Wednesday, November 26, 2008

Sign on the line that is dotted

I'm a business lawyer. The company which is my client is essentially a deal machine -- with many different and differently structured revenue streams flowing in and out. I see a lot of contracts cross my desk, and they vary extensively in terms of form, function, structure, content, purpose, etc. And I've been doing this a while.

So there aren't a lot of contract provisions that surprise me. In terms of royalty set-ups and revenue sharing structures, I've seen hundreds upon hundreds of different variations. But this was quite a new one:
8.1 Revenue Share. You shall receive a percentage of the Net Revenue associated with your use of the [Company's] Service. "Net Revenue" means the revenue actually received by [Company] from [clients], less any refunds to [clients] and less expenses related to discounts, taxes, third party commissions, [business] referral fees, payment transaction fees, costs incurred with service providers, distributors, or resellers of the [business] services ordered, cost-of-money/bad-debt fees and other write-offs, currency exchange fees, and applicable [business] and technology fees. You acknowledge and agree that the percentage of Net Revenue that you shall receive and the resulting payment due hereunder shall be determined solely by [Company] and reported and paid on an aggregate basis [...] [italics mine]
Ooookay. Where do I sign?

I suppose this might be what is known as a "black box" revenue sharing structure. We won't tell you what percentage you'll get, or what that percentage will be calculated on. We're going to list a whole bunch of vague deductions we might take, but don't worry too much about that because we're not going to report them to you and in any event you won't ever know what the top line number was to begin with. Oh, and all calculations and payments are in our sole discretion. Sound good? Now, let's go make some money!

1 comment:

Gleemonex said...

Where can I get me one of those?