PRACTICE NOTE

Option and “shopping” agreements for film and TV

by Practical Law TMT with thanks to Lisbeth Savill, Latham & Watkins LLP

Status: Maintained | Jurisdiction: United Kingdom

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A short note explaining option and “shopping” agreements for film and TV projects. An option
agreement is made between a writer and a producer and grants the producer an exclusive option
to buy the rights in the writer’s work. A “shopping” agreement allows the producer to represent
the work but gives the producer fewer rights than an option and typically lasts for a shorter period.

Scope of this note • Commissioning a screenplay. A production company

wants to commission an original screenplay not based
This note discusses option and “shopping” agreements on any underlying work or that is based on a work that
for TV and film projects: is no longer in copyright, such as a 19th century novel.
In this instance there will be no underlying copyright
• A film or TV option agreement is made between a writer
to acquire. The production company will most likely
and a producer and grants the producer an exclusive
appoint a writer or team of writers to develop the idea
option to buy the rights in the writer’s work. The option
and write the screenplay. Neither an option agreement
period in an option agreement gives the producer time
nor a shopping agreement will be necessary as the
to develop a film or TV programme based on the writer’s
production company will usually own the copyright from
work, with the assurance that no one else is developing
inception, pursuant to the commissioning agreement.
the same rights simultaneously. If the producer decides
to proceed with the project, it will exercise the option If an original screenplay is itself based on an underlying
and purchase the rights in the work. work that is still in copyright, the producer will need to
• A “shopping” agreement is an alternative to an option ensure that the underlying rights have been cleared.
agreement. It allows the producer to represent the Usually, it should ensure that it has a signed agreement
work but gives the producer fewer rights than an from the holder of rights in the underlying work as it
option over the work and typically lasts for a shorter will not be able to exploit the screenplay without the
period than an option agreement. necessary rights from the owner of the underlying work.
At the very least, if the screenplay is being optioned
rather than commissioned by the producer, the option
When to consider an agreement agreement and grant of rights should include warranties
There are three main starting points for a scripted film, from the writer that all rights have been cleared, there
TV programme or TV series: has been no prior grant or assignment of these rights
to another party (except as disclosed) and that the
• Developing an existing screenplay. A writer has screenplay does not infringe any intellectual property
written an original screenplay. A production company rights in third-party works, in order to understand
wants time to see whether it can develop the whether an option over an underlying work is needed.
screenplay into a film, TV programme or TV series. In
this instance the production company may want to
take out an option or enter into a shopping agreement Main types of agreement
in respect of the screenplay.
There are two main types of types of agreement to use in
• Developing an existing work still in copyright. A developing a scripted film, TV programme or TV series:
production company wants to make a film, a TV
programme or a series based on an existing work, • A traditional option agreement, which gives a
such as a book or play, that is still in copyright. In this production company an exclusive right to develop an
instance it may also want to take out an option on the underlying copyright work (see Option agreement).
existing work. (In this instance, an option rather than • A “shopping” agreement, which gives a producer
a shopping agreement is more likely.) The production an exclusive or non-exclusive period to try to attract
company will appoint a writer or team of writers to funding from a studio, network or co-producer (see
help develop and write the screenplay. Shopping agreement).

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 Option and “shopping” agreements for film and TV

