Much can be learned about the entertainment industry by comparing how those who perform services or license rights in their works are compensated under agreements to which they are a party. Some compensation in those agreements is fixed and essentially guaranteed, like advances and flat fees. Other types, which are the subjects of this article, are contingent.
The extent of contingent compensation that becomes payable, if any, depends ultimately on the monetary success of a work—whether from the number of units sold, such as books or tickets, or from license payments and similar fees. A contingent interest based on a percentage of gross receipts is the highest level of participation, but other than in connection with sales of print books (see below), it has become increasingly rare in the entertainment industry. More commonly, contingent payment is based on a percentage of gross minus defined deductions.
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