Fraud Has Become the Latest Hurdle for Music Streaming

Twitter’s recent housecleaning of some 70 million fake and automated accounts illuminates just how pervasive audience manipulation has become in the digital era. For Twitter, the fake accounts can create a shadow army of followers that has comparatively little monetary effect. But perform the same manipulation with music streams, and it constitutes fraud.

Tidal has found itself awash in accusations of data manipulation. As recently as May, Norwegian newspaper Dagens Næringsliv and the Norwegian University of Science and Technology (NTNU) accused the Jay-Z-owned service of falsifying tens of millions of streams for Beyoncé’s “Lemonade” and Kanye West’s “The Life of Pablo” albums. While Tidal has denied the claims on multiple fronts, a company rep tells Variety that several investigators are currently on the ground at the company’s offices looking into a potential data breach.

Fraud is applicable because there’s a tangible price tag involved in the consumption of a song: Labels and other rights owners are paid on a pro-rata basis, according to proportional volumes of on-demand streams. The average per-stream payout may not look like much — $0.004 for Spotify, slightly more for services like Apple Music and Tidal ($0.008 and $0.012, respectively), although exact rates depend on the type of artist or song.

But they can add up. A top hit like Ed Sheeran’s 2017 monster “Shape of You” would distribute millions of dollars in performance royalties to its songwriters and even more to the master-rights owner. Using Goldman Sachs’ projection that the streaming sector will hit $34 billion by 2030, millions of dollars in fraudulently acquired funds could be making their way through the royalty chain. Though unlike Twitter, which wiped out 6% of its users, the number of fake music streamers has not been determined. Says one major label head: “It’s not something we’re currently concerned about, but that’s not to say we won’t be in the future.”

“Music streaming payouts are a zero-sum game,” says another industry insider. “It is imperative that services are vigilant and sophisticated in their controls to ensure that streaming fraud doesn’t dilute payments to the artists who have rightfully earned those payments.”

Here’s how “playola” works at playlist-promotion companies like Spotlister: A customer pays the company to secure prominent placement of a song on key playlists, such as those on Spotify. When a track is uploaded, it is analyzed and its metadata is used to send it to the most appropriate playlists.

But that’s not the only way to game the system. In 2017, Post Malone’s label, Republic Records, found itself the center of controversy for a seemingly sanctioned loop of the hook to his song “Rockstar” that was posted on YouTube. Although it contained only a snippet of the tune, it played continuously for three minutes and 28 seconds and quickly racked up more than 40 million views.

“It’s pretty easy to buy guides online on how to stream your own content repeatedly.”
Christine Barnum, CD Baby director of finance

Two months later, YouTube acknowledged, “Loop videos that feature misleading and inaccurate metadata violate YouTube policies, and we are actively working to have them removed.”

But earlier this week, the New York Times published a piece titled “The Flourishing Business of Fake YouTube Views” in which it contended that “tens of millions of fake views” make it through the platform’s anti-fraud detection triggers daily.

Spotify has kicked outlets like Spotlister off its platform on a case-by-case basis — stand-alone sites like Social Media Experts, Streamify and StreamKO offer “Spotify promotion” with prices ranging from $5 to $995 — but concerns remain about whether that enforcement is being replicated meaningfully across entire platforms. And if not, are the labels or the streamers themselves complicit in royalty fraud by transferring payouts? The legal consequences for fraud convictions, and even of conspiracy to defraud, include hefty fines and up to five years in prison.

“We’re seeing an uptick in the type of fraud where people are distributing their content through us and signing up with a legitimate credit card, but then their intent is to manipulate streams and rip off a [digital service provider],” Christine Barnum, director of finance at CD Baby, tells Variety. “It’s pretty easy to buy guides online on how to stream your own content repeatedly. There are also more instances of well-meaning artists accidentally signing up for some sort of ‘marketing service’ that’s actually committing fraud.”

Moreover, on Spotify’s free tier, ad fraud is also becoming more prevalent. Spotify had to decrease its total reported content hours streamed in 2017 by 500 million, due to 2 million listeners who used unauthorized apps that blocked ads on the service. With freemium, there is “not only more susceptibility to fraud but also less incentive for Spotify to do something about it,” argues Rami Essaid, cofounder of bot-defense start-up Distil Networks. “With the subscription model, there’s a finite number of dollars to split up, and if part of that goes to fraud, no one else in the ecosystem is happy.”

