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Film, television, performing arts, theater, gaming, webisode and other contracts that involve live or filmed performance differ in many ways.  However, one term that can crop up in any of these contracts is “Most Favored Nations,” or MFN. An MFN clause or rider can substantially effect what performers or other designated artists are paid, which is why both producers and artists need to understand the meaning of MFN. MFN clauses are not limited to actors. They may also apply, for example, to designers or other members of a small but identifiable group of creatives working on a given project.

MFN clauses are not unique to entertainment deals. They commonly appear in other types of contracts, such as commercial sales agreements. For our purposes here, though, we can limit the discussion to the arts and the entertainment industry. Here, as elsewhere, a MFN clause is an agreement, in writing, between an employer and employee (or buyer and seller) that no one among a class of people being hired under specific terms (say, the lead actors in a cast, or the designers on an opera) will receive better terms than any other among that same group. If anyone among the delineated group is given better terms (as defined) than the person in question, then that person in question is also entitled to the same (better) deal. The MFN clause may appear in the contract itself, or, quite frequently, in a rider that’s also part of the negotiated agreement.

In some ways, the MFN clause appeals to the kindergartener in all of us – that little voice in the back of our brain that doesn’t want anyone else to be teacher’s pet. Of course, there’s a grownup version too: If you’re the creative person being hired, the MFN clause may give you a measure of assurance that another person of similar stature being hired for a similar job won’t be getting more than you’re getting. In other words, you and your select group of peers, as defined by the project, will be paid or treated equally, depending on what particular aspect or term of the deal is at stake. That might make you willing to take less pay, for the good of the project, or simply so the project can go forward. In some cases, it also offers a measure of protection for the creative who doesn’t want their normal asking price (often called their “quote”) to be lowered in the public perception, but who wants to work for less in this one instance. When it comes to future offers, that creative’s rep will be able to explain why the creative took a lower fee in this one instance, while plausibly arguing that it was an exceptional situation, a one-shot deal.

If you’re the producer, employing an MFN clause means you might be able to get better talent than you would otherwise be able to afford, simply by promising not to give anyone in an elite group substantially better treatment than anyone else in that special group. That simple reality can go a long way and sooth a lot of egos. It may make artists willing to take a cut in pay, in return for the assurance that their peers are taking the same cut. That can be a make or break factor when you’re producing on a very limited budget in, say, a not-for-profit situation, on an indie film or for a small theater. For many, it means the difference between being able to produce the project and having it die before it ever gets off the ground.

One of the main considerations, for both sides, is exactly which terms are to be covered by the MFN. Will it apply only to the money that the artist is being paid upfront? What about profit participation or “backend” money? Are your points on an MFN basis? And what about other terms in your agreement, such as credit, travel, transportation or time off? The bottom line is that your agreement could be MFN for one term and not for others. Or the MFN could cover all the terms in the contract. That one distinction can make a substantial difference. And it’s just one more reason why understanding terms such as MFN can be key to taking control of your contracts, and hence your career.