Deezer
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More than 1 billion music streams in France — or between 1% and 3% of all streams in the country — were detected to be fraudulent in 2021, according to a report released this week by a French government organization that analyzed data from Spotify, Deezer and Qobuz.
If the report’s number were to hold true for the worldwide music market — which the IFPI valued at $16.9 billion in 2021 — that would mean approximately $170 million to $510 million of streaming royalties are being misallocated globally. This is roughly in line with a 2019 estimate of $300 million lost to streaming fraud cited during Indie Week.
The Centre national de la musique (CNM), an organization created by the French government in 2020 that operates under the Ministry of Culture, found that fraud is widespread in France, the fifth-largest music market, to a sobering degree: “Irregularities are spotted” on both major-label and independent releases, national and international albums, old catalog and fresh new singles alike, the CMN says in its 56-page study. “The methods used by fraudsters are constantly evolving and improving,” it notes, “and fraud seems to be getting easier and easier to commit.”
The genres which had the highest percentage of fraudulent streams detected in the CNM’s report were background music (4.8% on Deezer) and non-musical titles (3.5%). While the raw number of fraudulent streams detected was highest in rap — the most popular genre in France — that represented just 0.4% of overall plays in the genre on Spotify and 0.7% on Deezer.
CNM’s report appears to be the first country-wide investigation of streaming fraud. “We’re happy with the effort by the CNM and the French government as a whole to look into this and take it seriously,” says Morgan Hayduk, founder and co-CEO of Beatdapp, a Canadian company that provides fraud detection software to streaming services, labels, and distributors. “This issue deserves the weight and attention that they gave to it.”
CNM’s report comes with several caveats, however. The organization’s data does not include information from Apple Music, YouTube and Amazon, who declined to share information about fraud on their platforms. According to a recent estimate from MIDiA Research, those three services account for slightly more than 35% of global streaming subscriptions. (MIDiA did not share country-level figures.)
In addition, Hayduk says, the report only looks at country-level data. This means it does not account for VPN usage that allows fraudsters to mask their country of origin.
Bad actors committing streaming fraud often “rotate through multiple countries redirecting traffic constantly,” says Andrew Batey, Beatdapp’s other co-CEO. “It’s not uncommon when we find fraud cases to see 15 devices spreading plays across 30 countries.” To catch that, he says, “you need a global view.”
Fraudulent streams, once defined by former Napster executive Angel Gambino as “anything which isn’t fans listening to music they love,” have become a major topic of music industry concern in Germany, France and Brazil. That’s because undetected fraudulent streams can impact market share calculations and divert money from honest artists.
The countries have taken different approaches to combat this fraud. The IFPI led a legal effort to shut down German websites that offered streams for cash starting in 2020. The organization made the case that manipulating play counts allows artists to create a false impression of popularity, ultimately misleading consumers and violating Germany’s Unfair Competition act.
In Brazil, law enforcement worked in conjunction with Pro-Música, IFPI’s Brazilian affiliate, to shut down 84 stream-boosting sites in the country in 2021. Prosecutors there argued that sites that offered fraudulent streams were violating Brazil’s Consumer Defense Code and treated the activity as a criminal act.
Brazil’s coordinated effort — dubbed Operation Anti-Doping — determined that the fraudulent streams were actually being generated outside of Brazil, illustrating the limitations of a single-country approach to fraud reduction. “No company in Brazil has the technology to make these fake streams,” Paulo Rosa, Pro-Música’s president, told Billboard in 2021. “This technology comes from websites hosted in Russia.”
The U.S. industry has historically appeared less bothered by streaming fraud — or at least less willing to acknowledge its existence publicly, with executives and streaming services reluctant to discuss the subject. This may be starting to shift, however. At a Music Biz panel in May, SoundCloud vp of strategy Michael Pelczynski noted that the current streaming ecosystem is rife with “very prevalent fraud and abuse,” and that this activity has “cultural ramifications.” When undetected fraudulent streams “start influencing the way we measure the success of music, we are literally supporting inauthenticity,” Pelczynski said.
