Answers/Glossary/Pro-rata allocation
Glossary · Royalties
Pro-rata allocation
Pro-rata allocation is the method streaming services use to divide royalties: all revenue in a market and month is pooled, a contracted share goes to rights holders, and that pool is split by each rights holder's share of total streams. Spotify and Apple Music both use it.
Pro-rata allocation is the reason a "per-stream rate" is a result rather than a price. Spotify, Apple Music and Amazon Music do not pay a set amount per play. They add up subscription and advertising revenue for a given country and month, allocate a contracted percentage of it to rights holders, and then divide that pool by share of total streams on the service.
If your recordings accounted for one ten-thousandth of everything streamed in that market that month, you receive one ten-thousandth of the pool. Your payout depends as much on what everyone else did as on what your listeners did.
Two consequences follow that surprise people constantly, and both are structural rather than anyone cheating you.
First, your average per-stream figure can fall while your streams rise. If total platform volume grows faster than platform revenue, the denominator inflates and every stream is worth slightly less. Second, market mix dominates your average. The pool is built per country from local subscription prices, so a surge of plays from a low-priced market dilutes your blended rate even though nothing about your music changed.
The misunderstanding I ran into early: I assumed my rate dropping meant my distributor had changed terms. It had not. The denominator moved. Under pro-rata, the only quantity you control is your numerator.
The alternative model is user-centric allocation, where each listener's own subscription fee is divided among the artists that listener actually played. SoundCloud launched a fan-powered version in 2021 and Deezer has pushed variants. The major services that generate most independent income remain pro-rata.
Field notes from someone who reads his own royalty exports — not financial advice.
Related terms
- User-centric allocationUser-centric allocation is a streaming royalty model that divides each listener's own subscription fee among the artists that…
- Royalty poolA royalty pool is the total sum of money a streaming service sets aside for rights holders in a given market and month, before it…
- Per-stream rateA per-stream rate is the average amount a recording earned per play, calculated after the fact by dividing royalties received by…
- DSP (digital service provider)A DSP, digital service provider, is a streaming service or download store that licenses and delivers music to consumers —…
Definitions on this site describe the United States system. I am an artist who has been through this, not a lawyer.
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