Script sale breakdown

In my last blog post about quotes, I talked about how a writer’s compensation typically increases over time, in the same way most other professionals slowly build a salary history  over the length of their careers through increasing levels of expertise and proven results.

Today, let’s break down how a writer actually gets paid out when they sell a script.

For the purposes of today’s post, let’s pretend you sold a script. Yay! And to keep the numbers nice and round, let’s say the script sale was for $100,000. Double Yay!

First, you have to understand that most script sales are usually composed of a number of different steps. The total value of the entire deal might be $100,000, but that’s probably for both the rights and some additional writing. The actual purchase of the rights might only be $50,000, for example, with another $50,000 worth of writing services (e.g., two rewrites, or a rewrite and two polishes). The first step to having a realistic expectation of writer earnings is acknowledging that the total value of the sale often doesn’t come in one big fat check. We’ll break that down further a little later.

Before that, you need to know that most representatives work on commission. An agent will take ten percent. Most managers also take ten percent. Your attorney will probably take five percent. After all that, if you have an agent, a manager, and an attorney on your team (a fairly common arrangement), 25% of your money is going to their commissions.

And don’t forget that you have to pay taxes too. Taxation is a very complicated subject because your tax rate is affected by a lot of factors including where you live, your family size, income level, the number of deductions and write-offs you report, etc. But if you file as a single in the city of Los Angeles and report $100,000 in earnings during a calendar year, you’re probably paying in the neighborhood of 30% to federal and state taxes. Add that to your reps’ commission and all of a sudden 55% of that $100,000 is out the door before you see a dime.*

Now let’s get back to the subject of how the script sale is broken down into different steps. In the vast majority of cases, a company will option a script before they purchase it. In other words, they’ll pay you a fraction of the money to acquire the rights for a limited period of time (typically for twelve or eighteen months), during which they’ll try to get everything in place so they can make the movie. At the end of the option period, depending on how successfully the project is coming together, they’ll either exercise the option and buy the rights for the agreed-upon purchase price (usually less the option payment), or they’ll let the option lapse and you’ll get the rights to your script back while keeping the option money.

Don’t worry, I’ll go in-depth about options in a future blog post. For now, you just need to understand that an option is usually the first money you get for a script sale, and it’s only a small piece of the larger purchase price which comes much later. The Writers Guild of America requires an option fee to be no less than ten percent of the purchase price, but non-guild deals can have any option amounts, sometimes even as low as $1.

So let’s fill out this $100,000 sale with a few more particulars. Let’s assume it’s $50,000 for the purchase price, with a 10% option for 12 months, and two rewrites for $25,000 each. It’s also worth noting that writing steps are typically paid half upon commencement and half upon delivery, so in reality, here’s how that $100,000 will probably be paid out:

  • $5,000 for the option
  • $12,500 for commencement of the first rewrite
  • $12,500 for delivery of the first rewrite
  • $12,500 for commencement of the second rewrite
  • $12,500 for delivery of the second rewrite
  • $45,000 for the rights purchase ($50,000 less the $5,000 option payment)

But don’t forget the 55% you’re paying to your reps and taxes! So the payouts really look more like this:

  • $5,000 $2,250 for the option
  • $12,500 $5,625 for commencement of the first rewrite
  • $12,500 $5,625 for delivery of the first rewrite
  • $12,500 $5,625 for commencement of the second rewrite
  • $12,500 $5,625 for delivery of the second rewrite
  • $45,000 $20,250 for the rights purchase

Typically, a writer is contractually given eight weeks per rewrite, and a company is given four weeks for reading and evaluation between steps. Even though deals hardly ever proceed exactly along those timelines (there’s almost always a delay for some reason or another unless you’re under a production deadline), let’s pretend you made this deal on January 1st and the money is paid immediately upon each step’s deadline (hey, I said it’s pretend!). Here’s how the payouts look with an ideal timeline attached:

  • January 1 – $7,875 ($2,250 option + $5,625 for commencement of the first rewrite)
  • February 26 (8 writing weeks later) – $5,625 for delivery of the first rewrite
  • March 26 (4 reading weeks later) – $5,625 for commencement of the second rewrite
  • May 21 (8 writing weeks later) – $5,625 for delivery of the second rewrite
  • December 30 – $20,250 for the rights purchase just before the option expires

Notice the huge gap in time between the last of the writing (May 21) and the time the option is exercised (December 31). It’s not unusual for a company to wait until the last possible moment to exercise the option. Since your option is twelve months long and started on January 1, the last business day of the option period would be December 30, assuming it falls on a weekday.

