Acquiring the right to adapt a book/screenplay – a legal overview

Below, Lauren McFarlane outlines some of the legal issues that are likely to arise during the process of bringing a book / screenplay to the screen and which authors / screenwriters thinking about granting an option to a production company to dramatise their book or screenplay, or producers looking to acquire that option, might wish to think about.

When would a legal agreement be required?

There are a few scenarios which might initiate a discussion between an author / screenwriter and a producer / production company. For example:

1. A production company wishes to make a film or television programme based on an existing work, probably a book or a play. Copyright in that work will typically (though not always) be owned by the author and so the production company would, as a starting point, need to obtain the requisite rights from the author / rights holder to take things forward. In this case, the production company may wish to secure an option agreement, giving it the option to purchase the rights.

• A well-known example of a production company that seeks to acquire the rights of bestselling books is Hello Sunshine, Reese Witherspoon’s company and which has in the past optioned the rights for Where the Crawdads Sing, Eleanor Oliphant is Completely Fine, Little Fires Everywhere, and Daisy Jones and the Six
• Closer to home, Synchronicity Films in Glasgow (following negotiations with Bonnier Books UK, who represented author Heather Morris) acquired the rights for The Tattooist of Auschwitz, now in advanced development with Sky Atlantic.

2. A production company wishes to ascertain whether it can secure interest/ funding to develop an original screenplay into a film or television series. In this case, the production company might want to secure a shopping agreement, or take out an option, which would give it some time to develop the idea and see if it has legs.
3. A production company might seek to commission an original screenplay, based on an original idea (not an existing literary work) or based on a work that is no longer in copyright (for example, a book by Jane Austen). In this case, the production company may engage a screenwriter (or team of screenwriters) to develop the idea into something that might be workable for the screen. It is worth noting that in this scenario, the production company would likely own the copyright in whatever was produced by the screenwriter (although this would be subject to the terms of the agreement between the production company and the screenwriter).

In two of these three scenarios, a legal agreement is required to adapt the book or screenplay into something suitable for the screen. We have considered the relevant agreements below.

The Option Agreement

One of the first steps a producer or production company is likely to take when seeking to adapt a book (or screenplay) is acquiring the legal rights to do so.

This is typically achieved via an option agreement, which is an agreement made between the author / screenwriter and a producer / production company and grants the producer an exclusive option to purchase the rights in the author’s copyrighted work.

If the producer then decides to proceed with the project, it can exercise the option and purchase the rights in the work.

Key components of a standard option agreement are:

• Term – generally, an option term is between 18 months and 3 years but it can be longer or shorter and sometimes there is also a renewal period (for an additional fee). In practice, the term is supposed to give the production company time to pull together financing, refine its ideas, or simply to decide whether to exercise the option.

• Price – the company/ person seeking to option the rights will typically pay the rights holder for the exclusive option to acquire the rights. The price is fact dependent and will depend on the book in question. A bestseller might attract an option fee of £50,000 or more. Publishing legend has it that Stephen King grants options in his short stories for $1. The price is usually offset against the price for the rights if the option is ultimately exercised. As a rule of thumb, option fees are generally 10% of the purchase price but may be more in the case of bestsellers (where a number of companies might be looking to option the rights and so there is a degree of competition over the option fee).

• Assignment/licence of rights – the option agreement will normally include an assignment or licence or rights in the underlying work. The assignment / licence is sometimes incorporated into the option agreement but can also be appended to the option agreement as a separate agreement. In this case, the assignment or licence might be left unsigned until the option is exercised, at which point the producer or production company would require to have the intellectual property rights assigned or licenced to it.

• Rights being optioned – this will always depend on the circumstances but a production company will normally want to option all of the dramatic rights, which would enable them to create movies, television shows, sequels, etc. Authors should always be mindful of exactly what they are granting and might want to retain certain rights. For example, an author might want to only option the right to produce one film, which gives the author scope to see how things work out and means they are not tied to working with a particular production company or producer.

• Purchase price – the purchase price is normally negotiated at the same time as the option price. This will vary wildly depending on the scope of the project and generally is calculated with reference to the production budget. Authors are advised to look closely at the terms of any proposed purchase price and whether they are also entitled to a share in the gross profits of whatever is produced. If there is a provision for entitlement to gross profits, the up front purchase price might then be lower.

Exercising the option

To actually exercise the option, the producer will need to pay the purchase price which will have been agreed already in the option agreement.

We would expect an option or purchase agreement to contain a provision for reversion of rights, in terms of which the rights would revert to the author / screenwriter if, for example, the production company has failed to take things forward. This would typically be between 5 and 7 years but can depend.

As an example, despite optioning Eleanor Oliphant is Completely Fine in May 2017, it was only in January 2022 that it was announced that a director was attached to the project (and since then noting has come of it). If nothing transpires, the rights, currently owned by Reese Witherspoon) are likely to revert to the author Gail Honeyman, who would then (at least in theory) be free to negotiate with other producers.

The Shopping Agreement

Another (less common) mechanism for adapting books / screenplays is what is known as a “shopping agreement”, which gives the producer an exclusive or non-exclusive period within which to represent the work (i.e., to try and obtain a proposal, interest in or funding for the proposed project from a studio, network or financier). These arrangements typically give the producer fewer rights than an option, last for a shorter period and are lower risk insofar as the producer does not usually pay for acquiring the right to represent the work.

Key components of a standard shopping agreement are:

• Term – generally, the term is 6 to 12 months which is sufficient time for the producer to scour the market and find financing / project partners, etc.

• Price – as a general proposition, there is generally little and often no payment to the rights holder in the case of shopping agreements, which tend to be lower risk from the author’s perspective, who is gaining the benefit of the producer’s network, insight and experience and retaining the intellectual property rights to her work.

• Assignment /licence of rights – we would not expect to see any provision for assignment or licence in a shopping agreement. If the producer is able to generate interest in or funding for the proposed project, the assignment or licence will be negotiated separately either with the production company or whoever is financing the project (albeit the producer will generally have a stake).

• Exclusive/non-exclusive – shopping agreements can be either exclusive or non-exclusive. The producer’s preference will always be exclusive, as this prevents the author from negotiating with other producers at the same time. If the shopping agreement is exclusive, this will likely be reflected in the term (which will probably be shorter in order to focus the producer’s mind).

Summary

Deciding which of the two agreements to use will depend on the facts and negotiating positions of the parties involved.

The obvious advantage of shopping agreements is that for the producer, they generally do not cost anything and for the author / screenwriter, they are not tied in for any great length of time and they retain more control of their rights (since there is no provision for an assignment or licence). On the other hand, the lack of investment means the producer is not acquiring intellectual property rights and there is at least a risk that the producer will invest time and energy into a project that does not come to fruition, which time would then effectively be a sunk cost.

Option agreements are more common and give the producer more rights in exchange for their investment. The author will also stand to benefit from the payment for the option which can in some cases be very lucrative. That said, in some cases a shopping agreement might well be more appropriate, particularly where the producer is reputable and just needs a bit of time to get a project off the ground.

There is no one size fits all approach and what is contained above is merely a high level overview of the key considerations that might arise during negotiations Parties are advised to seek legal advice before deciding which avenue to pursue and also in relation to the specific terms of any deal.

If you are an author / rights holder looking to grant rights, or an individual / producer / production company looking to acquire them, please contact Lauren McFarlane of our BTO BeCreative Team on 0131 222 2944 or lmf@bto.co.uk.