SHOPPING AGREEMENTS VS OPTIONS

If producers are seeking to produce a project that is based on a script owned by another party, unless the producers plan on financing the project themselves, they will need to secure the right to go out & seek financing, attachments, etc. To secure this right, producers will need to enter into either a shopping agreement or an option purchase agreement with the owner of the script.

There are similarities between shopping & option purchase agreements but also important distinctions. One of the main similarities is that both agreements typically give the producers exclusive rights. The option purchase agreement gives the producers the exclusive right to purchase the script for a period of time known as the option period. The writer cannot sell the script to any other party during that period. If the producer pays the agreed purchase price during the option period, then the script is sold to the producer along with all of the rights conferred by the agreement. During the option period, producers can package the script with other elements, such as talent attachments, to obtain financing before exercising the option.

The producer pays an option fee to secure this exclusive right to purchase the script for an agreed price. Unless the writer is in the WGA, the amount of that fee is completely subject to negotiation. If the writer is in the WGA, the amount of the option fee must be at least 10% of the purchase price. Option periods usually are from as little as 12 months to as much as 18 months, with some agreements providing multiple extensions of the option period for additional option fees.

For the writer, an option fee can be appealing because they are getting a fee for their script being frozen while the producer has the exclusive right to purchase it for an amount set forth in the agreement.



Many producers will prefer a shopping agreement because it allows them to present the material without making a financial commitment upfront as there is no fee paid. For a writer, this can be an issue if the shopping agreement gives the producer the exclusive right to shop the project, as this means that in exchange for no money, the writer cannot do anything with their script during the term of the shopping agreement. Since the producer pays no money, shopping agreements tend to have shorter terms than option purchase agreements, usually less than one year, with a provision that the term will be automatically extended if the project is set up with a network or studio.

A shopping agreement typically provides that the producer can bring the material to potential studios, networks, streamers, & other third-party buyers. If there is interest, the writer & producer will each negotiate their own deal. This arrangement has both benefits & potential pitfalls for each party. The most obvious & common pitfall is regarding the parties negotiating their deals. Though shopping agreements typically contain language of how the parties will negotiate in good faith & are consistent with industry standards, customs, & practices, these parameters are very broad & vague. One party may feel that they are negotiating in good faith & consistent with industry standards, while the other party may feel they are not. If either party is unreasonable in their demands when negotiating their deal, the other party cannot proceed without them. If the writer is engaging in this behavior, the producer has wasted time & effort on a deal that was never going to happen.

With an option purchase agreement, the producer has much more control over the project. The producer typically has the right to exercise the option at any time during the option period. The terms for the sale of the script have already been agreed upon, so the writer has very little leverage & cannot prevent the project from moving forward as long as the producer abides by the terms of the option purchase agreement.

Shopping agreements are also sometimes referred to as producer attachment agreements. The producer is helping prepare the project to be presented & may also attach other elements such as a name actor or director that will make the project more appealing to studios, networks, or other third-party buyers.

Whether an option purchase agreement or a shopping agreement is the best option for producers depends on several factors, so producers must be aware of the pros & cons of shopping agreements & options.