Summary: This article explains how the Subscriber Share model works, including a description of net revenue.
The ‘Subscriber Share’ Model
"Subscriber share" is the revenue share methodology we use on Envato Elements to allocate 50% of net subscription revenue among individual Authors. Please read our article on subscriber share over on the Elements Blog.
Envato is proud to be one of the first businesses to implement subscriber share at scale. However, we didn't invent subscriber share: it was first proposed as a way to make the revenue share of music streaming services fairer to indie artists.
The core idea behind the subscriber share approach is that a subscriber’s money should go to the content and Authors they actually use and value. This is very different to the traditional "big pool" method for dividing up subscription revenue.
How "subscriber share" works
With subscriber share, your earnings as an Author are directly linked to the money collected from each individual subscriber. We look at each subscriber in turn and assign you a share of 50% of their net revenue based on how important your items were to them (i.e your share of all item points they used in that period)
To help bring this to life, let's look at a few simple examples:
Example 1: A single subscriber
For example, let’s say there was only one subscriber, they generate revenue (excluding transactional taxes) of $29 for the month and download items worth a total of 20 item points. The amount available for sharing with the Authors of those items is 50% x $29 = $14.50.
Now imagine that one of the items they used is worth 3 item points. Your items make up 3 points out of the total 20 points used, so you earn 3/20 x $14.50 = $2.18 from that one subscriber for the month.
Example 2: Multiple subscribers
Now let’s expand that example to say 4 subscribers, each with their own usage patterns:
- Subscriber A is the person in the first example
- Subscriber B is a heavier user overall and uses 3 points worth of your items
- Subscriber C only downloaded your items and none from anyone else.
- Subscriber D didn’t actually use any of your items at all
The amount you would earn from each subscriber in this example is shown below.
This example demonstrates a few important things about subscriber share:
- The more subscribers who use your items, the more you earn.
- The greater your share of a subscriber’s usage, the more you earn.
- If a subscriber uses some items but not yours, you don’t share in their net revenue.
- If a subscriber solely uses your items, you get all of their net revenue.
Please note: The above examples are purely illustrative, and your earnings will, of course, vary depending on the number of subscribers, how much net revenue they generate, and which specific items they use in a given month.
What is the effect of subscriber share on Author earnings?
The total amount paid out to Authors is 50% of net revenue. Subscriber share simply affects how Authors earnings are allocated among individual Authors.
We chose subscriber share for Envato Elements because we believe it's the fairest possible way to divide earnings. In an upcoming blog post, we'll explore the rationale for this decision in more detail, but broadly speaking subscriber share encourages Authors to:
- Make items that are broadly appealing to many subscribers.
- Make unique items that do a great job of serving various niches.
- Not spend time making copycat items to target big downloaders.
- Not bother trying to game the system.
Collectively, the above incentives have huge implications for how the Envato Elements content library will evolve over time: it’s not about everyone chasing the big “hits” or "blockbusters", but instead, each Author is rewarded for creating unique, diverse, & valuable content that attracts and retains subscribers.
Net revenue is defined as:
Gross revenue from subscriptions minus taxes (including VAT, GST and other transactional taxes paid by us or the buyer), refunds, reversals, affiliate costs, costs we incur in relation to services offered as part of the Envato Elements subscription (including, without limitation, amounts we agree to pay to third party service providers and other costs we incur in making those services available to subscribers), costs we incur in commissioning or directly licensing content for Envato Elements from non-Authors, discounts and promotional offers, and payment processing fees.
For revenue share calculations, we adjust the subscription revenue received from each subscriber by a set percentage (%) to factor in the overall cost for refunds, chargebacks, affiliate fees, tuts creation, coupons and payment processing fees compared to overall gross revenue. This percentage is reviewed periodically.
Here’s an example to illustrate:
- A subscriber generates $49 gross revenue in a month (excluding transactional taxes),
- The cost of refunds and chargebacks in aggregate across all subscribers was 1% of gross revenue,
- The tuts creation, coupons and affiliate commissions was 4%,
Then net revenue from that subscriber would be $49 x (100% - 1% - 4%) = $49 x 95% = $46.55. We then allocate 50% of this net revenue to Authors using subscriber share.