Option and shopping contracts are two similar agreements where a creator, such as an author, playwright or screenwriter, contract with a producer to make their work into a film, TV show or series. An option agreement grants the right to buy or sell your creative work at a later time while a shopping agreement recruits someone to find and negotiate a deal on your behalf.
A shopping agreement is a contract between a creator and a producer. In this case, the producer is given the right to shop the creator’s work to studios, networks, and distributors. They are allowed to pitch the work and find backers for a set period of time. The producer doesn’t pay the creator unless they succeed in finding a buyer. The creator has more control over the negotiation process because they can directly negotiate with potential buyers if the producer finds one. If the project is not successful, the producer doesn’t receive any compensation for their efforts.
An option agreement grants more exclusive rights to the producer, relieving them of any worry that competing projects on the same rights are occurring. In this agreement, the producer pays a fee to the creator for this right, and they have the option, but not the obligation, to proceed with purchasing the rights. This means the producer can decide whether to make the project or not. This route can be both more flexible and advantageous to producers due to the option to proceed or not.
SHOPPING AGREEMENT DETAILS:
The parties to a shopping agreement do not pay or receive compensation unless the producer succeeds. This type of contract is beneficial to producers because they can attach themselves to a project without risking any money. If investors in the project (backers) are found, the producer can negotiate their own deal with those who want to produce the project (the buyer). On the other hand, if a buyer is found first, the creator of the work can directly negotiate with that buyer to get the best possible deal for themselves. However, where a project is not successful, the producer receives no compensation for the time and effort exerted.
Generally, shopping agreements last for 9-18 months. Exclusive contracts tend to be shorter than nonexclusive ones. In addition, there is usually a clause that allows for extension of the term if the parties are negotiating with a buyer when the agreement expires.
The producer in a shopping agreement has no ownership rights in the source material. This can allow the owner to have a great deal of control over whether the producer can move forward with a particular buyer and the terms of the deal with the buyer, as compared to an option agreement.
OPTION AGREEMENT DETAILS:
In an option agreement, the producer is required to pay an option fee to the owner. In addition, the agreement will state an execution or purchase price for the rights to the project. Owners are paid for each option and renewal, with renewals generally pricing higher than the initial option fee.
Owners receive some compensation for agreeing not to sell the project to anyone else. If the producer doesn’t exercise the option by paying the purchase price, no ownership interest is transferred, and the owner keeps the option fee.
The term of an option agreement is longer than a shopping agreement, typically 18 to 36 months. Options can be renewed and/or automatically extended. The option agreement should indicate both when the owner can terminate and when rights revert back to the owner. Rights typically revert to the owner if the producer does not purchase the work or produce the project within a certain period of time.
Producers have an exclusive option to purchase the rights to the work and can usually sell to any buyer. This means the owner has less control over the sale, but the producer is incentivized to get the best deal. If the option is not exercised, the owner maintains the rights to the underlying work.
WHICH AGREEMENT IS RIGHT FOR YOU?
Shopping agreements usually require less investment as compared to option agreements. Option agreements, however, tend to provide more security to both sides than a shopping agreement because of the producer’s monetized incentive to pitch the project.
Deciding which route is best for your work may depend on the specific needs, priorities, and type of work in question. The key consideration of any agreement involves weighing the advantages and disadvantages. Depending on the role of the party—producer or writer—these differ between shopping and option agreements. Which type of agreement is best for you should be determined in consultation with an experienced attorney.
Contributions made by Ruby Moscone