Option agreement as a “producer attachment agreement” or a “producer

representation agreement”) with a writer or other rights
A traditional option agreement gives a production owner. This gives a producer a period of time to try to
company an exclusive right to develop an underlying attract funding from a studio, network or co-producer
copyright work (including an already written screenplay). (shop the proposal around). This is usually a shorter
It is acquired from the owner of the underlying work (or period than under an option, such as six to 12 months,
via their agent) for a fee. It is likely to last between 18 and often for little or no payment to the rights owner.
months and three years and may be renewable (for an The benefits to the rights owner are the producer’s
additional fee). The producer is unlikely to be able to get experience and connections. What is being shopped may
third-party finance from a studio or network or appoint a include the underlying work or a treatment prepared by
co-producer unless it has an option on the rights. the writer (it is less likely that it will include a full script
The option fee is payable to the rights owner on unless the writer has written it speculatively).
signature and is usually offset against the price for the A shopping agreement is a services agreement with
rights if the option is exercised. The fee for extending the no licence or assignment of rights attached (unlike an
option cannot usually be offset. option agreement). If funding is secured, the rights
An assignment or licence of rights in the underlying owner will negotiate a licence or assignment of the rights
work and all other key terms of the exercise of the to the work either with the production company or with
option should be included in the option agreement the financier (usually where the financier is also a studio,
(as in Standard document, Film option agreement) or or broadcaster or streamer), and the production company
appended to the option as a separate agreement and will negotiate its own attachment to the project.
left unsigned when the option is taken out, in which A shopping agreement can be exclusive or non-exclusive.
case it will need signing the option is “exercised”. In the If it is exclusive, the rights owner may be more likely to
latter case, it would be advisable to include a power want to keep the term short. If it is non-exclusive, the
of attorney in the option for the producer to sign if the rights owner can pursue other avenues at the same time
rights owner fails to do so. as the producer is shopping the project around.
The option agreement should include a predetermined Because the term of a shopping agreement is likely to be
level of remuneration to be paid to the rights owner on short, a producer will want a provision in the agreement
exercise of the option. to ensure that the term of the agreement automatically
The details of what rights might be included in the extends if it is in negotiations with a prospective buyer at
assignment or licence, including rights for sequels, the end of the term, although the rights owner will want
remakes and adaptations, are beyond the scope of this the extension to be capped so that negotiations cannot
note, but should be agreed at the time of entry into the be strung out too long.
option agreement, to create certainty on exercise of the A producer will also want the agreement to contain a
option. For more information, see the drafting notes to term to prevent a rights owner completing a deal with a
Standard document, Film option agreement. potential buyer originally found by the producer during
the shopping period, but with whom an agreement was
Exercising the option not concluded. This would require careful description to
To exercise the option, the producer will need to pay the precisely delineate the project and the terms on which
exercise price which was agreed when the option was the rights owner is compelled to attach the producer to
originally entered into. Usually, the initial option fee is 10% the project or pay a “kill fee” to the producer.
of the purchase price but may be less for independently
produced projects or more for a “hot property”.
Choosing between an option or
If the licence or assignment was included in a separate
agreement from the option, it must be signed.
shopping agreement
The appropriate choice of one type of agreement over
The option or purchase agreement may contain a
another will depend on the specific project and the
reversion period, likely to be five to seven years from
priorities and negotiating positions of the parties.
exercising the option, when rights could revert to the
owner if filming has not commenced. This is something The parties can choose to use one or the other, or to
for a producer to keep in mind. employ a shopping agreement to start with and then,
once a buyer has expressed interest, enter into an option
Shopping agreement agreement with the buyer.

Instead of an option agreement, a producer may enter Shopping agreements are less common than option
into a more informal “shopping” agreement (also known agreements.

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 Option and “shopping” agreements for film and TV

Some of the key considerations for producers and writers • Because no fee for the rights has been negotiated at
in choosing between the two types of agreement are set the outset, rights owners may be able to make more
out below. money on the sale of the rights if the project gains
traction as it is being shopped around.
Considerations for producers • The short term means that they are not tied into an
option for a long period.
Shopping agreement: pros and cons
• If they enter into a non-exclusive agreement, they can
The advantage of a shopping agreement for a producer shop the project around themselves at the same time.
is involvement with a project at little or no cost. If it
takes out an option, it will have to pay an option fee to • A shopping agreement is usually less complex than
an option agreement: option agreements necessitate
the rights owner.
the negotiation of:
The main disadvantages of a shopping agreement for a
–– Terms (including the purchase price, option period,
producer are:
option fee and certain conditions precedent).
• It does not include the acquisition of, or the entitlement
–– The terms applicable once exercised (such as
to acquire, any rights to the intellectual property in
credits, bonuses and contingent participation,
the underlying work. If the rights owner sold the rights
credits and the like).
separately in breach of the shopping agreement, the
producer’s recourse would be limited to a claim for The main disadvantages of a shopping agreement for
breach of contract and it would not be able to sue for rights owners are:
infringement of intellectual property rights.
• Because the producer has little invested in the project
• The producer is likely to be more restricted as to who financially, it may not make much effort to sell it.
it can sell to, as the rights owner is more likely to
require approval rights over the buyer than under an • The rights owner may be pressured to enter into a
option agreement. shopping agreement for little or no money when an
option agreement would be fairer. They may also
be pressured into entering into an oral agreement.
Option agreement: pros and cons
Writers in particular should always require that a
The main advantage under an option agreement is that shopping agreement be in writing and signed.
the producer is likely to have acquired (on exercise of
the option) extensive rights both to develop the project • If there is little interest in the project, the rights owner
may end up receiving nothing for the project, but
and also to make sequels, TV shows, merchandising and
if they had entered into an option agreement, they
advertising. A shopping agreement does not give the
would at least have received the option fee even if the
producer any intellectual property rights.
option was not exercised.
The main disadvantage is that, if the producer is not
• A writer in particular may find that, even if there
able to secure a buyer, then the producer will not receive is interest from a big investor, the writer is in a
any compensation for its efforts. weak negotiating position (for example, in terms of
payment or credits) and may even be unable to retain
Considerations for writers the integrity of an existing screenplay.

Shopping agreement: pros and cons Option agreement: pros and cons
Key advantages of a shopping agreement for rights The main advantage of an option agreement for a rights
owners are: owner is that they are paid for the option. An option
agreement may also better suit a rights owner who has
• They retain more control over their rights and can
usually veto an offer brought to them by the producer little interest in being heavily involved in a film or TV
or (if the rights owners are writers) insist that they or exploitation.
their agent or one of their representatives attend the The main disadvantages are the flip side of the
pitch meetings. advantages of a shopping agreement, that is, in
particular, that the rights owner retains less control
over the development process and will not be able to
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