As there are multiple verification checkpoints and information requirements throughout the platform, too lost has used AI-powered Veriff, a state-of-the-art KYC compliance technology, for identity verification. The move aims to protect labels and artists from streaming scams — potentially putting an end to the rampant industry-wide problem.
Streaming scams, bid streams, copyright infringement – when it ramps up on reputable DSPs like Spotify and Apple Music, it becomes a collective problem for the entire music industry. With that in mind, Gregory Hirschhorn, CEO and co-founder of digital music distribution platform Too Lost, revealed details of the company’s latest release KYC (Know Your Customer) Compliance technology for DMN.
Hirschhorn acknowledges that indie distribution services are the root cause of this problem. “We take full responsibility,” he said. “DIY distributors must continue to develop better solutions to combat this scam.”
The economic damage caused by fraud is great. When industry organizations investigated how deep this fraud pit really is, they came up with shocking numbers.
According to the Mechanical Licensing Collective (MLC), the total amount of unredeemed and unclaimed royalties at the end of 2021 was $561 million. This discrepancy is often due to missing metadata or inaccurate payouts. DMN then examined these figures and concluded that the amount of compensation owed but unpaid for mechanical royalties could actually be much higher.
Earlier this month, DMN also reported that Spotify had removed thousands of songs to combat cheating. In the meantime, Bloomberg revealed that fake tracks could now make up a whopping 10% of all streams, which was also revealed Tricks scammers use to get songs on streaming playlists.
In January, a study published by National Music Center (CNM) in France estimated that 1-3% of all streams in France in 2021 were fake. That equates to 1-3 billion fake streams in a year. With these data points in mind, DMN recently partnered with Too Lost to raise awareness of their KYC initiative.
In an ideal world, 100% of content on legitimate DSPs would be fraud-proof and credible. But is it that easy to protect the space of the music industry?
What are the odds for smaller players and independent artists when an allegedly cheating Dua Lipa reverb track has over 80 million streams on Spotify?
Platforms like Spotify provide a threshold for inadvertently fraudulent content from providers. But when a distributor brings 20 million songs to the platform, that threshold is still a problematic number.
According to Hirschhorn, “There are so many fake artists that have 3 or 4 million listeners a month.” They make $20,000, $30,000, $40,000 a month from reverb versions, remixes and unauthorized sampling. You get paid and nothing happens.” Even if this fraud were discovered, Hirschhorn says, “Most of the time, streaming services and labels don’t seem to have the bandwidth to collect or redirect royalties that have already been paid out.”
Earlier this month Amazon Music, Spotify, Distrokid, Empire, Downtown and others announced their launch “Music Fights Fraud Alliance” (MFFA) – a global task force dedicated to eliminating music streaming fraud. The movement’s mission is to ensure that the global music streaming market is fair and that all members actively contribute to solutions designed to balance the fairness of their businesses.
The newly formed alliance signals strong industry-wide support for Too Lost’s first step with KYC integration. With DIY distributors now controlling 70-80% of all new music uploads, Hirschhorn says, “It’s really important to make sure that we do too.” to protect the legitimacy of new music from this plethora of fraudulent releases.” He added, “We don’t want to dilute the value of the music. We want people to honor and respect the art form and continue to want to pay for it.”
Too Lost’s early efforts to end cheating appear to have yielded promising results. “The goal is to prevent this stuff from touching our platform. Once it hits distribution platforms, it hits Spotify, Apple Music, etc.”
Hirschhorn explains how the latest KYC compliance integration increases security on the platform Veriffan AI-powered identity verification solution that prevents identity fraud.
“With additional checkpoints and the use of Veriff, all new and existing users will be asked to confirm their identity through systematic prompts. We have already suspended over 2,500 user accounts linked to fraudulent activity.”
Too Lost’s updated onboarding process includes ID verification and IP matching. The compliance integration also scans emails for previous internal activity on scam sites and data leak sites. The platform also sends a phantom email to confirm if the email used to verify the Too Lost account is valid. Among other data points, this confirmation protects the system from a hacked address. The platform now also records click behavior and prompts for captcha codes to rule out robot maneuvers.
“We have reported thousands of accounts in the past, deleting content from these users and documenting everything from IP addresses to IDs, first and last names and emails. We are also bringing other distributors on board here.”
Hirschhorn reveals that Veriff has fixed over 95% of its content issues. “This idea of having to show your face and show your ID to open a sales account has put many would-be scammers off, knowing their data is being collected at a very transparent level. For customers with good intentions, this new onboarding process means just an additional 6 seconds on average. I think they also appreciate the security at the bank level.”
Additional checks continue long after the content is uploaded.
Using the Google Images API, Too Lost can also identify copyright owners of cover images. To verify audio data, the platform has set up a multi-stage test that is carried out in cooperation with Audible magicACRCloud and others, as well as manual reviews by the quality control team as needed.
Hirschhorn also emphasizes that “fraud” is often only due to duplication of work. These “innocent mistakes” include an artist changing their name or moving to a different distributor when their content already exists elsewhere. There could also be different metadata points because the artist accidentally entered incorrect information.
The move to KYC and a shared data pool of “bad actors” appears to be a data-driven solution that could potentially nullify a huge music industry problem. Hirschhorn reveals that the company’s efforts have already had a huge impact in reducing fraud.