The entertainment industry relies on complex contracts drafted to protect the entertainment companies against economic risk.  The entertainment contracts often contain clauses that artists may consider to be unnecessarily complex or one-sided.  Record companies use complex contractual formulas to determine royalty payments to their artists.  Various clauses in the recording agreements are used to reduce the royalty percentages, reduce the number of units on which royalties are paid, and delay payment.

Many entertainment contracts are structured with advances, which are payments made to an artist before any actual income is received by the company that manufactures or delivers the artist’s products or services.  This advance is normally nonrefundable.  However, the publisher will keep any royalties that would have been payable to the author, until the author’s advance and other expenses have been recouped by the publisher.

In the entertaiment industry, personal service agreements are often governed by statutes and are often the subject of litigation because they restrict the rights of artists to perform or create for any entity except for the company with whom they have contracted.  Producers use personal service agreements to bind artists for a certain time, during which the producers attempt to recover their investment in the artist, make a profit, and cover losses from less successful artists.  In some entertainment industries, personal service agreements are structured using options which provide a producer, the right to extend an agreement for several time periods.