Glossary · Economics

Pro-rata versus user-centric

also filed under: royalty pool model, market-centric, user-centric licensing

Pro-rata and user-centric are two ways of dividing a streaming service's subscription revenue among rights holders.

The mechanism

Under pro-rata, all subscription money for a period goes into one pool and is divided by each rights holder's share of TOTAL streams on the service. Under user-centric, each individual subscriber's fee is divided among only the artists that subscriber actually played. The same listening produces different payouts under the two models, because pro-rata rewards share of total volume while user-centric rewards share of a listener's attention.

A worked example

A subscriber plays one niche artist exclusively for a month. Under user-centric, that artist receives a share of that person's subscription. Under pro-rata, the artist receives a share proportional to their fraction of every stream on the platform, which for a niche act is far smaller.
There is no per-stream rate. There is a pool and a formula.

What it is confused with

Why it matters

Most published per-stream figures are quoted with no mention of the pool model that produced them, which makes them incomparable across services and across time.

Sources: US Copyright Office
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Related: Recoupment · Black box royalties · 360 deal