Royalties can be structured based on either gross revenue or net profit, depending on the specific contractual terms negotiated between the parties. In natural resource sectors like mining and oil extraction, royalties are most commonly calculated as a percentage of gross revenue (such as Net Smelter Returns), ensuring the royalty holder receives a consistent payment regardless of the operator's operating expenses. Conversely, net profit interests calculate payments only after deducting specific operational, extraction, and processing costs.