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Wednesday, September 23, 2009

Seeking the Magic Number

("Now we're just haggling over the price." How much for your script? Guest blogger Jesse Rosenblatt gives some great info. Jesse is an entertainment attorney and a gifted screenwriter. Good guy and someone you want on your team.)

A burning question on any first time writer’s mind is – “How much will I get paid for my feature film screenplay sale?”

It’s a valid question, though a difficult one to answer. You’ve spent months, maybe even years, writing your script. You want to get paid! And you need to make sure you’re protected and don’t sell yourself short. Often times, writers are willing to forego monetary compensation in exchange for the hope they’ll receive credit on a completed film to help launch their writing career.

While I certainly understand that perspective, and in some cases it’s a valid point of view, please remember – if others are getting paid well for their contributions to the project, you should too. Every great film starts with a great script.

I want to make clear that the typical structure of a screenplay deal is not an outright purchase but rather an option/purchase agreement. Let me briefly explain what this is for those of you who are unfamiliar with the concept: an option/ purchase agreement is one where the prospective buyer (a producer, production company, studio, etc.) agrees to pay you some money (generally 10% of the potential purchase price or less) in exchange for a period of time (typically called the “option period”) where your script is off the market and the producer can develop it.

At any point during this time period (which is often a year), they may decide to exercise their option to purchase your script and acquire all your rights in it. This generally means they must pay you the full purchase price set forth in the agreement less the amount of the option payment you’ve already received.

Rather than discuss these option/purchase agreements (a topic deserving an entirely separate article), I’m just going to focus on the actual purchase price amount for your existing screenplay (not one you’re now being paid to write or rewrite).
There is no universally applied standard for the purchase price of your screenplay (although you may use the WGA – Writers Guild of America – Minimum Basic Agreement as a guideline, whether you’re a member of the WGA or not).

The amount you will receive for your first feature film screenplay sale will vary from project to project. There are several factors to consider, including:

- the demand for your script;
- who the writer is (taking into account whether the writer is in the WGA, the writer’s stature in the industry including his/her track record, etc.);
- the anticipated budget level of the film;
- if the script is based on any other underlying material;
- who the party producing the film is; and
- how many writing elements/steps the purchaser will require you to deliver (e.g., a treatment, a first draft and subsequent drafts, rewrites and polishes.

1) Fixed (or Flat) Purchase Price; WGA Minimums

For a writer seeking their first script sale, practical realities and other issues may lead smaller production companies to seek to buy your screenplay for a purchase price as low as a few thousand dollars. Whether or not to accept such an offer depends on your assessment of who the party making the offer is and your
confidence in your ability to find another buyer willing to offer more.

If the party seeking to acquire your script is a mini-major or major studio/ production company, you can expect the purchase price they’ll pay you should be at least WGA scale (e.g., the WGA’s stated minimum for its guild members), even if you’re not yet a WGA writer.

If you’re a member of the WGA, the union spells out mandated minimums to be paid for the purchase price of a screenplay by guild signatory producers. These prices currently fall between about $40,700 (for low-budget productions – i.e., less than $5,000,000) and about $113,600 (for high-budget productions – i.e., above $5,000,000). The WGA minimum schedule can be reviewed at

http://www.wga.org/uploadedFiles/writers_resources/contracts/min2008.pdf.

2) Purchase Price Tied To Production Budget

On projects set up with well established production companies or studios, often deals for screenplay purchases are done as a percentage of the budget, rather than a flat or fixed amount. So, you may expect to receive a purchase price equal to around 2.5% – 5% of the “in-going production budget” (which is typically defined as the final budget number for the film, including above and below-the-line items, less a
bunch of costs, such as overhead, completion bond fees, contingency, interest, bank/financing charges and any contingent compensation).

But if you try and apply this percentage of budget approach to a low budget feature, the purchase price amount you come up with may just seem too low (for example, for a $750,000 feature, the screenplay purchase price at 2.5% of the budget would be only $18,750 – over $20,000 less than the WGA minimum).

