Streaming platforms distribute the revenues from subscriptions and advertising according to established mechanisms to rights holders. The best-known approaches are the pro-rata model, the artist-centric model, and the user-centric model.
The Pro-Rata Model
All revenues of a platform are pooled together. In this model, artists are not paid based on their actual streams, but according to their share of all streams on the streaming platform within a specific billing period. Additionally, there are various "distribution pools" in this model - depending on the month, the country of origin of the stream, and the type of customer account (subscription vs. freemium). The individual listening behavior of single users has no direct influence on the distribution.
Stores: among others, Spotify, Apple, Tidal, Amazon.
Artist-Centric Model
The Artist-Centric model is a variation of the existing Pro-Rata system. It includes a common revenue pool, but the weighting of streams within this pool is different. Artists who achieve more than 1,000 streams from more than 500 different listeners within a month receive double weighting of their streams. This weighting increases further if a user has actively searched for an artist instead of passively listening to them through algorithmically played playlists. In addition, functional content (e.g., meditation music or nature sounds) is no longer remunerated.
Stores: Deezer
User-Centric Model
In the User-Centric model, the subscription fee of each individual user is considered separately and distributed exclusively among the artists that this user streamed during the respective billing period. Thus, the payout to each artist is directly linked to the actual listening time and frequency, not to their overall popularity on the platform.
Stores: SoundCloud is testing it