How an MG gets set
A distributor bids an MG based on what it expects to earn in its territory, minus its fee and marketing spend. The sales agent usually starts from estimates, a sheet listing an asking price and a price the agent expects to accept for each territory. Buyers look at cast, genre, comparable films, and, for a finished film, festival reception.
For a pre-sale, the MG is paid on delivery, so a bank lends against it. For a film sold after completion, the MG is often paid in installments tied to signing, delivery, and release.
Tracking whether an MG recoups
A UK distributor pays $250,000 for THE LONG DRIVE with a 25 percent distribution fee and marketing expenses capped at $150,000. Those terms are assumptions for this example.
| UK receipts to date | Fee (25%) | Expenses | Applied to MG | MG unrecouped | Overages |
|---|---|---|---|---|---|
| $200,000 | $50,000 | $150,000 | $0 | $250,000 | $0 |
| $500,000 | $125,000 | $150,000 | $225,000 | $25,000 | $0 |
| $700,000 | $175,000 | $150,000 | $375,000 | $0 | $125,000 |
At $700,000 in receipts, the distributor has taken $175,000 in fees, recovered $150,000 of expenses and its $250,000 MG, and owes the producer $125,000 in overages. That payment goes into the collection account and down the waterfall.
In practice the producer checks this through the distributor's statements, which is why distribution agreements include reporting schedules and audit rights.
Mistakes around MGs
Counting the full MG as production money is common and painful. Deposits are small, the balance waits for delivery, and a bank advance will be less than face value after interest and fees. Put only the realistic net figure in the finance plan.
Ignoring delivery costs is another. The distributor can refuse to pay the balance until every item on its delivery schedule arrives and passes QC. Budget the deliverables so the MG isn't held hostage by a missing music cue sheet.
Producers also forget that an MG recoups against more than the MG itself. Fees and expenses come first, so a film can earn well past the MG in a territory and still pay no overages. Read the expense cap before celebrating a big number, and model it in the P&L projection.