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First-dollar-gross deals for old-school talent meant they got a substantial cut of the studio’s box-office receipts, regardless of the picture’s performance. In the new deals, a break-even amount is established during negotiations so that the star’s back-end participation only kicks in once the studio has recouped costs up to that break-even number. In exchange, the talent gets a higher percentage than he would have received in the old model.
For instance, if a star received 5% of first-dollar gross as part of his deal, he would get that money no matter how much revenue the movie made. A $100 million movie that bombs out at $50 million means the star gets $2.5 million off the top while the studio hemorrhages money and everyone gets yelled at but the talent. If that same movie grosses $200 million, the star gets $10 million, and the studio makes some good cash (depending on how much it spent on promotion).
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