A Shopping Agreement is an agreement between the owner of a creative work such as a screenplay, treatment, book, series bible, etc. (the “Property”), and a producer, whereby the producer obtains the right from the owner to “shop” the Property to buyers (e.g., financier, studio, distributor, networks, or other potential buyers) for a fixed period of time.
Typically the producer pays no money to the owner for the right to shop the Property and the duration of the Shopping Agreement is usually 12 to 18 months, which time may be extended under certain circumstances if the parties agree.
Shopping Agreements are often viewed as convenient and cost-effective as they require less time and expense in the negotiation between the parties than a more detailed Option/Purchase Agreement. If arranged between trusted parties, the Shopping Agreement may be a path to test the waters for interest in a Property and, on occasion, result in a deal. However, like most agreements, the devil is in the details – the terms of the agreement – and these can vary widely.
While it had been common to have the Shopping Agreement provide when a buyer expresses interest in the Property each the producer and owner would negotiate their individual deals with the buyer – the producer for attachment to the project as a producer, and the owner for the sale of the rights to the Property – we are now seeing great variations in how this and other terms are stated which can significantly affect the rights of the owner and the producer.
Terms of note include –
Exclusivity – will the producer have the right to shop the Property to the exclusion of all others, meaning if the owner finds a potential buyer during the term of the Shopping Agreement, the owner cannot independently proceed and must refer the potential buyer to the producer.
Development – will the producer have the right to create materials about the Property (e.g., a look book or a synopsis or sizzle reel), and who will those materials belong to if no buyer is secured?
Independent Negotiation – will the producer control the initial negotiation with a potential buyer, or will the owner have meaningful participation from the outset? If the former, then the producer may strike their deal first leaving the “offer” to the owner fixed and limited in room for negotiation.
Controlled Negotiation disguised as Independent Negotiation – the agreement allows for the producer to control all negotiation, including the consideration to be paid for the sale of the owner’s property. In the extreme, that could result in the owner receiving no compensation at all except for a contingent right to participate in the net profits (if any) from exploitation of the Property. Below is an example of a clause that suggests independent negotiation, but really is controlled negotiation:
[Writer] and [Producer] shall each directly negotiate in good faith with such Buyer the terms and conditions, including without limitation the fees and credits, in connection with their agreement with the Buyer. In the event the Project is “set-up” with a Buyer during the Term, then [Producer] shall directly negotiate in good faith with such Buyer: (y) the terms and conditions for the disposition of any and all rights in and to the Underlying Property; and (z) the terms and conditions for [Individual/Producer] executive producer services on the Project, if a television series or as a producer if a motion picture, each within industry standards and the budgetary parameters of the applicable Project and so as not to frustrate the development, production, financing or exploitation of the Project.
In Summary, words matter – for each the producer and the owner, it is important that you fully understand the terms of the Shopping Agreement. On a positive note, with trusted partners and a balanced Shopping Agreement – good things do happen.