LITERARY OPTION PURCHASE AGREEMENTS
A Literary Option Purchase Agreement is an agreement between a Producer (or studio; network; production company; other financing entity) and a Writer (examples: screenwriter; television writer; playwright; author) in which the Producer options certain rights in the Writer’s literary property (examples: spec screenplay; television script; play; book; magazine article; etc.) for a specific amount of time (example: one year) and for a specific fee and during that year has the right to try to arrange financing (or sell the literary property to another entity (examples): studio; television network; other financing entity) to produce a movie, television program, etc. If the Producer does arrange financing or arrange for the sale of the literary property, then the Producer will “exercise the option” and purchase the literary property from the Writer for the purchase price which is part of the Literary Option Purchase Agreement.
If you are a Producer who seeks to option the rights to a literary property with a Literary Option Purchase Agreement or if you are a Writer who is presented with a Literary Option Purchase Agreement, it is crucial that you are represented by an experienced entertainment attorney.
If you are the Writer, be aware that the purchase price that is stated in your Literary Option Purchase Agreement is the price you will receive for the purchase of your literary property even if the Producer can sell it to another entity for a higher price.
For example, a Producer options a spec screenplay for $1,000.00 for one year, and in the Literary Option Purchase Agreement, the purchase price of the spec screenplay is stated as $100,000.00. During the option period, the producer can exercise the option and purchase the spec screenplay for that price. But what happens when a studio comes along and tells the producer that they want to purchase the spec screenplay and the producer negotiates a deal for $1,000,000.00 as the purchase price.
Does the Writer, who wrote the spec screenplay, get $1,000,000.00? The answer is no. The Producer purchases the spec screenplay from the Writer for the purchase price that’s stated in the Literary Option Pruchase Agreement, which is $100,000.00 and then sells it to the studio for $1,000,000.00, for a profit of $900,000.00. The information in this article does not constitute nor is it intended to constitute legal advice.
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