Also commonly referred to as “participation” or “contingency”, a back-end payment is a type of compensation usually given to an above-the-line talent on a film. This means that the talent will receive a percentage of the revenue generated after the film is completed and is typically given to the talent in addition to his or her fixed upfront fee. This could include box office sales, foreign sales, VOD sales, DVD sales, and sales from other ancillary markets. How the back-end payment is defined varies from project to project, and depends solely on what the talent negotiates. Often times the agent will negotiate this deal. The talent may negotiate for “gross-participation” in which the talent receives a percentage of the revenue before certain expenses have been deducted. This is often referred to as “First-Dollar-Gross”, which is every talent’s objective to attain in a back-end negotiation. In other words, as soon as the first-dollar of revenue has been generated, the talent starts receiving a percentage of that revenue. The talent may negotiate for a percentage of “distributor’s adjusted gross” which means that the talent will receive a percentage of the revenue after a defined break-even point has been reached. The talent may also negotiate for a percentage of “net-profit”, however, this is type of deal is rarely done as a film, according to standard accounting principles, rarely reaches net profit.
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