Film Accounting Glossary
Cross-collateralization
What is cross-collateralization?
Also called crossing, or cross-collateralisation.
Cross-collateralization is the practice of offsetting losses in one territory, medium, or title against profits in another before calculating what a participant is owed.
A distributor holding several territories may pool them so a loss in one absorbs a gain in another, which lowers or eliminates the participation. Whether cross-collateralization is permitted, and across exactly what, is a heavily negotiated point in any sales or participation agreement.
Example
A distributor holds five territories: four each profit $400,000 and one loses $900,000. Uncrossed, the participant is paid on $1.6M. Crossed, the pool is $700,000, and the participation shrinks with it.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
Sales and participation agreements. Whether it is permitted, and across exactly what, is heavily negotiated.
Common mistake
Signing without restricting what may be crossed against what. Broad crossing rights let a loss anywhere absorb a gain everywhere, and the participation disappears.
Related questions
- What does cross-collateralization mean in film distribution?
- Offsetting losses in one territory, medium, or title against profits in another before calculating what a participant is owed.
- Why do participants resist cross-collateralization?
- Because it lets an unrelated failure eat their share. A picture performing well in four territories can pay nothing if a fifth is pooled against it.