Adapting books into movies or TV shows has long been a favorite way for production companies to bring captivating stories to life. However, turning a book into a screen-ready masterpiece isn’t as simple as just liking the plot—it starts with securing the rights to adapt the story. This is where option purchase agreements come into play.
If you’ve heard the term tossed around but aren’t quite sure what it means, don’t worry. Whether you’re an author negotiating your first deal or someone simply curious about the process, this guide explains all the ins and outs of option purchase agreements in a way that’s easy to follow.
What Is an Option Purchase Agreement?
An option purchase agreement is a legal contract granting a production company or studio the exclusive rights to evaluate a book for a potential adaptation into an audiovisual format. Think of it as placing a “reservation” on the story for a specific period—commonly referred to as the “option period.” During this time, the company explores how to bring the material to life, which includes developing scripts, hiring talent, and pitching the project to financiers or distributors.
If they decide to proceed, they can then purchase the full adaptation rights, putting the wheels of production into motion. If they don’t, the rights revert back to the author, allowing them to explore other opportunities.
Why Are Option Agreements Important?
For production companies, an option agreement provides time to test the waters without committing to a full purchase. From the author’s perspective, it secures a financial return while leaving room for additional opportunities down the line. It’s a win-win situation—but only if the terms are well-negotiated.
Key Components of an Option Purchase Agreement
1. The Option Period
The option period is the heart of the agreement. It outlines how long the production company has to evaluate and develop the book before deciding whether to purchase the full film or TV rights.
Initial Period
This typically lasts 12-24 months, giving the company exclusive control over the story during that time. For example, during these months, they might conduct feasibility research, draft screenplays, hire a director, or even attach actors to the project.
Extensions
Development can be a slower process than anyone anticipates. This is why many agreements include an option to extend the evaluation period. Extensions are typically for another 12-24 months.
2. Option Fees
Option fees are generally structured as 10% of the total purchase price. For example, if a publishing house sets the rights’ purchase price at $50,000, the option fee for an initial 12-month period would be $5,000. If the company exercises the option and buys the rights outright, the remaining $45,000 would be paid, since the initial option fee is applicable—meaning it’s credited toward the final purchase price.
But what if the company needs more time and exercises an extension? Let’s say they pay another $5,000 for a 12-month extension. In most agreements, this extension fee is not applicable to the purchase price—it’s paid simply to keep the rights exclusive for another year, and does not reduce the final purchase price. So if the company moves forward after the extension, they would still owe the full $45,000 (purchase price minus the initial applicable $5,000), and the extra $5,000 paid for the extension is not credited—it just gives them more time to decide.
This distinction is important: only the initial option fee is typically deducted from the purchase price, while any additional extension fees are simply costs for securing extra time.
3. Purchase Price
When the option is exercised, the production company commits to acquiring the adaptation rights, triggering the payment of the purchase price.
For feature films, the purchase price is often calculated as a percentage of the project’s budget, with guarantees that it won’t fall below or exceed certain thresholds. For TV series, the purchase price is typically a flat fee, independent of the project’s budget.
4. What Rights Are Included?
When the option is exercised, the company acquires specific rights to adapt the book. These typically include rights to produce feature films, TV shows, spin-offs, remakes, or other derivatives. Merchandising rights related to the new picture or series are also usually granted to the purchaser, while the author may retain merchandising rights connected to the original book. Studios often negotiate for broad rights to maximize creative opportunities, but this doesn’t mean the author loses everything.
Reserved Rights for Authors
Authors often retain the following rights to continue monetizing their work in other ways:
- Publication Rights: The author remains free to publish the book in print and digital formats.
- Stage Adaptation Rights: Some deals exclude live stage productions like plays and musicals, leaving these opportunities open for the author.
- Radio or Audiobook Rights: Typically, non-dramatic audiobook readings remain under the author’s control.
- Podcasts: The author typically retains non-dramatic podcast rights, while the studio acquires the rights to create dramatic podcasts based on the work.
- Author-Written Sequels/Prequels: The right to publish sequels and prequels authored by the writer are retained by the writer.
Additionally, a “holdback provision” is a time of period where the author cannot exploit the reserved rights. A holdback is typically included on the stage adaptation rights to prevent the author from exploiting a stage play that may compete with the feature film or series the purchaser is developing. Also, a holdback is often included with respect to Author-Written Sequels/Prequels preventing the author from selling related works to competitors for a certain period to protect the original property’s value.
5. Reversion of Rights
Not every adaptation goes to production. This is why agreements often feature a reversion clause, ensuring the rights return to the author if the studio doesn’t move forward within a reasonable time frame.
Feature Film Reversion Timeline
If a feature film project hasn’t been greenlit within 5-7 years of purchasing the rights, the rights usually revert to the author. This protects the source material from being “stuck” in development purgatory indefinitely.
Series Reversion Timeline
Reversion timelines for television and streaming adaptations are often more complex and are structured around the production milestones of the series. Typical language may include:
- If No Pilot Production is Produced: Eighteen months after the later of the company’s exercise of the option or the expiration of a network hold.
- If Only a Pilot is Produced: Eighteen months after the expiration of a network hold, but in no event earlier than eighteen months after delivery of such pilot.
- If Less Than One Season is Produced: Twenty-four months after the later of the exhibition of the last episode produced or thirty-six months from delivery of the last episode.
- If Two or Three Seasons are Produced: Thirty-six months after the later of the exhibition of the last episode produced or forty-eight months from delivery of the last episode.
- If More Than Three Seasons are Produced: No reversion to the owner; the rights are retained by the production company.
These provisions ensure that if a series adaptation stalls at any phase—whether before a pilot is made, after a pilot but before a full season, or after only a few seasons—the author has a clear path for the rights to eventually return, keeping their property viable for future opportunities.
It’s worth noting that any scripts, treatments, or other materials developed during the option period usually remain the property of the production company unless otherwise negotiated.
6. Payment Beyond the Initial Deal
While the option fee and purchase price form the bulk of the deal, additional payments can significantly boost an author’s return. These are often triggered by milestones in the adaptation’s success.
Types of Additional Payments
- Set-Up Bonus: Paid when a major or mini-major studio officially commits to the project.
- Production Bonus: Paid when the project begins principal photography.
- Best-Seller Bonus: A bonus tied to the book’s commercial success, such as hitting the New York Times bestseller list after signing the agreement.
- Episodic Royalty: If the project becomes a TV series, the author might receive per-episode royalties, ensuring ongoing compensation. Example: If a series runs for 20 episodes and the royalty is $5,000 per episode, the author would earn $100,000 in royalties over the course of the series’ lifespan.
- Backend: A negotiated percentage of net proceeds from the exploitation of the feature film or series, allowing the author to share in the project’s financial success if it performs well.
- Derivative Rights: If a remake, sequel, prequel, or other derivative project is produced, the author may receive additional payments. For feature films, this usually means a negotiated percentage of the original purchase price and backend. For series adaptations, derivative payments are often structured as a percentage of the episodic royalty and backend, ensuring the author continues to benefit from the ongoing and expanded use of their work.
Final Insights
Understanding option purchase agreements is essential for authors hoping to break into the film and TV world. While the process may seem complex, every clause serves a purpose—whether it’s protecting the author’s creative control or offering a safety net for unused rights. If you’re navigating this process, ensure you work with an entertainment lawyer or agent who can advocate for your best interests.
By Trisha Gum, Film & Ink Founding Partner
