Recouping the MG

Here's how it generally works. Any advance paid at signing is usually credited against the MG. As you report sales, earned royalties are counted against the remaining balance. Once earned royalties exceed the MG, you pay the difference each period. If you never reach the MG, you still owe the shortfall, often at the end of the term or at set dates.

Details to check in your contract:

• Cross-collateralization — whether royalties from different products, territories, or years count toward one MG, or whether each has its own.
• Payment schedule — whether the MG is paid in installments regardless of sales.
• Shortfall timing — when unpaid balances fall due.
• Carry-forward — whether overpayment in one year counts toward the next.

Fictional example: Moonfox pays a $10,000 advance against a $30,000 MG. In year one, it earns $14,000 in royalties, so the advance is covered and $4,000 is due. In year two, it earns $12,000, reaching a total of $26,000. At the end of the term, Moonfox owes the $4,000 shortfall to reach $30,000.