What is sometimes frustrating for the principals involved, along with their respective agents, managers, lawyers, accountants, business advisors and the like, is that despite the euphoria of the million dollar script option deal reported in the trades, a considerable amount of time, effort and emotional drama is invested in negotiating out all of the specific terms and conditions of the option deal but, at the end of the day, little and sometimes no cash may actually exchange hands. Nevertheless, it is essential that all of the key terms and conditions of the option deal be negotiated and put in writing between the parties so that in the event financing for the project and all of the other essential creative elements come together within the option period, an orderly transfer of rights on behalf of the parties is achieved. As is customary with most terms of the LPO, the period of the option is negotiable. The current standard for an initial option period is one year to eighteen months. There is usually also an extension right so that the option period can be extended if the producer needs more time to secure the financing.
Option fees are always negotiable.
A typical option fee for a studio deal is ten percent of the negotiated purchase price for the literary property. The initial option payment is typically applied against or deducted from the purchase price. If an option extension is made, that payment is usually not applied against the purchase price. If you are a writer-director, it is in your best interest to be actively involved in the development and to negotiate a clause which assures that you will also direct the project or at least have a first negotiation right to direct. This is a difficult point to obtain for first time directors, but it is possible.