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
What it is confused with
- Per-stream rate The per-stream rate is an OUTPUT of whichever model is in use, not an input. This is why no fixed per-stream rate exists and why every published figure differs.
- Payout threshold Thresholds decide whether a track is eligible to be paid at all. The pool model decides how the money is divided among eligible tracks.
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