Interestingly, the Q2’18 report still included these aforementioned, suspicious ad-blocking users — which account for just under five percent of the company’s total ad-supported base — among the service’s 180 million total monthly active user count.

“In general, we should not think of fraud as the polar opposite of what Spotify and other platforms do,” says Patrick Vonderau, a professor at Stockholm University who successfully forged fake Facebook and Spotify accounts for his research on streaming. “I do not believe that bots are a total breach with Spotify’s own informational norms. As reports have shown, the system can be easily gamed. A word like ‘fraud’ does not acknowledge these fleeting boundaries between what is legal and illegal, acceptable or not.”

Some startups like Rebeat are building independent solutions for labels to monitor and detect irregular streaming activity on their content. Others have suggested a “user-centric” royalty distribution model for premium tiers, whereby payouts are determined on the individual subscriber level rather than on the aggregate company level. For instance, if a subscriber paying $9.99 a month for Spotify listens exclusively to Rihanna, Rihanna will get all of that user’s $9.99, rather than having that cost distributed pro-rata among the platform’s millions of artists. That way, a bot generating artificial streams would simply be capped by the subscription fee.

But that still doesn’t account for streaming services’ increasing reliance on advertising, especially as they expand into under-banked markets across Asia and Africa. As the potential scale and business models of music streaming increasingly mirror those of Facebook, Twitter and other social media platforms, they are inevitably facing the same rogue activity, not to mention the same incentives — or lack thereof — to take action.

For its part, Spotify stated in a just-released second-quarter earnings report, “We continue to work to identify and remove users from our reported metrics that we consider to be ‘fake’ users based on various criteria,” with the caveat that “some such users may remain in our reported metrics because of the limitations of our ability to identify their accounts.”

COMMENTS


im literally doing this on tidal now by streaming my own music overnight. i just didnt see why not now that i have premium on it. they pay so much better than spotify will ever


This has been a problem since MySpace. Why would anyone believe that those bots magically went away? Mandy Perkins, signed to Sony based on having 4 million play, spins, followers, whatever they were called, on MySpace. Goes on tour. Turns out she had zero followers/fans.. All fake. Why would now be any different?


Interesting article especially the mention of the “user-centric” royalty distribution model. I never understood why these companies operate on a platform pay out basis. On the other hand there is an interesting company called Resonate which is working on disrupting the current streaming model.


Stories like this highlight the absurdity of awarding money, a) based on listens and b) involving a zero sum game. The record industry needs to change and start keeping track of ownership of digital downloads. This is true record ownership, brought forward to the digital age. And the book publishing and movie industries should do the same.


It’s interesting that you raised Post Malone’s ‘Rockstar’ on YouTube. But that loop was hardly fraud (not sure if you were implying that given the focus of the article). And there’s nothing illegal about remixing your own song and re-releasing it.

Instead, the loop was designed to tease the track, while denying YouTube access to it given its horrible payouts. Instead, why not shuttle people to higher-playing platforms?


Nice, how about write an article on how the record companies, and now the downloading and streaming services have been ripping off the artists for years? I was personally robbed by The Orchard, the digital distribution service that spread my music around the world without a license, refused to pay me anything, basically told my lawyer to pound sand because I wasn’t big enough to last through a protracted lawsuit. In their government filing for investors they even state that they may be open to lawsuits since they don’t pay all of the artists. So, if you’re big enough to successfully sue them they’ll pay you, if you’re not they’ll cheat you and steal from you. I’d like to see that article.


The labels are the biggest fraudsters. They are partial owners of Spotify and they create hundreds of millions of fraudulent spins of their artists via bots and offshore paid playlist players (Tidal did it too, creating fake numbers to keep the money inside — Kanye, Beyonce, as partial owners — but Tidal are amateurs compared to the big labels/streamers.)

The labels also own the playlist companies — every label has created companies to make playlists, each one with 70% of their own artists (plausible deniability by appearing nonpartisan). The vast majority of the popular playlists aren’t by some single user making a cool list, it’s a label employing 40 people to make, get fake plays and promote (to blogs, media, etc.etc.) Spotify loses about a billion a year. How is this acceptable? Because it money that gets transferred to the labels which means CEO bonuses. And because the labels are partners in Spotify, there’s little chance of them policing themselves for fraud. It would decrease their own payments.

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