about the ultimate length of time your rights will be tied up. The option should state that the agreement will terminate automatically and all rights will revert to you (with all option money retained by you) if the purchaser fails to exercise the option during a specified time period, including renewals.

Since your purchaser is sure to insist on settling both the option and the purchase price up front, you should try to get a sense of the true value of the rights at the option stage. Interview the optioning party at length and research the entities and individuals mentioned as possible participants in development.

If you sense that the planned production might have a big budget, you might push for a percentage of the budget (3.5 percent is considered favorable) with a fixed floor and ceiling in lieu of a fixed purchase price.

You do not want a share of a film’s “net profits.” Given the movie industry’s fantastic method of calculating, “net” profits will always be less than zero. Sellers with clout can try—as a film’s producer, director, and stars will—to negotiate for a percentage of the gross profits (ideally 5 percent; more likely, 2 or 3 percent). If that is out of reach, you can try asking for a percentage of “adjusted gross.”

Warranties and Representations

Like standard publishing contracts, film and television contracts require rights sellers to promise that their work does not infringe copyright, defame anyone, or invade anyone’s privacy. The same general principles apply here as with book contracts: try to qualify your promises realistically and to limit the amount of your financial responsibility if someone sues.

A Cautionary Note

In any dealings with prospective buyers from the movie and television industries, remember that an option need not be formal to be binding. A letter or a simple memo memorializing a deal (often called a “deal memo”) can be just as binding as a “short-form” option contract.

Negotiate any understanding, regardless of its length or informality, with care and with professional help, even if you agree that entry into a more formal contract will come later.

Recommended Reading

Dealmaking in the Film and Television Industry by Mark Litvak (3rd edition, 2009) and Hollywood Dealmaking: Negotiating Talent Agreements by Dina Appleton and Daniel Yankelevits (2010) are two excellent books that explain the components of movie and TV deals in detail.

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