Glossary · Royalties
Royalty pool
A royalty pool is the total sum of money a streaming service sets aside for rights holders in a given market and month, before it is divided among them. Individual payouts are shares of that pool, which is why streaming has no fixed price per play.
The royalty pool is the first term in every streaming payout calculation, and understanding it dissolves most of the confusion about streaming income. A service like Spotify or Apple Music collects subscription fees and advertising revenue in a country over a month. A contracted percentage of that revenue becomes the pool owed to rights holders. Everything artists receive comes out of that pool and nowhere else.
Pools are not singular. There are separate pools for the recording side and the composition side, separate pools for the ad-supported tier and the subscription tier, and separate pools per market. An ad-supported play and a premium play are two different economics that only look like one number when you average them together afterwards.
The composition-side pool in the United States is not negotiated freely either. For interactive streaming, the Copyright Royalty Board's Section 115 formula determines the size of the mechanical pool from the service's revenue, measured against what it pays record labels, with floors tied to subscriber counts. That pooled money goes to The MLC for matching and distribution.
Three things follow. Your payout rises when the pool grows or when your share of usage grows. Your payout falls when platform-wide stream volume outruns platform revenue. And no fixed per-stream rate can exist, because a share of a pool is not a price.
The misunderstanding worth killing: the widely circulated "Spotify pays $0.003 per stream" figure is an average outcome computed after the fact, not a rate anyone agreed to pay.
Independent artist writing from my own statements — for contracts, ask a professional.
Related terms
- Pro-rata allocationPro-rata allocation is the method streaming services use to divide royalties: all revenue in a market and month is pooled, a…
- Per-stream rateA per-stream rate is the average amount a recording earned per play, calculated after the fact by dividing royalties received by…
- Statutory rateA statutory rate is a royalty rate set by law rather than by negotiation.
- BreakageBreakage is money a digital service pays a label or rights holder that is never attributed to any specific track — minimum…
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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