The purchase price is often further refined with a stated “floor” amount – maybe $25,000 – and a “ceiling” amount – maybe $150,000 – so there is a fixed minimum and maximum the purchaser knows they’ll have to pay and you know you’ll receive. The idea here is that the studio or production company is protected from overpaying and you are protected from selling your script for a price that’s too low (so if the film becomes a major production with a much larger budget, your compensation will increase accordingly).

As a general rule, no more than 5% of a production’s total budget is allotted to acquiring all of the underlying literary properties (though in the case of very low-budget or very high-budget productions this percentage may not apply). This budget item must cover the payment for any books, articles, etc. on which the script is based, as well as all payments to all writers for the initial screenplay and any
subsequent drafts, rewrites, polishes, etc. As a result, the production company must be mindful that if the“ceiling” amount is too high, this may be a hindrance in getting the movie made (since this line item in the budget will be too costly). So the purchaser will generally do their best to keep the “ceiling” amount as low as possible.

3) $__________ Against $__________

I’ve also heard it said from time-to-time that the “typical” range for new writers selling their first screenplay to an established production company or studio is $100,000 “against” $250,000 (but obviously take that with a grain of salt, particularly based on the current economic climate in the industry). This means you get paid a guaranteed fixed fee of $100,000 for your screenplay drafts (including the original draft delivered, and any additional writing steps included in the option/purchase agreement), though this fee may be actually payable in stages, with a chunk upfront and the remainder upon starting/completing writing steps.

Then, only upon some condition taking place (which condition will be stated in your
option/purchase agreement), you would get the other $150,000, which is often referred to as a production bonus.

The condition triggering this production bonus payment is usually one of the following:

- the film going into active development;
- the film proceeding to production; or
- you being the sole credited writer on the final produced film (though in this case, if you receive shared credit, you would typically only receive half of this amount, or $75,000 in my example).

The reason the production companies and studios like these structures is that they purchase many more scripts than they actually ever produce and so this protects them from overpaying for material that ends up unproduced.

4) Purchase Price As It Relates To Writing Services – Which Amounts Are “Applicable Against” The Purchase Price?

In the event that you are negotiating not only a screenplay option/purchase, but also the terms for you to render additional writing services on the same project (e.g., additional drafts, rewrites, polishes, etc.), these may be negotiated at the same time (though the terms of each may appear in separate agreements).

That said, you will need to negotiate which writing services are required from you and which optional writing steps the purchaser may elect to require from you down the road. Whatever the case, it is always important to make sure you know which of your writing steps are going to be “applicable against” your overall purchase price. This means that the purchaser will deduct the payments for those writing steps
from the overall purchase price – so when you receive your purchase price, it will be less than the amount originally stated, since you’ve received additional sums along the way as you complete writing services).

As a rule of thumb, optional writing steps are almost always applicable. But once you go beyond the required steps and optional steps set forth in your agreement, if the purchaser asks you to render further writing services, you must make sure the payments for these steps are not applicable against your overall purchase price (because otherwise, you could be in a position where you cap out and working more does not yield you any more money).

Sometimes, a purchaser will request a writer enter into an “all services deal” once the film heads into production – meaning the writer is paid a flat payment which covers all required writing services from that point forward until the film is released. These should never be applicable against your purchase price
and you should make sure some limits are placed on them so you are not stuck writing for ages if the project is dragged out.

5) Contingent Compensation (or “Back End”)

In addition to the purchase price, you can also hope that your option/purchase agreement will entitle you to contingent compensation in some form, often referred to as a “back end.”

It is not uncommon for a writer selling their first screenplay to be entitled to an amount equal to 5% of the producer’s “net profits” (or however else this concept may be defined by the party purchasing your script). This may drop to 2.5% if you receive shared credit on the finished film. Be aware that your agreement will likely grant you a percentage of the limited pool of “net profits” received by the producer rather than those of the film production as a whole.

Generally, “net profits” are monies leftover after the producer (or the production company or studio producing the film) deducts all of their expenses (whether actually paid or not). The list of deductible expenses is quite lengthy and frankly, most writers believe that you will never receive a penny from your “net profits” allotment.

