Option Agreement

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Imagine there is one autographed baseball card at a shop that you really want, but you are not sure yet whether you can afford it or even truly want it. So you give the shop owner a few dollars, and in return the owner promises to hold that card just for you for one month and not sell it to anybody else. You also agree, right now, on the full price you would pay if you decide to buy it. If you come back within the month and pay that price, the card is yours. If the month runs out and you have not bought it, the owner keeps your few dollars and is free to sell the card to someone else.

That small payment to hold something is called an option, and in the movie world an option agreement works almost exactly the same way.

What is an option agreement?

An option agreement is a deal where a producer pays an author a fee to "hold" the movie rights to their story, such as a book, an article, a play, or a screenplay, for a set amount of time. During that time, the author cannot sell those rights to anyone else. The producer and author also agree, right at the start, on the full price the producer would pay later if they go ahead and make the film.

The clever part is that the producer does not have to make the movie. Buying an option gives them the right to buy the rights later, but not a promise that they will. That is why it is called an "option": it is a choice they get to make.

Why do producers use options?

Making a movie is wildly expensive and can take years just to set up. A producer often is not ready to pay full price for a story, because they still have to write a good script, convince a director and actors to join, and find people willing to pay for the whole thing. Any of those steps might fall apart.

An option lets the producer lock up the story cheaply while they try to line everything up. The fee to hold the rights is usually much smaller than the full purchase price. If the producer manages to put all the pieces together, they can buy the rights for the price they already agreed on. If it does not work out, they have only spent the smaller holding fee instead of a fortune.

What is inside one?

An option agreement usually spells out a few key things:

• The option fee, which is the money paid now to hold the rights.
• The option period, which is how long the hold lasts, often a year or two. It can sometimes be renewed by paying again.
• The purchase price, which is the larger amount the producer would pay later to actually buy the rights, agreed on up front so there are no surprises.
• Exactly which rights are covered, for example the right to make a movie, a TV show, or both.

What happens when the time is up?

There are two ways an option can end:

1. The producer "exercises" the option. This means they decide to go ahead, pay the agreed purchase price, and the movie rights become theirs. Now they can make the film.
2. The option expires. If the producer does not buy the rights before time runs out, the rights simply go back to the author, who keeps the option fee they were already paid. The author is then free to option the story to a different producer.

Because an option or purchase agreement is often the very first permission a film collects, it is usually one of the earliest links in the movie's Chain of Title, the trail of documents proving who owns the film.

Fun facts

• Most stories that get optioned never actually become movies. The option quietly expires, and the world never sees the film that might have been.
• An option fee can be almost anything. Between friends it might be a single dollar, just to make the deal official, while a story that many studios are fighting over can cost a lot to lock up.
• A popular book can be optioned over and over across the years, by one producer after another, until someone finally manages to turn it into a film. If a story is old enough to be in the Public Domain, though, no option is needed at all, because nobody owns it anymore.