Are 10% of Spotify Streams Really ‘Fake’? — New Report Prompts Conjecture

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Photo Credit: Magnus Hoij / CC by 2.0

Are 10% of Spotify streams really ‘fake’? The latest report from the Financial Times prompts more industry conjecture in a time of AI uncertainty.

On the heels of Swedish newspaper Svenska Dagbladet’s report last week of criminal gangs using Spotify’s royalty system to launder money through artificially inflated stream counts, a new report from the Financial Times has prompted further industry conjecture about the legitimacy of DSP stream counts.

Although few would argue against the simplicity introduced by Spotify’s initial financial model upon its 2011 debut in the US — $10 a month to listen to music online — the distribution of that money back to the artists has long been a hotly debated topic. But the other side of the coin of a system based on simplicity can lead to bad actors utilizing the financial incentives to game that system, which has become increasingly common in the era of content streaming.

According to the Financial Times, JP Morgan analysts found that if someone uploaded their own 30-second track to Spotify and programmed their phone to listen to it on repeat for 24 hours a day, they would receive $1,200 in monthly royalties. Executives estimate that as much as 10% of all music streams are “fake” — artificially inflated from streaming farms where devices run services like Spotify on loop specifically to boost the listening count of these tracks.

“Artificial streaming is a longstanding, industry-wide issue that Spotify is working to stamp out across our service,” Spotify told FT earlier this year.

Indeed, UMG tasked streaming services with cracking down on AI-generated content earlier this year and further spotlighted its endorsement of an “artist-centric” payout model. Deezer has become an early adopter of this new format, but the bigger fish in the pond, like Spotify, have hesitated.

Deezer is a much smaller player in the DSP space, but as France’s top music streaming service, it provides the perfect testing ground for a new royalty payment model. The deal sees Deezer diverting more royalty money toward professional artists, defined as those whose work draws at least 1,000 streams a month, and away from bots and “white-noise” soundtracks, paying more for songs and artists to which listeners are actively seeking.

Deezer’s new payment terms will be implemented in October, while UMG executives hope to announce deals with other streaming platforms in the coming months.

“This is the biggest change to the model in 15 years,” says Deezer’s chief executive, Jeronimo Folgueira, who argues, like many executives now do, that the terms laid out with streaming platforms over a decade ago are outdated. “Music is the only industry where all streams are valued exactly the same, regardless of the quality. A 30-second YouTube video is not worth as much as an episode of Game of Thrones.”

But UMG made Spotify’s participation in such a model a stipulation of the agreement the two entities struck over the summer, according to sources close to the matter. Publicly, Spotify founder and billionaire Daniel Ek has been less than enthusiastic about the artist-centric model, saying the approach “seldom leads to these gigantic differences that most people perceive it to do.”

JP Morgan warns via the FT report that if left unchecked, Spotify’s platform could become “littered with AI-generated rubbish, potentially exploding from 100 million songs to more than a billion in a few years.” The “artist-centric” model laid out by UMG aims to dissolve the financial incentives for AI tracks to proliferate.

That said, UMG’s — and therefore, Lucian Grainge’s — proposed solution will direct more money toward musicians, certainly, but also toward UMG, which already controls nearly a third of the world’s music and takes a cut of the income of a staggering number of superstars like Taylor Swift, Drake, and The Weeknd.