The CNM appeared heartened by the fact that, since the summer of 2021, it has seen “the growing mobilization of platforms, distributors and producers” worried about fraud, resulting in the creation of “dedicated teams” and the outlay of increased resources to battle “manipulation.”
But there remain several key challenges when attempting to tackle fraud. The lack of transparency from some streaming platforms, and the inability to push toward assembling a comprehensive global data set, means that the scale of the problem is still unknown.
What’s more, as the CNM points out, it’s nearly impossible to punish those engaged in fraud because they are rarely identified. The penultimate section of the report lays out potential legal remedies that could be used to fight fake streams in France — if authorities were able to prove that bad actors violated laws related to illegal hacking or unfair business practices. They include fines of up to 300,000 euros ($324,000) and prison sentences of up to five years for perpetrators.
The CNM pledged to release a follow-up report in 2024.
As streaming became the dominant mode of music consumption, fraud and “fake streams” have been regarded as a minor nuisance — generally acknowledged but seldom worried about. Most industry executives tend to see this activity as a way for aspiring acts to inflate their numbers, and thus their commercial potential, or as an avenue for grifters to steer money into their pockets by running up plays of white noise or rain sounds.
At least since this summer, however, SoundCloud has detected evidence of fraudulent streams or manipulation on multiple releases from both notable independent acts and major-label artists, including hitmakers with track records of successful singles, according to two sources familiar with the company’s operations who spoke on the condition of anonymity. And this is not unique to SoundCloud. This summer, Deezer executive Ludovic Pouilly told the French investigative publication Les Jours that it has become more common to see “artists in the top 200 who have millions of real streams” have fake streams as well.
Streaming services are increasing their effort to fight the fakes. In a statement, a spokesperson for SoundCloud said, “We take the issue of stream manipulation extremely seriously and make every effort towards identifying and mitigating inauthentic plays.” It’s not alone: Earlier this year, a Spotify spokesperson told Billboard, “Stream manipulation is an industry-wide issue that Spotify takes very seriously.” SoundCloud also works with a third-party company that “specialize[s] in bot detection” to fight stream manipulation, an executive said at a Music Biz panel in May. (The panel had a pointed title, “They’re Coming For Us: Fraudsters & How We Stop Them.”)
Streaming executives say there are a handful of ways to fraudulently boost an artist’s numbers, including harnessing bot networks or fake or stolen user accounts, and that this activity is becoming “more intense,” as Pouilly put it. At Music Biz, Napster senior vp and general counsel Matthew Eccles noted that fraud on the platform “increased over COVID.”
In fact, the current streaming business is rife with “very prevalent fraud and abuse,” according to SoundCloud vp of strategy Michael Pelczynski, who spoke at the same panel. This abuse has “cultural ramifications,” Pelczynski added: If fraudulent streams go “undetected and not policed, and [they] start influencing the way we measure the success of music, we are literally supporting inauthenticity.”
The level of fake streams detected varies by service and region. At one point, bots on Pandora were generating “a large, large fraction of spins,” according to George White, senior vp of music licensing at SiriusXM, “nearly equaling” the amount coming from human accounts. Pouilly told Les Jours that “7% of the volume of daily streams [on Deezer] is now detected as fraudulent.”
The Merlin Network, which handles digital licensing for many independent labels and distributors, used to send members a monthly report detailing the percentage of fraudulent streams from their releases on Spotify; this February, 2.5% of ad-supported streams and 1.2% of the plays from premium Spotify accounts were identified as fraudulent. (Asked about the issue, a spokesperson for the platform said that stream manipulation was “an industry-wide issue.”) The ad-supported number was nearly 10% at one point in 2020, according to one executive who received the report.
As evidence of what Pelczynski dubbed “prevalent fraud” grows, music executives worry that artists who are playing by the rules will start to feel pressure to pad their numbers in order to keep up with rivals — especially in an increasingly crowded landscape where it feels harder than ever to stand out. Paying for fraudulent streams “will become a marketing expense that everyone needs to employ if it’s left unchecked,” White warned at Music Biz.
