Starting in 2020, the NFL and the players` union agreed on a revenue split that would pay the team`s owners 53% of the revenue, while players would receive 47%, as reported by CBS Sports. In 2019, the NFL generated $16 billion in revenue, meaning just over $8.5 billion was paid to teams, with the remainder going to players. The practical details for each type of revenue participation plan are different, but their conceptual purpose is consistent in using the benefits to enable separate players to develop efficiencies or develop mutually beneficial innovations. It has become a popular tool within corporate governance to encourage partnerships, increase sales or share costs. Although the development of an engine takes between three and five years, an engine can be in service for up to thirty years with each order. During this time, repair and overhaul would be required to maintain the engine. Given the potential benefits to these production organizations, it seemed logical that the joint use of some of the investments would allow them to be eligible for the awards. Several types of contracts coordinate a supply chain when the product has a fixed price: buyback, volume flexibility and sales discounts. With a repurchase agreement, the supplier agrees to repurchase shares not sold at a price below the original price. Flexible measurement contracts require the supplier to grant a full refund to the distributor up to a certain amount; and in the case of sales contracts, the supplier gives the distributor a discount for exceeding a certain number of sales. Cachon and Lariviere show that with a retail fixed price, buybacks and revenue participation generate the same cash flow, regardless of demand. However, this does not apply to quantitative and firm rebates.
And revenue sharing (as well as price awards) helps coordinate a supply chain when the distributor sets the price of a product, which is not the case. As is well known, risk-sharing contracts are an effective way for a supplier to increase the profit of the channel by sharing with its buyer the risk of asymmetry between supply and demand. This chapter describes an activity to implement two types of risk-sharing contracts that take into account buy-back and revenue participation, looking at cases where each of these contracts needs to be used more appropriately. The activity consists of two exercises in which students act as suppliers, first choosing the contract to be offered and then defining the contractual parameters of one of the types of contracts. When reviewing the results, students find that the profit margin of a product (if it is high compared to a low margin) results in differences in contractual preferences and profit levels.