In an effort to give yourself the best shot at ever seeing some money from this, I suggest you try to tie the definition of “net profits” in your agreement(s) with the same definition in the agreement of the producer and/or director, since they will likely have greater negotiating leverage based on their past precedent. The
above approach is often referred to as a “favored nations” or “most favored nations” definition, whereby your definition is ‘tied’ to that of someone else (usually the producer). This way the pool of money from which you all may receive contingent compensation will be defined, calculated and paid the same way.

Since production companies/studios have several negotiated versions of the same definition for “net profits,” you want to do your best to protect yourself from getting gypped out of money (if any is actually left after permissible deductions) which other above-the-line personnel receive.

If you’re feeling confused by all of this, you’re not alone. I urge you not to try and parse through these concepts without an experienced attorney at your side. In the event that your definition is not as beneficial as it should be and your script turns out to be a blockbuster film, this could potentially cost you millions in the long run.

In addition, you may try to negotiate additional compensation in the form of box office bonuses, which only become payable if and when the film hits certain threshold levels of theatrical box office gross receipts. In some cases, you may even be able to negotiate a bonus which is contingent upon budget level(so if the budget ends up exceeding a certain amount, you’d receive additional compensation).

In conclusion, there’s no easy way to answer the question posed, since the amount paid for any screenplay is totally determined on a case-by-case basis. Armed with the information I’ve outlined above, and hopefully a great lawyer, manager and/or agent, you’ll reach an agreement and sign a contract for your first screenplay option/purchase.

Congratulations! Going forward, the amount of your compensation from this (your most recent agreement) with be referred to as your “quote.” The next question you’ll call to ask me is “How can I raise (or “bump up”) my quote?”

Generally, as your career builds and you work on more projects, your quote should grow organically with each new deal. But three common ways to help speed up the process are:

-Have one of your screenplays green lit so the film proceeds into production and you receive credit on a completed film;
-Attract heat by selling a pitch, treatment or spec script (e.g., one written on your own with no impending buyer ready and waiting for it) in a “bidding war” where there are multiple interested parties; or
-Receive screenplay credit on a project that nets awards or has an impressive performance at the box office.

You should now have some parameters by which you can gauge your expectations. But remember, you’re a writer, not a lawyer/manager/agent – so make sure you surround yourself as early as possible with experienced and capable representation who will make your career and your success a priority. You want a team with integrity who can fight for what’s in your best interest – but only after first trying to reach a mutually amicable agreement. And let them handle all the heavy lifting. You should never try to negotiate the terms for your agreements on your own. It’s your job to write and be seen as the friendly creative force – not the negotiator.

I hope you found this helpful for providing some context to your question. I wish you all ever-increasing success!

Jesse Rosenblatt is the founder of the Law Office of Jesse Rosenblatt, an entertainment law/consulting firm servicing corporate and individual clients across all segments of the entertainment business. He has over 10 years experience working and negotiating with many of the most powerful players in the entertainment industry. For more information, please visit www.jesserosenblatt.com.

9 comments:

  1. You made it sound like you wrote this on Done Deal.

    Plus, Rosenblatt is a one person shop. Pretending that he actually is a player is a joke.

    But he's still more legit than your last consultant.

    Why are you doing this? Not enough bad information floating around?

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  2. Hellainformative! Thanks!

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  3. This truly is invaluable information. I've been looking all over the internet for this stuff for quite some time now. Thanks for the free legal advice and explanations!

    Mike

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  4. Great article. Every new writer should sit down and read this, it will open lots of eyes...

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  5. Note to Anonymous Basher: I met Jesse through producer Gary Goldstein (Pretty Woman, Under Siege, Mothman Prophecies). Gary speaks highly of Jesse and that's enough for me.

    You can examine Jesse's client list on the website. Of course, any advice here does not constitute legal advice and you should seek counsel from your own attorney before signing any contract.

    Good luck!

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  6. Very informative for us rookies!
    Thank you.

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  7. I dont care if Jesse is a one man shop or not. I really dont, just as long as the bastard is on my side and he kick's ass for me :)

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  8. What if we live in Canada and want to pitch in both Canada and the U.S. Should we (my co-writer) register for Writers guild of Canada and WGA?

    ReplyDelete