Interactive Streaming Pool Formulas

The Interactive Streaming Mechanical Formula

Unlike physical mechanicals (flat per-unit rates), digital interactive streaming mechanical royalties are calculated using complex monthly revenue-sharing matrices governed by 37 C.F.R. Part 385.

The All-In Publishing Pool First, the DSP (e.g., Spotify) calculates the All-In Publishing Pool. This pool represents the total amount owed for *both* performance and mechanical publishing rights. The All-In Pool is calculated as the greater of two prongs:

1. The Headline Rate Prong: A locked percentage of the service's monthly subscription and ad revenue. Under Phonorecords IV, this rate is 15.2% in 2024 (scaling to 15.35% by 2027). $$\text{All-In Pool} = \text{Monthly Service Revenue} \times 15.2\%$$

2. The Total Content Cost (TCC) Prong: A percentage of the money paid by the DSP to major record labels for the master sound recording rights (which is usually around 52-55% of revenue). In 2024, the TCC percentage is 26.2%. $$\text{TCC Prong} = \text{Total Paid to Record Labels} \times 26.2\%$$

Extracting the Net Mechanical Pool Because the All-In Pool covers *both* mechanical and performance royalties, the performance royalties collected by PROs (ASCAP/BMI/SESAC) must be subtracted from the All-In Pool to isolate the mechanical royalties:

$$\text{Net Mechanical Pool} = \text{All-In Pool} - \text{Performance Royalties Paid}$$

This isolated Net Mechanical Pool is what the DSP pays to The MLC to be distributed to songwriters and music publishers based on their share of total streams.