Eccles from Napster worried that the music industry could enter a phase like professional cycling decades ago, when cyclists felt compelled “to dope” just to compete at a high level. It is “key,” Eccles stressed, “to avoid a situation where that happens in music.”
Deezer named Maria Garrido chief marketing officer. Based in Paris, Garrido will lead the company’s marketing team and help further the development of the Deezer brand. She will report directly to CEO Jeronimo.
Ron Savage was named vp and executive director of the Berklee College of Music, where he previously served as dean of the college’s professional performance division and chair of the ensemble department; he also attended Berklee as a student. Savage will be responsible for oversight and direction of all academic programs, facilities, operations and faculty and staff for the college’s three divisions. He will additionally join the core leadership team at Berklee and help devise a strategy for the organization as a whole. He reports to executive vp and provost Dr. David Bogen. Savage can be reached at rsavage@berklee.edu.
Universal Music Canada promoted Craig “Big C” Mannix to vp of Black music. In the role, Mannix will continue leading UMC’s commitment to Black music with “an integrated approach to marketing and A&R,” according to a press release. His expanded purview includes an A&R remit to discover, sign and support Black music created by Canadians while continuing to lead the teams responsible for domestic international Black music marketing. He reports to Universal Music Canada chairman & CEO Jeffrey Remedios. Mannix can be reached at craig.Mannix@umusic.com.
ASM Global named Gary Jacobus president of business development. He will oversee the company’s plans to grow its sales efforts and strategies for securing new accounts across the Americas while providing support to ASM Global’s European and APAC business development teams. Jacobus can be reached at gjacobus@asmglobal.com.
Sound Royalties is expanding its West Coast team, tapping Andrew Stess and David Blutenthal of StessCo Consulting Group as new representatives for the music financing company in the western U.S. Out of Los Angeles, the pair will help songwriters, artists, rights holders and other music creatives seek out funding solutions to support their careers. Stess can be reached at andrew@stess.co.
iHeartMedia Los Angeles named Doug Hall regional digital program director for the iHeartMedia radio clusters in Los Angeles and San Francisco that encompass 14 stations. In the role, Hall will handle strategy, audience growth and maximizing iHeartMedia’s digital platforms in those markets while reporting to John Peake, senior vp of programming for iHeartMedia in Los Angeles. He was previously senior digital director on the national iHeartRadio team out of Nashville.
UTA promoted a slew of staff members in its music department, including Brennan Duffy, Noah Friedlander, Alana Gift, Akhil Hegde and Lauren Holland to manager and Mackenzie Coberley, Alexis Lesko, Gabriella Librizzi, Lauren McClusky and Hope Murray to coordinator.
Bailey Sattler and Stephanie Marlow formed another/side, a new creative and public relations agency. The company “will focus on where the underground and mainstream culture collide,” according to a press release. Sattler comes from Grandstand Media and Marlow built her own brand independently before joining forces with Sattler. The roster at launch includes Blessed, Circle Jerks, Cold Cave, Drab Majesty, Emma Ruth Rundle, Have A Nice Life, High Vis, Knocked Loose, Narrow Head, Power Trip, The Spits and Trust Records. Sattler can be reached at bailey@another-side.net and Marlow can be reached at stephanie@another-side.net.
Vickie Nauman, founder & CEO of music and tech consulting company CrossBorderWorks, joined the board of directors for Evan Bogart‘s Seeker Music, which boasts a portfolio of music publishing, master recordings and ancillary rights as well as a roster of songwriters, producers and artists.
Jessica Bonner was named vp of publicity at Milestone Publicity, where she was previously an account executive. In addition to continuing to serve clients, she will be more involved in an internal leadership role at the firm. Bonner can be reached at jbonner@milestonepublicity.com.
DJ and music journalist Dani Deahl was named head of communications and creator insights at BandLab Technologies. She will serve as a cultural liaison, highlighting the company’s impact on the music industry and surveying industry changes.
