Universal Agrees Pro-Rata Is Broken. Its Fix Isn’t Ours.
On October 29, on Universal Music Group’s third quarter earnings call, Lucian Grainge said the quiet part out loud. Streaming services, he argued, treat a flood of Ai generated filler the same as the most loved songs in the world. Then he named the mechanism: “The uniform application of pro-rata payments makes the problem worse.”
Independent artists have been saying some version of that sentence for a decade. Hearing it from the head of the largest record company on earth feels like a win. It is one, partly.
But when the most powerful company in the business agrees the system is broken, the next question matters more than the agreement. Broken for whom? And fixed for whom?
This isn’t a conversion. It’s an escalation.
Universal didn’t discover the problem this quarter. In January 2023, Grainge circulated an internal memo attacking the pro-rata model and committing the company to find an “artist-centric” replacement within the year.
Later that year, Universal and Deezer launched that replacement. It kept the shared pool and added weighting: artists who clear certain listener thresholds get their streams counted double.
So what changed on this call is the target. In 2023 the villains were noise tracks and gamed playlists. In 2026 it’s Ai slop. The diagnosis has stayed the same for three years. So has the cure.
How pro-rata actually works
Every month, a streaming service adds up all its subscription money into one pool. It counts every stream on the platform. Each rights holder gets paid by its share of total streams.
Picture a subscriber named Maya. She pays $10.99 a month and spends 90 percent of her listening on one small folk artist from her hometown. Under pro-rata, her money doesn’t follow her listening. It goes into the pool, and the pool pays out by platform wide market share. If that folk artist accounts for a tiny fraction of all streams, she gets a tiny fraction of Maya’s money. Most of it goes to artists Maya never played.
That’s the core flaw. A subscriber’s money follows everyone else’s habits instead of her own.
The label’s fix: reweight the pool
Artist-centric doesn’t get rid of the pool. It changes the weights inside it. Streams from artists who clear listener thresholds count for more. Streams that look like noise or filler count for less.
That does push money away from junk. But look at who sits above the threshold. On the same call, Grainge said Universal artists accounted for nearly half of the roughly 900 tracks streamed more than 100 million times in the US last year. Management also described what they call the 80/80 rule, their shorthand for the idea that career artists create most of the value in music.
A model that boosts artists above a line will reward whoever already owns the most catalog above that line. That’s not a conspiracy. It’s arithmetic. Universal is acting in its shareholders’ interest, which is its job. The mistake would be treating its fix as the artists’ fix.
The other fix: follow the listener’s money
User-centric starts from a different question. Not “what got streamed most on the platform” but “what did this person listen to.”
Each subscriber’s payment is split only among the artists that subscriber played. Back to Maya: if 90 percent of her listening went to her hometown folk artist, that artist gets 90 percent of her distributable payment. No pool. No weighting. No threshold.
It isn’t perfect. Researchers have flagged real tradeoffs, including that heavy listeners spread each dollar thinner and that total payouts shift in ways that are hard to predict before a platform tries it. The industry hasn’t settled on an answer. But user-centric has one property no reweighted pool can match: the subscriber’s money and the subscriber’s taste point the same direction.
The Ai slop argument cuts the other way
Here’s where Universal’s own case turns against its own fix.
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Ai slop and stream fraud are pro-rata problems because of the pool. A bot farm running thousands of fake accounts, or one uploader dumping ten thousand generated tracks, grabs a slice of everyone’s subscription money. The fraud works because the money is shared.
Under user-centric, that lever disappears. A fake stream can only redistribute the money of the account that played it. If a fraudster pays for a hundred accounts and streams his own tracks, he gets back some of what he paid in. He can’t reach Maya’s $10.99, or yours, or anyone else’s.
Artist-centric fights slop by drawing lines and deciding who falls below them. User-centric fights slop by removing the shared pot that made slop profitable in the first place. One requires the platform and the labels to keep judging which music counts. The other lets listeners decide by listening.
What this means for working artists
Every threshold is a line, and someone draws it. When the line decides whose streams count double, the artists just under it lose twice: once to the pool, and again to the weighting.
Those artists aren’t slop. They’re the brass band that plays the same neighborhood bar every Thursday. The jazz singer with a few thousand devoted listeners. The songwriter whose fans play her record on repeat but who will never crack a major playlist. Their fans are real, and they pay real subscriptions. Under any pooled model, most of that money still leaves.
The question for artists isn’t whether Universal is right that pro-rata is broken. It is. The question is who gets to define “sustained demand.” Under artist-centric, the platform and its biggest licensors define it. Under user-centric, the fan does.
If the pool is broken, why keep the pool?
The biggest label in the world now agrees with what independent artists have argued for years. That’s worth celebrating for about a day or two.
Then comes the harder conversation. Agreement on the diagnosis is not agreement on the cure, and the cure Universal is negotiating with streaming services keeps the shared pool and adds a gatekeeper.
I built SonicCritic on the other answer, in two rails.
Rail One is live today for independent artists. Each subscriber’s money follows that subscriber’s listening, and 88 percent of net subscription revenue, after payment processing, goes to the artists they actually played.
Rail Two is on the roadmap and not live yet. It’s designed to bring licensed label and publisher catalog onto the same listener-first ledger, with a split built so rights holders match or beat what they earn on Spotify. Statutory publishing would be paid through the MLC and PROs, with everything above that going straight to songwriters as a direct, non-recoupable payment.
That’s the point of Rail Two. Labels don’t need a shared pool to get paid fairly. They need listeners who choose their music. It’s one approach, not the only one, but it starts from the right question.
If everyone now agrees the pool is broken, the burden has shifted. It’s no longer on artists to prove pro-rata is unfair. It’s on everyone else to explain why we should keep pooling at all.
