The
Literary Property Agreement may be the first contract for the movie.
This may mean buying the rights
outright or taking out an
"option" on the rights. An option agreement provides for
all the terms of the purchase of the underlying
rights, but the purchaser
makes a small down payment in exchange for the exclusive
right to complete the transaction during a specified option
period.
The basic purpose of a
submission agreement is to allow the production company to review treatments
and screenplays written by
writers who are not employees
of the production company. Often, these are “spec
scripts” – scripts
written as pet projects by
writers hoping to break into the motion picture industry or to
move up in the
industry.
A typical film company of
even modest size quickly undertakes all the attributes
of a well-established
business. The company,
however legally structured, will need to
engage employees, rent equipment, pay taxes,
raise working capital, and sign
contracts with landlords, insurance companies, lenders and many
others. If
at all possible, the duties
of filmmaking should be separated from the duties of operating the film
company.
While a film company has all
the same legal and business obligations of any service company, certain
obligations are most
important for the successful completion of the film. The
following introduces the most basic of
these areas.
There are two discrete types
of equity sales in the motion picture industry. The
first is sale of securities
in the film company. By
selling stock in a corporation or membership interests in the
LLC, the company raises funds by
increasing the amount of
equity owned by people other than the filmmaker. This is the typical model of equity financing.
The second form of equity financing involves selling
the film's distribution
rights. In this form of equity
financing, the company sells its
assets in exchange for a present or guaranteed payment.
Today, the major motion
picture studios are primarily distributors rather than film production companies.
Instead of directly
purchasing stories or scripts, the studios
work through existing relationships with established production companies. Those
production companies serve to package the script, develop the budget and manage the
production.