LONDON — Deezer has always been the streaming service that charted its own path. After launching in 2007 — a year before Spotify debuted — the Paris-based company rapidly opened its service in over 180 countries; but, unlike Spotify, which focused on one or two markets at a time, Deezer avoided the biggest markets, like the United States and Japan, for many years. But now that the number of on-demand music subscription services has boomed, Deezer has struggled to keep up with its rivals.
New CEO Jeronimo Folgueira, who took over in June 2021, hopes to change that. Deezer is shifting from targeting small and emerging territories to renewing its focus on large and established music markets, where consumers are more willing to pay for subscriptions. In August, Folgueira forged a partnership with German broadcast giant RTL Deutschland to deliver music and video content in a single app — RTL+ Musik — putting Deezer in a stronger position to compete with Spotify, Apple Music, Amazon Music, China’s Tencent Music Entertainment (TME) and YouTube Music.
Folgueira calls the RTL tie-up a “transformative” deal that gives Deezer the scale it needs to break into Germany, the world’s fourth-biggest recorded-music market, with revenue of $1.6 billion in 2021, up 12.6% from 2020, according to IFPI. “In those markets where we have the right partner and the right distribution strategy, our product is second to none,” says Folgueira.
But in the increasingly crowded streaming business, Deezer, which counts Warner Music Group owner Access Industries among its biggest shareholders, is fighting an uphill battle to unseat Spotify. Deezer’s strategy seems more about becoming a “second-tier player that is strong where first-tier players are not,” says Mark Mulligan, analyst at MIDiA Research. While it was “once incumbent,” along with Rhapsody, “it is now challenger, and it has honed its strategy accordingly.”
Deezer is strongest in France, where it is partnered on bundle deals with telecom company Orange and has 4.4 million subscribers, and in Brazil, where it partnered with TIM Celular in 2016 and has 2.7 million subscribers, according to company filings. Worldwide, Deezer has 9.4 million subscribers compared with Spotify’s 195 million subscribers and 273 million free (ad-supported) users, while TME has 82.7 million paying subscribers, according to the companies’ latest earnings reports.
While Apple Music, Amazon Music and YouTube Music don’t regularly announce user numbers, last year Lyor Cohen, YouTube’s global head of music, said the service had surpassed 50 million paying subscribers worldwide. The last time Apple issued any data for its service was in 2019, when it said it had over 60 million subscribers worldwide; Amazon Music said it had more than 55 million subscribers globally in January 2020 but has not updated that figure since.
Rapidly growing TikTok dwarfs them all, with the social media app boasting over 1 billion active monthly users, many of whom use music in their videos. Streaming executives will watch closely what ByteDance, TikTok’s parent, does next. The Beijing-headquartered company is understood to be in talks with labels about expanding its subscription-based music streaming service Resso — currently available in India, Indonesia and Brazil — to more than a dozen new markets ahead of a global rollout. (Verified profiles with the username “TikTok Music” have appeared on social media platforms in recent months advertising “a new way to experience music.”)
For Deezer, strategic partners like RTL Deutschland, which says it reaches 99% of the German population through its 15 TV channels and numerous radio, print and digital outlets, are the key going forward, says Folgueira. “RTL has to compete with Netflix, Apple and Amazon,” he says. “We compete against Spotify, Apple and Amazon. Together, we can compete much better and have a proposition that is equal or better.” Deezer is seeking strategic partners in other big markets, he says, including the United States (where it launched in 2016), the United Kingdom, Spain and Italy.
Engineers at Deezer and RTL spent a year developing the RTL+ Musik app, which combines music streaming with film, TV and news content and costs 9.99 euros ($9.84) for the first six months, then rises to 12.99 euros ($12.80) per month. RTL, which is owned by BMG parent company Bertelsmann, says it has 3.4 million paying subscribers for its lower-priced, video-only RTL+ streaming service but believes it can quickly grow its premium subscriptions through music.
This year’s merger with I2PO, a special purpose acquisition corporation that raised 275 million euros ($282 million) in a 2021 initial public offering, gives Deezer the funding it needs to execute the plan, says Folgueira. Still, as it tries to make its strategic pivot, Deezer faces strong market headwinds and an uncertain investment environment for music streaming.