Now, for my writer friends who just rolled their eyes at the ridiculousness of a development scenario that actually stays on schedule, let’s add some realism to the above process:

  • January 15 – deal finally closes because everyone took their time coming back from the holidays.
  • February 3 – after the creative execs have been out of pocket at Sundance for the last couple weeks, you finally have the meeting, get the notes, and are officially commenced on your first rewrite.
  • February 17 – your reps follow up with the company because you still haven’t received the option or rewrite commencement money.
  • February 28 – your reps follow up again because still no money.
  • March 17 – you finish the rewrite a few weeks early and finally get your $7,875 on the same day you deliver because your reps told them you wouldn’t turn in the rewrite until you get your commencement money.
  • April 26 – it took several weeks of harassment, but your reps finally convince the company to pay your $5,625 for delivery of the first rewrite you turned in back in mid-March.
  • June 2 – even though the company’s reading period was technically supposed to be only four weeks long starting when you turned in the script back in mid-March, you just now got feedback on that first rewrite from the execs because they were busy with SXSW in March, Tribeca in April, and Cannes in May. But at last, three months later, you start working on the second rewrite.
  • July 14 – you’re ready to turn in your second rewrite and finally get the $5,625 for commencement because your reps (again) had to threaten to withhold delivery until they paid you for commencement.
  • August 2 – your reps manage to convince the company to pay your $5,625 for delivery of the second rewrite. No word on what they thought of the rewrite, because they’re on vacation with their family, busy with TIFF, got bogged down with a hot new project that suddenly materialized, etc.
  • December 30 – after months of hearing nothing, the company decides to exercise the option on the script and pays you the $20,250 for the balance of the purchase price. Keep in mind they very well might decide to let the option lapse, in which case this number would be $0.

The above scenario is, sadly, not all that uncommon. There are a few companies who are very good about keeping on schedule and paying on time, but the course of business and cashflow in this industry often leads to delays, constant shifts in focus, feet dragging, etc. Money doesn’t always get paid quickly and your reps earn their commission in part by staying on top of what you’re owed for your work. All of this affects your work schedule and when you get paid. Just looking at the above example, that $100,000 sale boils down to the following over a calendar year:

  • $7,875 in mid March
  • $5,625 in late April
  • $5,625 in mid July
  • $5,625 in early August
  • $20,250 in late December (maybe)

That’s not a lot of money (especially if you live in Los Angeles), and the sporadic schedule requires you to manage your money really effectively if you don’t have another source of income to rely on. The last thing you want is to have your financial situation dependent on check for a purchase price or writing step that may or may not come when you expect or need it, if at all.

Unlike a corporate job that offers a steady, regular paycheck throughout the year, screenwriting is very much a feast or famine profession. Be financially responsible during the feasts where you’re earning big chunks of money so that you have the resources to support yourself during the famines, which could be weeks or even months between steps when you’re on a project, and months or even years if you’re between paying projects.

I’m sorry my readers who found this post particularly sobering… I know there are a lot of misconceptions out there and a lot of advice givers that often play up how lucrative a screenwriting career can be. While a screenwriting career has the potential to be lucrative when you’re established and successful, it’s important to set realistic expectations for your first sale and your writing career prior to reaching the pinnacle of the profession. For most working screenwriters, this is a job where the day-to-day realities are often very different from the assumptions of how it works. The more accurate your expectations, the better you can prepare and sustain yourself in terms of the working conditions you’re likely to encounter.

I can’t promise this blog will always be uplifting and heartening… but I can promise that it will always be honest.

*UPDATE: Based on some questions and feedback from several readers about deducting commissions, I want to clarify that: 1) commissions can typically be reported on your tax return as an itemized deduction under Unreimbursed Employee Expenses which reduces your taxable income; 2) depending on the way you’re paid, that money might still be taken out at the time you’re paid and then credited back to you when you do your taxes in April; 3) I will have future posts detailing loanout corporations and other tax considerations; and 4) all of this notwithstanding, you should absolutely consult with your accountant or tax professional about your own individual situation to be sure of how to properly report the commissions you pay to your reps  (see disclaimer).

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