As an independent filmmaker, negotiating a film rights purchase agreement for your independent film production is certainly a big deal. This is your opportunity to not only establish the rights to a copyrighted work that you are most interested in producing a film about. But it’s also your chance to do your part in negotiating the best price for these rights. So that you can use your finances for the actual production itself. Before you begin negotiations, here’s what you need to know.
It’s not uncommon for film rights purchase agreements to constitute 2-4% of the total production budget. But this doesn’t mean that you can’t negotiate a little. If you’re planning a production that’s going to cost $500K? A little negotiation can go a long way.
The difference of just 1% can mean $5K or more so it pays to negotiate. But there’s more to the negotiations than just price! You can also negotiate the underlying rights and the individual elements of the agreement that you’re making with the original copyright owner.
Consider the following:
Your film rights purchase agreement is likely to be based on net profits. But all net profits are not created equal. These deals frequently involve the adjustment of what is considered “net profit” to include a variety of different calculations.
In fact, many film contracts will negotiate net profit definitions to mean different things. Sometimes net profit means the gross income minus expenses. But there are also a lot of misconceptions or potentially altered understandings of what constitutes an “expense.”
For example, what if a business makes $1M annually and has expenses of $400K? The net profit would be $600K. However, if that same business pays its CEO $600K a year, the net profit is $0.
As you can see, negotiating film rights purchase agreements based on net profit deals can be tricky. And should include very clear descriptions as to what is actually considered “profit” and what “expenses” are.
Another sticking point in the negotiation of film rights purchase agreements is the points and percentages. You might have heard the term “points” used in discussing back-end compensation.
Basically, under these types of agreements points are based on percentages. So perhaps you will hear the justification of 5 points out of 50% of net profit.
The way points work, it’s important for you to understand that there is a strong likelihood that the structure of compensation based on points and percentages will result in minimal output. Keep this in mind as you’re negotiating.
If you’re a screenwriter that’s negotiating the film rights purchase agreement with a producer? Know that you have the right to request regular audits of the accounting. To ensure any profits that are to be shared with you are being appropriately allocated.
But only if these rights are addressed in your original film rights purchase agreement. Make sure that your agreement dictates regular auditing by your own chosen source. And that you have included your right to choose an accountant that is mutually unbiased.
Additionally, you want to make sure that you have included details in the contract which dictate the right for you to be involved in any future writing required as part of the production. For example, if you’re negotiating a film rights purchase agreement for your screenplay.
You should maintain the right to write any revisions and be compensated for them as well as to write any future episodes of a series or for remakes later on should your screenplay result in a successful film.
Included in this should be your right of first refusal. If you’re going to maintain the right to write any sequels or additional series episodes, you should also have the right of first refusal.
This means that you, the original writer and copyright owner involved in the film rights purchase agreement, will have the right to either accept the role of writing a subsequent screenplay for a series or second film or that you can refuse that right and pass it on to someone else.
The point of the right of first refusal is to allow you the opportunity to refuse the right before it is given to someone else.
As you navigate the negotiations of your film rights purchase agreement there are likely additional concerns that will come up.
It’s important that you consider all of the pertinent details and important rights relative to the project at this time because once you’ve finalized the agreement you must be satisfied with the rights that you have secured for yourself.
Consider your rights to the release of future, ancillary products along with the film that is based on your screenplay.
For example, what rights will you have if a video game is made based on your screenplay in the future?
Will you retain any right to future radio shows or the publishing of a book about your film? All of this is important for you to consider before you finalize your negotiations. Because once the agreement is signed, you’ve basically outlined your rights for now and the future of the work.
Just because you don’t think your screenplay is worthy of a video game or some other sequels in the future, don’t give those rights away. You never know what an audience will think. And you certainly don’t want to find yourself in a position in which you are forced to sit from the sideline.
And watch your film draw in loads of revenue from other ancillary products like video games while you effectively render nothing out of it. Plan ahead, take the deal, even if you think it may never amount to anything – it could!
As much as you want your screenplay to be produced into a feature film, and you believe it will be as part of your film rights purchase agreement, there is still a tiny chance that your film will not be produced.
Things can go wrong even after the rights to produce a film based on your screenplay have been purchased. So what can you do?
This is where the reversion of rights comes into play and it’s important for any screenwriter to understand those rights. You have the right to negotiate a reversion clause into your film rights purchase agreement.
And, in doing so, you retain the right to have the rights to your work revert back to you. In the event that your screenplay is not produced into a film within the allotted amount of time that is specified in your rights reversion clause.
Without this, you lose any right to your work and will not be able to experience seeing your film on the big screen. You lose all rights to your intellectual property. Especially as they pertain to the production of a feature film.
Obviously, the film rights purchase agreement for independent film production is a huge legal contract that requires a lot of negotiations and working out an agreement between the screenwriter and the film producer or the production company that has interest in the production of your screenplay.
It’s best to work very closely with an entertainment attorney throughout each step of this process and to be as educated as you possibly can about the whole thing.
The more you know ahead of time, the better prepared you will be for the negotiations that are going to take place over the course of time as you work to sell your screenplay to a film producer.
