A gentleman from the States emailed me recently asking questions about financing cartoon animated series production. Since I wrote the article “8 Steps to Producing A Cartoon Series”, this is a favorite topic of mine. His question was about options, which is quite unusual.
Options is a term that is used in financial factors, but it is not commonly used in animation industry context.
An option, in essence, is a contract that gives its holder the right but not the obligation to purchase or sell shares of an underpinning security at a specific price on or before a date.
An option is a contract that allows the holder to purchase or sell animation property or derivatives at a specific price.
You might have an idea for an animated movie. Steven Spielberg wants it. He makes an offer to you to “hold” your idea while he raises funds to buy and produce it. However, he doesn’t have to keep your rights to your idea for ever. If the option contract expires without him paying you the money to buy your idea, the option will be void. Steven just lost the money that he paid to buy the option to keep your idea, and you’re now much more wealthy!
This sounds confusing. Steven will pay you for the right to keep your idea for a certain time. In the option contract, it will be stated how much Steven will pay for your idea and the purchase price of the rights for good if he decides to exercise the option.
Having a better understanding of the options available, let’s now ask the following question.
The question: Where can I find published figures (or reports) on option deals or outright acquisition deals for animation? If a studio is interested, I will be able to give you an idea of what to expect. Unknown properties are less valuable. I searched and searched.
My Answer: Option deals can be difficult to negotiate if there is no precedent or if the creatives involved (e.g. the EP and scriptwriter) don’t have impressive credits. The buyer will do everything he can to reduce the value of the project. There is no way to know the true value of this project because there aren’t precedents and there aren’t any scriptwriters or EPs who have been successful with similar projects. The buyer is in control of the ball and can offer any amount he likes. However, it will not make you happy all the way to bank. It is best to speak with an entertainment lawyer or agent that has done similar deals for other projects. They will likely be well-informed and experienced enough to help you find precedents in the industry or deal structures they may have used to assist your case. Be careful not to give away any rights! This is a non-exclusive service (or exclusive for a brief period of time), where you will pay the agent or attorney a proceeding from the deal. (Usually 15-30%). Another option is to pay them directly without any backend. You can do it all.
What you are looking for is what many people are also searching for (including me!). If you don’t work with entertainment lawyers or agents who have been there and done that, these figures may be difficult to find. You can also look into annual reports of listed animation firms that might have information about their deals. It wouldn’t hurt if you have some industry friends. You might be able to share information about what your companies have acquired recently.