Since its rocky debut on the Euronext Paris exchange in July 2021, Deezer’s share price has plummeted almost 60% and now hovers around 3.5 euros (it closed at 3.42 euros on Nov. 8). Spotify shares have tumbled 74% over the past year, to $73.44 on Nov. 7, as investors soured on streaming following a pandemic-related boom. (Spotify’s all-time high closing share price was $364.59, set on set on Feb. 19, 2021.)
“There is a growing acceptance among investors that the boom period for streaming investments is drawing to a close,” says Mulligan. He predicts streaming services will continue to represent long-term value but “will be less interesting to certain kinds of investors, which may weaken overall demand and thus push down share prices.”
Folgueira points to Deezer’s midyear financial results — revenue grew 12.1% (up 9.9% at constant currency) from the prior-year period to 219 million euros ($218 million) — as evidence that the company is well positioned to survive and grow within the fast-changing music streaming market. (Since the interview, Deezer released its third quarter earnings on Oct. 27, showing revenue up 13.8% and 11.4% at constant currency.) “For the last 10 years, streaming companies have prioritized growth over profitability,” says Folgueira. “That will start shifting now, and we will all focus more on profitability going forward.”
French music streaming company Deezer posted revenue of 115 million euros ($112.5 million at the Sept. 30, 2022 exchange rate) in the third quarter, up 13.8% from the prior-year period (11.4% at constant currency), the company announced Thursday. Following the news, Deezer’s stock closed up 0.59% on Friday (Oct. 28).
The quarter was bolstered by a 13.8% improvement in average revenue per user (ARPU) to 3.9 euros ($3.81) from the third quarter of 2021. Deezer attributed the improvement primarily to price increases implemented in France in January 2022 — individual plans increased from 9.99 euros to 10.99 euros per month and family plans climbed from 14.99 euros to 17.99 euros per month.
Other subscription services have followed — or likely will follow — Deezer’s lead in raising prices. Apple’s decision on Monday to raise prices on Apple Music “was extremely good news for us,” said Deezer CEO Jeronimo Folgueira during Thursday’s earnings call.
Folgueira also encouraged by comments made Tuesday by Spotify CEO Daniel Ek about possible price increases in early 2023. “We have been the first ones to raise prices very successfully and now that the competitors follow, obviously that is a good thing for the industry as a whole,” Folgueira said. “It also makes us more competitive once competitors increase prices.”
Folgueira does not expect Deezer to further raise prices in 2023 but he didn’t rule it out, either. “We always remain flexible when it comes to pricing,” he said.
Deezer’s ARPU growth was partially offset by a higher proportion of family plan subscriptions, which carry a higher price than individual plans but allow up to six subscribers per account. At the same time, Deezer saw strong business-to-consumer subscription growth in France, adding 300,000 to 3.4 million in its home markets. The ARPU gain more than compensated for a 2.5% decline in total subscribers to 9.4 million — the same number as the second quarter of 2022.
Outside of France, Deezer’s B2C subscribers fell 15.8% year-over-year, from 2.7 million to 2.2 million, although the loss in the third quarter was a more modest 4.4%, or 100,000 subscribers. That decline was due to Deezer’s decision to focus more on a smaller number of larger markets — including France, Germany, U.S. and Brazil — and reducing unprofitable spending in elsewhere. Also, Deezer shut down its business in Russia at the end of the first quarter.
The company expects to finish the year with about 455 million euros ($445 million) of revenue, a 14% improvement from 2021. Deezer expects to see benefits from its new partnership with media company RTL in Germany in the second half of the year. More price increases should help bolster ARPU and revenues, too. In an Oct. 4 investor presentation, Deezer revealed it plans to raise prices in the U.S. and Germany in October and Brazil in December. Additionally, Deezer will increase the price on all existing iOS users in November, which Folgueira said “willl have a substantial impact” on fourth-quarter earnings results.