Revenue sharing is the distribution of the total amount of income generated by the sale of goods or services between the stakeholders or contributors.
It should not be confused with profit shares. As with profit shares only the profit is shared, that is the revenue left over after costs have been removed.
Revenue Shares are not the same as stock shares which may be bought and sold and the value may go up and down.
Revenue shares are often used in industries such as game development were the studio doesn't have sufficient capital or investment to pay up front or where the studio or company wishes to share the risks and rewards with their team members. It allows the members / employees to realize returns as soon as revenue is earned before any costs are taken out.
Revenue sharing in Internet marketing is also known as cost per sale, in which the cost of advertising is determined by the revenue generated as a result of the advertisement itself. This method accounts for about 80% of affiliate marketing programs, primarily dominated by online retailers such as Amazon and eBay.
Web-based companies including HubPages, Squidoo, Helium and Infobarrel also practice a form of revenue sharing, in which a company invites writers to create content for a website in exchange for a share of its advertising revenue, giving the authors the possibility of ongoing income from a single piece of work, and guaranteeing to the commissioning company that it will never pay more for content than it generates in advertising revenue. Pay rates vary dramatically from site to site, depending on the success of the site and the popularity of individual articles.
In professional sports league, "revenue sharing" commonly refers to the distribution of proceeds generated by ticket sales to a given event, the amount of money distributed to a visiting team can significantly impact a team's total revenue, which in turn affects the team's ability to attract (and pay for) talent and resources. In 1981, for example, the Scottish Premier League changed its policy from splitting a match's receipts evenly between its two competing football teams over to a system in which the hosting team could keep all of the proceeds from matches hosted at its facilities. This move is generally believed to have negatively affected the league's parity and enhanced the dominance of Celtic F.C. and Rangers F.C.
The United States government implemented revenue sharing between 1972 and 1986, in the form of congressional appropriation of federal tax revenue to states, cities, counties and townships. Revenue sharing was extremely popular with state officials but lost federal support during the Reagan administration. In 1987, it was replaced with block grants in smaller amounts to reduce federal revenues given to states.
In Canada, "revenue sharing" refers to the practice in which one level of government shares its revenues with a sub-jurisdictional government. For example, the Canadian federal government has an agreement to share gasoline tax revenue with its provinces and territories.