The Royalty Drain: Combating Streaming Fraud In The Music Industry

In the vibrant digital landscape of modern music, streaming platforms have revolutionized how artists connect with fans and earn a living. Yet, beneath the surface of soaring play counts and global reach lures a growing, insidious threat: music streaming fraud. This manipulation of streams impacts royalties, distorts charts, and ultimately hurts the livelihoods of legitimate artists and the integrity of the entire music ecosystem. CTX Connect delves into the streaming fraud issue to uncover who’s at stake and what collective actions are required to combat it.

Deceiving the Algorithm: A Look Inside Streaming Fraud

Music streaming fraud involves deceptive tactics designed to artificially inflate play counts, engagement metrics, and chart positions on digital streaming platforms (DSPs). The primary goal is often to generate illegitimate revenue or create a false sense of popularity.

The methods employed by fraudsters are increasingly sophisticated:

• Bots and Automation: This is the most prevalent form. Automated software programs (bots) or scripts are used to repeatedly play songs, often from thousands of fake or hijacked accounts. These bots may loop songs, try to simulate varied human listening patterns (e.g., listening for just over 30 seconds to trigger a monetized stream), and create numerous fraudulent accounts to increase perceived unique listeners.
• Streaming Farms (Click Farms): These involve networks of physical devices (like old phones) or virtual machines continuously streaming music. While some are automated, others might have human operators initiating plays to simulate authentic engagement at scale.
• Account Takeover (Hijacking): Fraudsters gain unauthorized access to legitimate user accounts (often through stolen credentials). Using real accounts for fraudulent streams can make detection more challenging, as the activity appears to originate from genuine users.
• Playlist Manipulation Services: Deceptive services promise artists increased streams by placing their music on “botted playlists.” These playlists appear legitimate but are primarily designed to generate artificial streams for the tracks they feature. Artists may unwittingly (or knowingly) pay for placement on these fraudulent lists.
• AI-Generated Content Exploitation: A more recent and alarming development involves fraudsters using readily available AI music generation tools to create vast catalogs of low-quality or generic tracks under fabricated artist names. They then use bots to stream these millions of tracks a smaller number of times each, aiming to generate royalties from individual streams while flying under the radar by not having any single track or artist accrue a suspicious number of plays. This was notably highlighted when Universal Music Group flagged AI-music service Boomy for alleged bot activity, leading Spotify to remove tens of thousands of AI-generated songs.

The underlying vulnerability for many of these schemes is the “pro rata” royalty model, where a platform’s total subscription revenue is pooled and then distributed to rights holders based on their percentage share of total streams. This incentivizes fraudsters to inflate stream counts to capture a larger slice of that revenue pool, regardless of whether actual human listeners are involved.

The Victims of Deception & True Cost of Streaming Fraud

The repercussions of music streaming fraud cascade throughout the entire music industry, harming virtually every stakeholder:

• Legitimate Artists & Songwriters: This group bears the brunt of the damage. Fraudulent streams dilute the royalty pool, directly siphoning money that should go to genuine creators. This means fewer earnings for real artists. Beyond finances, artificial streams distort charts, algorithmic recommendations, and perceived popularity, making it harder for genuinely talented artists to gain visibility and secure opportunities. Artists unknowingly caught in fraudulent schemes can also face severe reputational damage, the withholding of legitimate royalties, and even permanent account bans from DSPs and distributors. The case of Benn Jordan (The Flashbulb), whose entire catalog was removed by his distributor due to detected artificial streams he asserts he didn’t commit, underscores this harsh reality. Similarly, singer-songwriter Jonah Baker received a strike notice from DistroKid for unexplained artificial streams.
• Digital Streaming Platforms (DSPs): Fraud erodes user and artist trust in the platform’s integrity and chart accuracy. It also leads to wasted advertising revenue (as bots are served ads) and forces platforms to invest heavily in costly fraud detection systems.
• Labels, Distributors, and Publishers: These entities face direct financial penalties from DSPs when fraud is detected within their distributed catalogs. They also incur significant operational burdens in identifying, investigating, and addressing fraudulent activity. Their reputations are at stake if they are perceived as facilitating or not adequately combating fraud.
• Listeners/Fans: Fraudulent activity makes it harder for fans to discover genuinely popular or emerging artists, as charts and recommendations are skewed. It diminishes their trust in the authenticity of the music ecosystem.

