revenueshare

Revenue share, or revenue sharing, is an arrangement in which parties that contribute to the creation, distribution, or sale of a good or service divide a portion of the revenue generated, rather than the profit. It is commonly used in digital platforms, licensing, franchising, and content distribution to align incentives and reduce upfront investment.

In a revenue-share agreement, one party (the recipient) receives a percentage of revenue earned from sales or usage while another party (the provider or platform) retains the remainder. Revenue may be calculated on gross revenue or net revenue; gross revenue means total receipts before deductions, while net revenue subtracts costs such as refunds, chargebacks, taxes, and processing fees. Terms may specify timing of payments, minimums, or caps, and may include audit rights.

Common models include fixed percent of gross revenue, tiered percentages that rise with volume, net-revenue sharing after certain costs, and blended or milestone-based schemes. Some agreements include revenue sharing only for specific products, regions, or time periods, and may adjust automatically with inflation or performance metrics.

Applications span digital marketplaces and app stores, affiliate programs, streaming platforms, resellers, and licensing deals. Revenue sharing can incentivize partners to promote adoption, handle distribution, or curate content, while allowing the primary owner to retain control over pricing and customer relationships.

Negotiation considerations include the relative value contributed, customer ownership, costs of customer acquisition, risk, and the durability of the revenue stream. Advantages include lower upfront cost and scalable growth; drawbacks include revenue leakage, accounting complexity, reduced visibility into margins, and potential misalignment of incentives.

In practice, revenue-share agreements are governed by contracts and subject to applicable accounting and tax rules, including revenue recognition standards and audit provisions.