Part 2 Modified Adjusted Gross Receipts: Do You Need Help Finding and Following the Money as Talent?

Now that you have an idea of what does and does not go into Gross Receipts, you need to start deducting from it to calculate your MAGR. First, you must deduct distribution fees. This is a flat fee that studios charge for doing the work of distribution. Distribution fees include a percentage on all Gross Receipts for all licenses to telecast the series anywhere, and a percentage on all Gross Receipts for any other uses of the Series (e.g., merchandising, soundtracks, publishing).

For example, if $100 came in for the licensing to a broadcaster of X series anywhere and Tom’s contract says 15% will be taken for broadcasting rights. This means that 15% of $100, $15, will be deducted from Gross Receipts. Tom's contract also says that 15% will be taken out for any other uses of the series that aren’t broadcast which means that 15% of $100, $15, will be deducted from Gross Receipts as well.

Next, you must deduct distribution expenses. These are the costs and expenses incurred by a Studio in connection with the distribution, advertising, and exploitation of the Series. Then, you will deduct production costs. These are the direct costs associated with making and producing the series. This includes how much it costs to produce the series (e.g., budget, license fees), advances, overhead costs, overall deals, and interest on some or all of these costs. Advances fall into the cost of production because some bigger name directors and producers will sometimes not attach themselves to a series without an advance. Therefore, it is a cost of production to hire these people and provide them with an advance. Overhead costs fall into production costs because they are the cost of all of your departments (e.g., publicity, legal, etc.). The overhead cost is computed at a certain percentage of the production cost, usually 15%, because it is difficult to individualize these costs.

For example, if the cost to produce the series is $1 million. 15% of that, 150k, will be considered the overhead cost.

The cost of a person employed full time on the series under an overall deal is also included in production costs.

For example, Tom has an overall deal with Warner Brothers. In that overall deal, she gets 50k per episode. Since Tom is employed full time, the cost to pay his overall deal fee is included in the production costs.

Lastly, you will deduct contingent deferments and other contingent amounts. This includes calculating all the people receiving MAGR, Gross, or Net proceeds on the show and deducting their participation. Sometimes there may be an overall player who is getting so much participation that if you deduct that amount from a smaller player's participation, they will not get any money. To rectify this, a studio will usually say anyone getting the same level of participation, MAGR or lower (net proceeds), will not be deducted.