What are pro‑rata vs user‑centric streaming payment models and how would each change artist payouts?
Executive summary
Two competing rules govern how streaming platforms turn subscription and ad revenue into artist pay: the widespread pro‑rata “one big pot” system that divvies money by market share of total streams, and the user‑centric model that allocates each subscriber’s fee only to the artists that subscriber actually listens to [1] [2]. Proponents say user‑centric would boost niche and fan‑driven artists and better align payments with listener intent, while critics and some academic work warn it could re‑shape incentives, benefit different genres unevenly, and even favor strategic behavior or superstars in some scenarios [3] [4] [2].
1. What pro‑rata actually does and who benefits
Under the pro‑rata model, all subscription and advertising revenue in a period is pooled and distributed to rights holders in proportion to their share of total streams on the platform, so an artist with 1% of streams in a month receives roughly 1% of the royalty pot [1] [5]. That aggregation makes pro‑rata efficient and low‑cost for platforms, but research and industry observers say it tends to concentrate payouts toward the most‑streamed songs and superstars while disadvantaging artists with smaller, dedicated fanbases or niche genres [4] [6].
2. How user‑centric would reallocate money and the expected winners
The user‑centric alternative routes each individual user’s subscription share only to the artists that user listened to during the billing period, meaning a fan’s money directly supports their listened artists rather than being diluted across the platform’s mega‑hits [2] [7]. Studies and pilots — and SoundCloud’s “fan‑powered” rollout — show that certain artists with concentrated, active fanbases can see meaningful gains under user‑centric or fan‑powered approaches; SoundCloud reported 135,000 musicians benefited and some artists averaged ~60% higher earnings in their sample [8] [5].
3. Evidence that the change is not uniformly pro‑artist
But empirical and theoretical work cautions that effects are uneven: several academic papers and a large French dataset simulation found user‑centric could reduce revenues for urban/Rap genres, superstars, and new releases, and that artist‑centric variants might not help professional artists much at all [2] [9] [10]. Some economic models even argue pro‑rata can incentivize higher overall quality or be more “egalitarian” under certain strategic behaviors by artists, so the claim that user‑centric is categorically fairer is contested in the literature [10] [4].
4. Hidden agendas, politics and who’s pushing for change
Calls for user‑centric advocacy often come from independent artists, unions and Nordic organizations who argue fairness for niche creators, while major labels have mixed incentives—some publicly back experimentation, others warn of new biases and genre losers [3] [6] [9]. Platforms weigh transaction costs and competitive positioning: pro‑rata is cheap to run; user‑centric raises accounting complexity and could change listener behavior and marketing value, which is why large‑scale switches are still rare despite pilots [7] [5].
5. Practical implications for artist payouts and the broader music economy
If fully adopted, user‑centric would likely shift revenue from the platform’s most streamed catalog slices toward artists with smaller but highly engaged listener bases, increasing payouts for some independents and reducing income for some high‑volume tracks and genres — but magnitude and distribution depend heavily on real listening patterns and platform design choices [3] [2]. Any transition would also alter promotional economics, playlist power, and label strategies; retrospective simulations risk misestimating outcomes because changing the rules changes artist and platform behavior, a caveat highlighted by former industry economists [9] [4].