Revenue sharing began in the late-1980s when a company called Rentrak Corporation
began distributing titles amongst a client base of smaller chains and independent video
dealers, while sharing a percentage of the rental revenue with the production studios.
Through revenue sharing, smaller stores are able to purchase titles from a distributor at a
much lower price, in return for sharing part of the revenue from rentals and used-tape
sales. Revenue sharing allows the stores to produce higher levels of inventory, especially
new releases, which increases customer satisfaction and the overall number of rentals.
However, there are downsides to the revenue-sharing system, especially for independent
retailers like Video Vault. One is that the distributors retain control over which titles and
how many tapes the retailers can purchase, then the distributor retains oversight over the
store’s transaction history. Adverse effects of not utilizing the revenue-sharing system are
fewer overall titles, specifically newer releases, which can be detrimental to small chains
and independent dealers. In 2000, Blockbuster reported that 90% of its revenue came from
revenue-sharing contracts, while typical independent retailers like Video Vault only
received 25% of their overall revenue from revenue-sharing contracts.