Revenue sharing refers to the distribution of revenue or the total amount of income that is generated by companies among the shareholders. It can be better understood from the fact that when operating large companies, various stakeholders have to be catered to. The profits obtained should never be limited to the company as there are varied stakeholders and shareholders involved. When at times different entities are taken together to produce or advertise a product, a revenue sharing model is made use of. This is done for ensuring that each entity is compensated in a fair way for the efforts put in. Companies make use of revenue management software for allocation of revenues to the stakeholders. Some more examples can make the concept clearer. Industries including sports and gaming use a sort of revenue sharing model. For instance, gaming studios may lack the funds to pay their team upfront and decide to share the risks or rewards as soon as these start generating revenue. Another similar example is application development for Android and iOS ecosystems. Developers need to pay a specific amount to the respective store for purchases. States or provinces as well can also share the revenues with local governments or federal governments. These can be taken to be as the laws in place which determine as to how much revenue needs to be shared.
Revenue sharing is good because of the many benefits that it provides. Some of these are as listed below:
Shared growth- The structure of revenue sharing permits all of the parties involved in it to share the revenue. The company as well as its shareholders focus solely on generation of sustainable revenue.
Less impact on the bottom line- Revenue sharing takes up a percent of the gross revenue of the investment done. This is an implication that even if the company has a slower rate of revenue for a specific month, there is not much impact on the bottom line.
Control- Once one meets the repay cap, he or she does not have to share future revenue with investors or shareholders. Full ownership and control can be retaining over the company.
Higher chance of funding- There is higher chance of being funded as the focus gets shifted towards revenue growth. Again, the changes in potential investments also become bigger.
Provides better direction- Revenue sharing can do away with equity. Investors can be taken to be as simply creditors rather than just being owners of a business. In all ways there is a better direction and one just needs to focus on growth and higher profits and returns. The focus as well is also on revenue instead of acquisition and that is exactly something that makes success easier.
To calculate revenue sharing, there is a need to take the amount of an individual’s contribution and thereafter multiply the same by the percentage of revenue sharing that was set out. Revenue sharing takes various different forms and each of the iteration involved sharing operating profits or losses among different financial actors. This as well is also used as an incentive program. For example, it can happen that a small business owner might pay associated a percentage-based reward for referring new consumers. It is also made use of to distribute profits from a business alliance.
Revenue sharing is significant as it keeps the stakeholders, shareholders as well as the investors happy. This as well is also a fact that some companies implement it to keep their employees happy by making use of commissions and bonuses. Considering the case of a sports league it can be said that several sports team make use of revenue sharing with the amount of revenue that is collected from sales and merchandise of ticket. All the teams in the National Football League (NFL) draw their revenue and this specific amount of money is been shared among all of the members. With the help of the model of revenue sharing, businesses keep some of the revenue that it receives and splits it among their stakeholders, investors and lastly shareholders. Some companies as well also share this with third-party sellers who sell their products or services on their behalf. In this specific way, the regulator permits the operator to keep some part of the revenue that is received by it starting from selling the product or service. The operator is needed to give the remaining to the customers by means of price reductions, increased investment in facilities or services and refunds as well.
Revenue sharing happens when a government shares part of its tax income with other governments. State governments, for instance may share revenue with local governments while national governments can share revenue with share governments. As mentioned above some other examples are gaming studios may lack the funds to pay their team upfront and decide to share the risks or rewards as soon as these start generating revenue. Another similar example is application development for Android and iOS ecosystems. Developers need to pay a specific amount to the respective store for purchases. Then again, considering the case of a sports league it can be said that several sports team make use of revenue sharing with the amount of revenue that is collected from sales and merchandise of ticket. All the teams in the National Football League (NFL) draw their revenue and this specific amount of money is been shared among all of the members. Thus, these are some of the examples that make it clear as to why revenue sharing is used and how this helps in situations where there are many stakeholders. This can also be said to be as a proven way to deal with conflicts that are common amongst stakeholders and can be said to be disturbing at times. Revenue sharing is significant and should be practiced by companies.
MS in Computer Sci...
I boast excellent observation and analysis skills. I am excellently thorough with the subject knowing all the aspects, a...
400 Completed Orders
42 Student Reviews
M.sc in Electronic...
Allotting responsibilities and giving directions on achieving the targets within the team. Excellent research and creati...
350 Completed Orders
45 Student Reviews
Msc in Nursing fro...
I am in this field for 15 years, which helps me come up with unique topics and cases for students’ papers. I have comp...
400 Completed Orders
125 Student Reviews
MS in Statistics...
I am skilled in creative writing to craft any kind of assignment especially essays, thesis and dissertations of any kind...
360 Completed Orders
45 Student Reviews
I took a MBA degre...
Along with an in-depth knowledge in marketing I am also skilled in composing assignments especially case studies with pr...
300 Completed Orders
51 Student Reviews
MS in Biology...
I am skilled to do research to find proper content for research papers, thesis and dissertation. I give only verified co...
200 Completed Orders
56 Student Reviews
Masters in Account...
I am thorough with the changing financial scenario in US and the factors behind it. I am also updated with the changing ...
250 Completed Orders
34 Student Reviews