Minimum Guarantee
In relation to royalty payments, a minimum guarantee, often referred to as an "M.G." is a minimum payment that a licensee guarantees they will pay to the licensor regardless of performance. The minimum guaranty is considered a royalty payment; with the minimum guaranty, the licensee is paying the first portion of the royalty payments, and will make "overage" payments once the total payments due exceed the minimum guaranty.
For example, if the royalty rate on an anime is "50% of net revenue, with a minimum guaranty of $100,000," it means that the licensee will pay the licensor 50% of net revenue, but guaranties that the minimum payment they will make will be $100,000. The initial $100,000 covers the first $100,000 of royalties (on the first $200,000 of net revenue). Once net revenue goes over $200,000, the licensee will have to start paying 50% of all subsequent revenue to the licensor.
Minimum guarantees are sometimes paid upfront, or they may be paid over a schedule.
For example, if the royalty rate on an anime is "50% of net revenue, with a minimum guaranty of $100,000," it means that the licensee will pay the licensor 50% of net revenue, but guaranties that the minimum payment they will make will be $100,000. The initial $100,000 covers the first $100,000 of royalties (on the first $200,000 of net revenue). Once net revenue goes over $200,000, the licensee will have to start paying 50% of all subsequent revenue to the licensor.
Minimum guarantees are sometimes paid upfront, or they may be paid over a schedule.