Many Hollywood writers write screenplays speculatively or “on spec” meaning they write it before selling it. This can be a great way to get noticed and make a lot of money if you write a good one. But you have to know how to sell it or else you could lose your screenplay to a savvy producer who could take advantage of your inexperience in the industry to offer you less than you deserve. 

 The first step is getting noticed. Once you have someone interested in your screenplay, congratulations! Just finishing a screenplay is a huge accomplishment and it’s even bigger if you find someone else who likes it. 

Be prepared, they likely will not offer to buy your screenplay outright. An outright purchase is extremely rare in the film industry. Instead, they’ll probably offer you an Option Agreement. 

The Difference Between an Option Agreement and a Purchase Agreement

Think of your screenplay as a house that you want to sell. With a Purchase Agreement, you sell your screenplay outright to the producer. You are usually paid a flat fee and the sale is completed. Like selling a house, you have a contract, money is exchanged, and you turn over the keys. 

But with an Option Agreement, you are not selling the screenplay (house) outright. Instead, you are giving the producer the “option” to buy the house in the future if they want to. They will usually offer you an amount up front (often a small amount) in order to get this “option” to buy the screenplay in the future. 

 You can negotiate how long the option period lasts for. It’s typically between 1.5-3 years. During the option period, the producer can try to develop and package the project. If they are successful, they may want to purchase the screenplay from you outright. 

 If they are unsuccessful, then the option expires and the screenplay is yours to sell to someone else. 

 Important Points for Option Agreements:

• During the term of the option you CANNOT sell the screenplay to someone else. The producer who paid you for the “option” has the exclusive right to purchase your screenplay during the option period;
• The amount you receive for the option may be the only money that you ever get. If the producer is offering you a very small amount or nothing for the option (some offer $1 or zero) ask yourself if it is worth tying up your screenplay for the option period for that amount.
• Consider the experience and reputation of the producer. Ideally you want to do an Option Agreement with a producer who actually has a chance of getting your screenplay produced and will purchase your screenplay down the road.
• The Option Agreement gives all of your rights in the screenplay to the producer. If you want to use your screenplay for any other purpose (i.e. to write a book, do a play, enter contests) you need to make sure that the Option Agreement keeps those rights for yourself.   

Protect Yourself

An Option Agreement is a legally binding contract and it significantly impacts your rights involving your screenplay. Be very careful entering into any legal contracts, particularly those where you are giving away your rights. Ideally, you’d have an experienced entertainment lawyer help you with negotiating the Option Agreement. An experienced attorney will know industry standards and be able to advise you on the pros and cons of an Option Agreement for your particular situation. 

Can’t hire an attorney?  Download my free Checklist for Negotiating Option Agreements with helpful tips and pointers on Option Agreement negotiations. It’s like having a lawyer in your pocket.