In payment information, especially streaming services, the term "prorate" may appear frequently.
The prorate is the percentage quota applied by each channel on the benefits generated by the songs distributed through it. It is established by each platform and it does not affect the confirmed royalties.
(The numbers expressed below are only indicative for the example. The same calculation is valid for any channel, as long as its percentage ratio is known.)
To calculate the prorate, the channel uses your accounts data, comparing the number of reproductions in your catalog with the total reproductions made by the service.
Based on this, they obtain the activity ratio of your account in relation to the total number of accounts, allowing them to transfer the net income (discounting management expenses and taxes).
For example, a channel has a prorate of 50%.
1. Channel revenue
This channel receives a gross monthly income of € 10,000 for its subscriptions, of which you must pay:
- VAT (€ 1489)
- Processing fee (€ 500)
- Management fee (€ 680)
Net income becomes € 7331
2. User activity ratio
If you have accumulated 1000 streams on your account, and there has been a total of 10000 streams in the channel, your activity ratio represents 10% of the shares.
3. Application of the prorate
The prorate is applied to the net total generated by the channel, which are the benefits that are automatically granted to the platform. In this case: 50% x € 7,331 = € 3,665.5. This would be the total benefit that would be shared among End Users.
4. Login for the user
On this total, the activity ratio must be applied. In this case, there has been an activity ratio of 10%.
Therefore, the following math is applied: 10% x € 3,665.5 = € 366.55.
These € 366.55 would be the final benefits for the End User who has sent their music to the channel, and those that would be paid to the La Cupula Music account and which are reflected in the sales report.