GPSolo March 2007
ENTERTAINMENT AND SPORTS LAW
From Book to Screen
From the earliest days of the film industry, books have been used as the basis for the narrative structure of great films. This article focuses on the agreement between the book author and the producer and the impact of that agreement on the book-to-screen scenario.
The agreement used by producers to acquire motion picture and TV rights from the book author is the option and purchase agreement. It is actually two agreements wrapped into one. The option part of the agreement grants the producer the exclusive right for a period of time to purchase the motion picture rights in the book under the conditions specified in the purchase part of the agreement. Think of it as renting with the option to buy. During this “renting” period the producer develops the film project. Development consists of putting a “package” together consisting of a budget, commitments from actors and technical personnel, and a synopsis or screenplay.
The producer should make sure the option and purchase agreement not only specifies the terms of the option but also the terms for purchase of the film rights. The book and its origin should be described with specificity in the agreement. If the copyright in the book has been registered, the copyright registration number and the country in which the book is registered should be specified. The producer acquiring rights in a book protected by copyright should conduct a copyright search no later than when undertaking the financing of the production and preferably prior to the execution of the option and purchase agreement.
The option and purchase agreement should include a short-form option agreement and a short-form assignment agreement attached as exhibits. It is advisable for the producer to file the short-form option agreement against the copyright registration in the book following the signing of the option and purchase agreement. The short-form assignment agreement should be filed against the copyright registration in the book following the payment of the purchase price.
Certain rights are granted temporarily but exclusively during the option period so that the producer can develop the film or TV project. When the option is exercised, certain rights are granted exclusively and perpetually.
Rights granted to the producer during the option period include the right to do preparatory work during the option period in anticipation of making the motion picture or television program.
Rights granted to the producer when the option is exercised include at a minimum the following exclusive, worldwide, and perpetual rights: (1) the right to make one or more motion pictures or television programs (the “Picture”); (2) the right to distribute, copy, sell, promote, publicize, market, and exploit the Picture in any and all media, now known or hereafter known; (3) the right to change, modify, and rearrange the book while the Picture is created; and (4) the right to use the name and likeness of the author in the promotion and marketing of the Picture.
The author may wish to expressly reserve certain rights. In addition to retaining publishing rights, the author may also want to reserve the rights to write a theatrical play or create a radio program or live television program. The producer may wish to place restrictions on the use of the author’s reserved rights. For example, the producer may wish to restrict the writer from selling rights in the author’s books that are sequels unless the producer has the rights to make the films of those sequels.
Also, the producer may require a “hold-back” period during which the author may not exploit the reserved rights. This prevents productions based on the reserved rights from competing with or trading off the good will created by the producer’s film or TV program.
A film can create commercial opportunity and contribute significantly to the commercial value of works created based on the writer’s reserved rights. For example, there may be no interest in a play based on the author’s book until a commercially successful film is released. In those circumstances, the producer may be justified in taking a share of the revenues from the author’s exploitation of the play.
Another alternative is to grant the producer the right to enter into an agreement with the author later, should the author wish to exploit the reserved rights. Several mechanisms can be used to protect the producer’s interests in this regard, including requiring the author to come to the producer first before negotiating with others (right of first negotiation) or giving the producer the right to match any third-party offer (right of first/last refusal).
There are two terms in the agreement: the term of the option(s) and the term of the agreement if the rights are purchased. The initial option period usually lasts for six to 18 months but can be longer in some cases. Agreements commonly include second and sometimes even third options to extend the duration of the option period. Extensions are customarily exercised by the producer, giving the author written notice and an additional payment.
The agreement grants exclusive rights to the producer during the option period, in particular, the exclusive right to purchase the motion picture and television rights. Likewise, the rights purchased by the producer are exclusive and worldwide and perpetual, especially in the case of theatrical films.
The contract provisions specifying when, how, and how much the author is paid for the rights vary greatly and are limited only by the imagination and the bargaining power of the parties.
The amount of the option payment depends on a number of factors, including, for example, whether there is competition and whether an agent is involved. The size of the option payment also can be affected by the length of the option period—a longer option may require larger payments.
The initial option payment is paid when the agreement is signed. Option payments are either applicable against the purchase price (that is, they reduce it) or inapplicable against the purchase price (they do not reduce it). By custom, the first option payment is applicable and the second option payment (often larger) is inapplicable.
The purchase price, generally paid prior to or upon commencement of principal photography, can be formulated in many ways. The simplest formulation is to set a fixed price. However, it is common to determine the purchase price as a percentage of the film’s production budget.
The publisher’s consent is an agreement signed by the book publishing company that has the publishing rights to the book. The publisher’s consent is attached to the option and purchase agreement as an exhibit. It acknowledges that the publisher approves of the grant of the following rights to the producer: film and TV rights and ancillary and subsidiary rights and the publication of a limited portion of the book for advertising and publicity purposes. In many cases the author has retained all such rights and the publisher’s release is merely a quitclaim. The publisher’s consent is required by the errors and omissions insurance carrier. It is important for the producer to get the publisher’s consent signed when the option and purchase agreement is signed, or it could be expensive later.
The option and purchase agreement is the root agreement from which all rights flow. It is one of the most common agreements in the industry, and yet its terms vary greatly from deal to deal. Getting it right—getting an agreement that serves all parties and the resulting production—requires knowledge of the industry, careful analysis of the many factors affecting the deal, and an artful balance of the parties’ bargaining power.
If a film creates new opportunities for the author to exploit the work, the producer may be justified in sharing the revenues.
FOR MORE INFORMATION ABOUT THE FORUM ON THE ENTERTAINMENT AND SPORTS INDUSTRIES
This article is an abridged and edited version of one that originally appeared on page 1 of Entertainment and Sports Lawyer, Spring 2006 (24:1). For more information or to obtain a copy of the periodical in which the full article appears, please call the ABA Service Center at 800/285-2221.
Periodicals: Entertainment and Sports Lawyer, a quarterly newsletter.
CLE and Other Educational Programs: The Impact of Digitalization and New Media Technology and the Collective Bargaining Agreement, February 27, 2007, Los Angeles, California; Immigration Law for the Entertainment Lawyer, April 25, 2007, New York, New York; Entertainment Law 202, May 2007, Chicago, Illinois; Entertainment Law Ethics—Everyday Scenarios, June 19, 2007, Chicago, Illinois; “The Whole World is Watching!” Privacy, Copyright and Parental Control in the Age of YouTube, MySpace and Beyond, August 9, 2007, San Francisco, California; Forum Annual Meeting, October 11-13, 2007, New York, New York.
Daniel M. Satorius is a shareholder with the firm of Lommen Abdo, P.A. He can be reached at firstname.lastname@example.org.