Man holds colored shopping bags to illustrate "shopping agreement"

Shopping Agreements

Option or Shopping Agreement – What’s the difference?

*Disclaimer: This is not legal advice! Consult a reputable entertainment attorney who specializes in writer agreements before signing any legal contract that concerns your intellectual property.

If you’re an intermediate screenwriter, one of your goals is to ‘option’ your spec script, if you can’t sell it outright immediately. But are you familiar with the Shopping Agreement?

This is a type of legal contract for intellectual properties (IPs), particularly for screenplays, but also for novels. SAs are much more common in these financial times than options. A shopping agreement entails an agent or a producer or publisher with high interest in testing the financial waters with your script or novel. But without sufficient funds to commit to a full-on option or purchase.

Unlike option contracts, shopping agreements do not include rights or final purchase price agreements. In essence, the writer gives permission to a producer to “shop the script around,” in order to determine if there’s enough interest to leverage the necessary financing.

Show me the money

There’s usually a symbolic $1 fee to seal the deal, but as one experienced LA screenwriter tells me, “Most of the time, you don’t even get the dollar.”

Shopping agreements can ultimately turn into outright sales, assuming the property is hot enough to generate some buzz and financing promise. And -most importantly to the screenwriter- the owner retains the rights to their IP. They can therefore be directly part of any negotiations, should an interested buyer turn up in the process.

Shopping agreements have become more than just popular in recent years. They’re now the norm. I’ve interviewed a couple of people on the subject and found some differences of opinion.

From the writer’s perspective, one repped/working screenwriter told me it’s better to negotiate as short a contract term as possible. His feeling was that most producers will do the hard work in the early days of the agreement, then move on to new things if interest in the script isn’t immediate.

If true, this would leave the writer’s IP stuck in the legal doldrums, where nothing is happening with their script, but they’re unable to do anything with it themselves either.

Which is better?

Lawyers and producers prefer shopping agreements to run between 9 and 18 months, according to entertainment attorneys at Romanow Law. The time period differs from options, which can run for 18 to 36 months and then renew for another three years.

It doesn’t take much digging into the subject to figure out that intermediate screenwriters need to thoroughly understand the difference between these types of agreements.

A few years ago, optioning your script was a huge deal, and it’s still a thrill, for sure. But it’s also true that options only rarely lead to produced films. There are stories by the barrow about optioned screenplays that never made it to production. And others about certain eccentric producer/directors who own hundreds of script options set to auto-renew. But will likely never get around to producing them.

A colleague from my old writers’ group was thrilled to option one of her scripts for $5000. It’s definitely an exciting moment to option your film to a producer. Especially when it’s to someone who is equally excited to drum up the dollars required to fully develop and produce it.

But anything can happen. And once your screenplay is optioned, it’s in no man’s land to the writer, inaccessible until the option runs out.

In the case of my friend, the producer had engaged an A-list lead actor and even some hype in the trades. Then all of a sudden, for no apparent reason, the previously gung-ho producer stepped back from further development. Turned out, he was in the middle of a divorce and decided to deliberately let the option run its course so it would have no value to his ex.

For both shopping agreements and options, the writer’s hands are tied. It’s a funny world, this business of intellectual property.

The Option Agreement

In attempting to conjure an analogy, I came up with this:

Imagine you build cars. You create a fabulous prototype that attracts raving attention at the car shows. Someone wants to use the car to test it. So, like a lease agreement, the potential buyer pays you for the use of your one-of-a-kind vehicle. He’ll use it as if it were his for a mutually agreed trial period.

And like a lease, they can opt to purchase it after the agreement runs its course. But in this case, if he decides he wants to keep it, he’ll pay a pre-agreed sum to purchase the car outright. At least once he’s confirmed that his family and friends approve. Or, just like a car lease, at the end of the appraisal phase, he can simply give it back. And lease another unique car from another manufacturer.

That would describe an option, something few producers are purchasing these days and fewer still from unknown writers.

The Shopping Agreement

You’re the same manufacturer of a prototype vehicle. A potential buyer approaches you and wants to take a test drive. A long test drive during which time no-one else can drive it, not even you. But after the time term of the agreement has passed, the car comes back to you. Possibly along with a friend, who is also interested in purchasing it.

Both during and after the test drive, you retain all your rights of ownership to the vehicle. If the guy who first took it shows it to someone else who is even more interested than he is, you can negotiate directly with the new guy.

Still want to know which is better?

Option agreements might seem better for the writer at first blush. This is because a.) the producer is willing to pay hard cash for the exclusive rights to your film. And b.) they contain a pre-negotiated, built-in agreed dollar amount for the full purchase price at the end of the option period. That is if the producer decides to “exercise the option.”

But it also means that you’ve ‘rented’ your rights during the option period. You don’t own the IP during the option agreement, so you can’t pitch it, enter it into contests, or even talk about it.

The shopping agreement might not earn any cold hard cash, but there are definite advantages to both the writer and the producer or agent.

Either way, if you get to the stage where you’re offered an option or a shopping agreement, I hope you have a specialized entertainment attorney on speed dial. Don’t try to save money by running it through your Uncle Cliff who practices tax law. You’ll want to make sure you’re dealing with a bona fide producer, not just someone who’s hanging a shingle. And that the agreement clearly defines your rights as the writer and their full return at the end of the term. Good luck and hope to see your work on the screen soon!

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