Part 1 Modified Adjusted Gross Receipts: Do You Need Help Finding and Following the Money as Talent?

Let's talk about how talent can participate in gross revenue through learning about and understanding Modified Adjusted Gross Receipts and how to properly calculate it. Simply put, Modified Adjusted Gross Receipts is the money that is leftover for the studio after deducting the costs and expenses associated with the project from the total pot of money received by the studio. MAGR is called number things like gross receipts, adjusted gross receipts, and modified adjusted receipts with some of the common abbreviations being AGR, MAG, and MAGR. MAGR is also described as X person receiving back-end or contingent compensation. Any artist who is earning back-end compensation on a project will receive this through a percentage of the MAGR, the money left after deducting the expenses listed above. No one studio will have the same exact approach for what they consider in the bucket and not in the bucket of revenue, so we’re going to be looking at some of the general ways people define it.

MAGR can be difficult to calculate as it is very complex and differs on a project by project basis. Due to MAGR being defined in all these different ways, it can become very difficult for someone to interpret and fully understand all of its complexities. Understanding MAGR is crucial in the entertainment industry, for artists and major networks alike, as misunderstandings and misinterpretations regarding MAGR occur often and easily. Most lawsuits associated with television series have to do with MAGR, the calculation of MAGR, and whether or not the person believes they received the right amount of MAGR. As you can see, MAGR can cause a lot of disputes, so being able to fully understand it is crucial in ensuring that an artist (e.g., showrunner, director, or actor) is being fairly compensated and that a network can avoid a major lawsuit.

Now that we’ve discussed what MAGR is and what some of the possible implications are that come along with the miscalculation or misinterpretation of MAGR, let’s discuss how MAGR gets calculated. A commonly used equation used to calculate MAGR is showcased in Figure 1.

“Gross Receipts” - (Distribution fees, distribution expenses, production costs, contingent deferments and other contingent amounts) = Modified Adjusted Gross Figure 1.

For example, using this equation, Tom is supposed to receive 5% for sole credit and 2.5% for shared credit of X project. Let's say that the studio had $200 of Gross Receipts come in. $100 is left after subtracting the distribution fees, distribution expenses, production costs, and contingent deferments and other contingent amounts. This means that Tom would receive $5 (5% of the $100) for sole credit or $2.50 (2.5% of $100) for shared credit from back-end compensation (MAGR).

While this equation is a very simplified version of how MAGR gets calculated, it is a great starting point when learning how to calculate MAGR. When looking at the equation in Figure 1. you may ask yourself “what counts as Gross Receipts?” It’s not as complex as you may think. I like to think of Gross Receipts as all of the money that is received by the studio from the creation and distribution of a project. This money includes a percentage of the revenue that comes in for home video revenue, a percentage of the revenue that comes in any time something is merchandised, 100% of the revenue that comes in for music publishing, and 100% of the money that comes in for soundtrack royalties. It is very important to understand what Gross Receipts does include, and it is equally as important to understand what it does not include. Some of the money that is not included in the calculation of Gross Receipts include refunds/credits/discounts, advances that have not been earned, and money held as deposits subject to refund. This money is not included in Gross Receipts because it has not yet been earned. Since this money does not come into the pot, it can be taken out of the Gross Receipts.