Fighting Back: Building a Fraud-Resilient Music Ecosystem

Combating streaming fraud demands a collective, multi-disciplinary approach with clear roles and enhanced collaboration across the entire music value chain.

1. Digital Streaming Platforms (DSPs): As the primary custodians of streaming data, DSPs hold the most powerful tools. They must:
   • Invest in Advanced AI/ML: Continuously develop and deploy sophisticated algorithms to detect unusual streaming patterns, bot behavior, and suspicious account activity.
   • Enhance Data Sharing: A critical need, as highlighted in recent industry discussions, is for DSPs to share more real-time, granular fraud signals and intelligence with labels and distributors. This crucial behavioral data is currently often held in “platform silos.”
   • Implement Stricter Policies & Penalties: Consistently apply penalties like royalty withholding, content takedowns, and account bans for confirmed fraud.
   • Explore Alternative Payment Models: Actively consider shifting from the pro-rata model to a user-centric payment system. In a user-centric model, a subscriber’s monthly fee is distributed only to the artists they actually listen to. This fundamentally changes the incentive structure, as bots (which don’t pay subscription fees) would generate no revenue, effectively “wiping out” the financial incentive for most streaming fraud. While major labels currently benefit more from the pro-rata model, the long-term integrity of the system arguably depends on such a shift.

2. Distributors: Serving as the gatekeepers between artists and DSPs, distributors must:
   • Implement Robust KYA (Know Your Artist) Processes: Strengthen identity verification and continuous risk monitoring to prevent fraudsters from even onboarding their music.
   • Proactive Monitoring & Due Diligence: Utilize their own analytics to spot anomalies in streaming patterns within their catalogs and reject suspicious content (e.g., low-quality, AI-generated tracks designed solely for fraud).
   • Artist Education: Crucially, educate their artists about the severe risks of “guaranteed stream” services and promote organic growth strategies.
   • Collaborate with DSPs: Actively participate in initiatives like the Music Fights Fraud Alliance (MFFA), a global task force comprising major independent distributors (DistroKid, TuneCore, Believe, Downtown, UnitedMasters, etc.) and DSPs (Spotify, Amazon Music, YouTube Music, SoundCloud). Launched in 2023, the MFFA aims to create a shared database of fraud markers to track, investigate, and respond to fraudulent activity in real time.

3. Rights Holders (Artists, Songwriters, Labels, Publishers):
   • Vigilance & Self-Protection: Artists must educate themselves on how fraud works and avoid any “too good to be true” promotional services that promise guaranteed streams. They should monitor their own analytics for suspicious activity and report it to their distributors.
   • Focus on Organic Growth: Building a genuine fanbase through quality music, real engagement, and authentic promotion is the only sustainable path to success.
   • Advocacy: Continue to advocate for fairer payment models and greater transparency from platforms regarding fraud detection and data sharing.

4. Tech Professionals:
   • Innovation in Detection: Data scientists, AI engineers, and cybersecurity experts are vital in developing the next generation of fraud detection algorithms, tools to identify bot networks, and solutions for securing accounts against hijacking.
   • Preventing AI Misuse: Developing methods to detect and flag AI-generated content that is clearly intended for fraudulent use.

5. Legal Experts & Law Enforcement:
   • Prosecution & Deterrence: They are essential for prosecuting fraudsters, which serves as a powerful deterrent. Successful legal actions can send a strong message across the industry.
   • Policy & Regulation: Legal experts advise on robust legal frameworks and industry standards to combat digital fraud more effectively. They also provide crucial defense for innocent artists wrongly caught in fraud crackdowns.

Conclusion

Music streaming fraud is a persistent and evolving challenge, but it’s not insurmountable. While some argue that it will exist as long as the pro-rata model does, the collective efforts of the industry – from artists diligently monitoring their work, to distributors vetting content, to DSPs deploying advanced tech, and through collaborative alliances like the Music Fights Fraud Alliance – are making strides. By understanding the issue, who it affects, and the vital role each stakeholder plays, the music industry can work towards a fairer, more transparent, and ultimately more rewarding ecosystem for all genuine creators and fans.