In the entertainment industry, securing the rights to develop a creative work is a crucial step in bringing a project to life. Two common agreements that help achieve this are option agreements and shopping agreements. Both are used to secure the exclusive right to develop or shop a creative work, but they differ significantly in structure and intent. It’s essential to understand the nuances of these agreements to protect your interests.
What Is an Option Agreement?
An option agreement is a legally binding contract where a rights holder (often a writer or creator) grants a producer the exclusive right to purchase certain rights to a work, typically within a set timeframe (i.e. a screenplay, a book, life story rights). This period allows the producer to develop the project, seek financing, and explore opportunities with talent or distributors—without the risk of losing the rights to a competing buyer.
Key Features of an Option Agreement:
- Exclusivity: The producer has exclusive rights during the option period.
- Option Fee: An upfront payment made to the rights holder for granting the option, subject to extensions and extension fees.
- Purchase Price: A pre-agreed price that the producer will pay if they decide to exercise the option.
- Reversion Clause: If the option isn’t exercised within the specified time, the rights revert to the original owner.
The option period typically lasts from 12 to 24 months, providing the producer with enough time to evaluate the potential of the project. If the producer chooses to move forward, they exercise the option and purchase the rights, at which point the work enters into the production phase. If the producer decides not to proceed, the rights return to the original creator.
What Is a Shopping Agreement?
In contrast to an option agreement, a shopping agreement is a more informal arrangement that allows a producer to shop a creative work around to studios, networks, or co-producers, in an attempt to secure financing or a distribution deal. This agreement is often shorter in duration—typically between six to 12 months, and often comes with little or no upfront payment to the rights holder.
Instead of granting exclusive rights to purchase the work, a shopping agreement allows the producer to try to attract buyers for the project. This might involve the producer marketing the underlying work, a treatment, or a speculative script (though it’s less common for a full script to be included unless already written). If a deal is secured, the producer will negotiate with the buyer, and the rights holder will then enter into a formal licensing or assignment agreement.
A shopping agreement can be exclusive or non-exclusive, depending on the negotiation between the rights holder and the producer. An exclusive shopping agreement may give the producer more time and control to shop the project around, while a non-exclusive agreement allows the rights holder to pursue other opportunities simultaneously.
Key Features of a Shopping Agreement:
- No Rights Transfer: Unlike option agreements, shopping agreements do not involve any transfer or assignment of rights to the producer.
- Short-Term: The agreement is typically for a shorter period (six to 12 months).
- Payment: Shopping agreements may come with little or no upfront payment but can offer compensation or a commission if a deal is made.
- Extension Clause: Producers often request that the agreement be automatically extended if they are in negotiations with a buyer when the term expires.
- Protection for the Producer: The producer may require a clause to prevent the rights holder from cutting them out if a deal is made with a buyer that the producer originally introduced.
Why Are These Agreements Important?
Option and shopping agreements are more than mere paperwork—they set the stage for your project’s success, managing risk and defining roles long before cameras roll. By choosing the right structure and negotiating clear, precise terms, you ensure that rights holders benefit from fair compensation and producers retain the flexibility to develop compelling content without excessive upfront risk.
Whether you need temporary exclusivity to secure financing or a shorter shopping window to test the market, these agreements are strategic tools in any toolkit. Crafting them thoughtfully helps prevent later disputes, preserves creative ownership, and aligns incentives between all parties.
Next Steps: If you’re preparing to option or shop your work, whether as a writer securing fair terms or a producer seeking development rights, our Hummingbird Law entertainment law team can guide you through every clause and contingency. Contact us to discuss your project and draft an agreement that moves your vision from concept to screen with confidence.
