Which statement is true about recoupment in the described arrangement?

• A. The distributor pays both advance and revenue share upfront.
• B. The distributor must wait to pay any additional revenue share until the advance is recouped.
• C. The contract ends immediately after the advance.
• D. The recipient stops receiving royalties permanently.

Answer: (B)

Recoupment means the advance given to the recipient is recovered from future royalties before the recipient receives ongoing payments. In a distribution deal, the distributor funds an upfront advance to the creator, and those funds are paid back out of the royalties the creator earns. Until that advance is fully recouped, the distributor does not advance additional revenue share to the creator. That’s why the statement saying the distributor must wait to pay any additional revenue share until the advance is recouped is correct.

Think of it as the advance being a loan against future earnings: the first portion of royalties goes to repay that loan, and only after it’s fully paid back do further royalties flow to the creator. The contract typically continues after the advance, and royalties don’t vanish permanently; they resume once recoupment is satisfied. The other scenarios—paying everything upfront, ending the contract right after the advance, or the recipient stopping royalties indefinitely—don’t align with how recoupment is designed to work.