Revenue Sharing Business Models

By Gambling Insider
NSoft CFO Igor Marković writes exclusively for Gambling Insider, delivering insight into revenue sharing business models in the betting industry

Revenue sharing has its advantages; I cannot say this is ultimately the best way in accomplishing KPIs (or profitability), but I can assure you it works.

Revenue sharing refers to firms’ practice of sharing revenues with their stakeholders. Thus, in this business model, advantageous properties are merged to create symbiotic effects in which additional profits are shared with partners participating in the extended value creation. One party can obtain a share of the revenue from another that benefits from increased value for its customer base. In short, it’s fair.

We believe the revenue share model NSoft prefers is the best way for both sides. It brings growth, prosperity, revenues and profitability for all parties included in this business solution. It is a partnership: in stable times companies grow and make progress together; bringing new solutions and becoming market leaders from both sides, by doing what we know best in our industry separately.

On the other hand, in bad times, and especially with Covid-19 restrictions, a client knows that even in such difficult circumstances, it has to have trust in its partner. A revenue share model means companies share good and bad results and it is in both parties’ best interest to always overcome obstacles as soon as possible.

This model is the most profitable solution in the long run. We see it every day, as understanding our clients’ needs and the specifics of every single market gave us specific insight. We believe it’s the best practice worldwide.


Tracking revenue sharing

As previously mentioned, in this business we are partners. Also, in the revenue sharing model, it is fully understandable and clear about how revenue is collected, measured and distributed. The events that trigger revenue sharing, such as a currency, period, price and hold are always visible to everyone involved, so contracts always outline these methods in detail.


Revenue share model in practice

If the operator has gaming revenue, the supplier receives a share of it. If the operator has higher revenue, then the supplier will get the same, if not an even smaller share of it.

On the other hand, operators can make losses. The supplier then can apply unique risk management systems, and continues to provide products and services without charging share in those periods of losses.


Benefits of this model for operators:

A clear benefit for the client is that there will be no capital investment needed to purchase a product or data. This is the biggest and most important item on the pro list. In this case, a betting supplier is the one who invests in the client, so to speak. This is sometimes the deciding factor for startups to choose one or the other operator, as the initial investment can be high and limiting for new companies.

Another opportunity and option for operators using a revenue share model gives the affiliate the freedom to work in their own way, in their own home countries. On the other hand, the supplier does its best and the affiliate does its best. It’s a perfect match.


Different revenue model types

Of course, there are a lot of other revenue model types, including:

A transaction-based model, a classic way for any business to make money. The revenue from this is generated by directly selling an item or service to a customer.

Licensing/one-time purchases, entailing selling software products by licence, used by a single customer or a group of users; for example, a majority of video games.

Unlike licensing, subscription/recurring payment enables a user to receive access to the software by paying a subscription fee on a monthly/annual basis. Popular examples include Netflix, Spotify and Adobe products.

The pricing tactic with pay-per-use is mostly utilised by different cloud-based products and services that charge for the computing powers, memory, resources and time used. Examples of this are Amazon Web Services and Google Cloud Platform.

One type of monetisation app is freemium/upselling, where a user may access the main project for free but charge for additional functions, services, bonuses, plug-ins and extensions. Companies that adhere to this are Skype, Evernote and many video games.

Lastly, and certainly not the least, there is also hybrid pricing, an advertisement-based revenue and commission-based model. Revenue sharing is a somewhat flexible concept that involves sharing operating profits or losses among associated financial actors. Revenue sharing can exist as a profit-sharing system that ensures each entity is compensated for its efforts.