Here is a short extract from a much better and definitive article.
In recent years, a growing number of theatre companies have sought to obtain “participation rights” from playwrights who have been commissioned to write an original work or where the theatre is mounting the premiere production of a work.So the deal basically is that if you produce a premiere production then you get a piece of the playwrights royalties for any subsequent productions for an agreed upon term. Just to be clear ...this is money that the playwright would have to give the original company out of their royalties. It is not paid for by the subsequent producing company.
I have heard this referred to a "tip of the hat" to the original company. Now this amount is somewhere in the range of 2% -5% of the playwrights royalties. If a basic guaranteed royalty is $2500 we are talking in the range of $50 - $125. If of course you have backed a show like The Drowsy Chaperone it could add up to huge dollars. But really so what.The vast majority of plays in this country don't even get a second production and the playwrights full financial return on several years work is $2500. In my mind if they are blessed with a second or third production they still haven't recovered anywhere near the effort and work they have invested. Also consider the fact that of all the salaries in a production the playwright is in the bottom third. Well into the bottom third. On most indie shows I know that the actors make way more than the playwright.
For example in an F house the actors would be in the $700 range. $700 x 8 weeks = $5600. About 125% more than the playwright. So I say that arguing for participation rights is like spending time complaining that your change at Starbucks is a penny short.
If and when we can at least pay playwrights the equivalent to an actor and above then perhaps we can start to worry about getting another $100 from them down the road.