streaming fraud
Last year, I wrote an op-ed titled “Fighting Streaming Fraud at the Distributor Level.” In it, I discussed the complexity of streaming fraud, where it comes from and how it can be solved with all industry stakeholders working together. At Symphonic Distribution, we’ve worked to create resources for our clients, such as an analytics tool that shows fraudulent streams and best practices for streaming safely while utilizing KYC (know your customer) efforts to combat increases in fraud and championing the use of identity verification. All of these efforts, along with continued collaboration between members of the Music Fights Fraud Alliance (MFFA), have led to a reduction in instances of fraud.
In the months since my op-ed was released, streaming fraud has become an even more important topic of conversation at industry events and conferences and is being meaningfully addressed by distributors around the globe. Currently, most distributors have continued to be or are now involved in learning how to proactively deal with fraud; they’ve been more vocal, provided more data to each other, and most now have policies to prevent it as best they can. However, fraud has also become more sophisticated, and like a virus, it has mutated and evolved to better hide itself. For example, we’ve recently seen fraudsters begin to “sprinkle” fraudulent activity through bot playlists, use AI to impersonate artists and even attack legitimate streaming activity to weaponize fraud against others as sabotage; the latter even happened to me.
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Symphonic has had success in decreasing fraud and been outspoken about what can be done to combat it. I can say we’ve seen results, and that our work will continue, but we felt it important to be transparent about what could be done to continue to make progress in this area.
Distributors
As I’ve said before, distributors need to implement advanced KYC procedures. At an absolute minimum, there needs to be robust identification checks for all new labels and artists they bring under their umbrella. Fraudsters cannot commit fraud if they can’t upload their tracks, and many will balk when asked to provide their personal ID. Moreover, if they do provide their ID and commit fraud that is then traced to them, all accounts linked to that ID can be deleted at once.
Additionally, leveraging platforms such as Tipalti, Trolley and other fintech payment platforms is helpful for OFAC (Office of Foreign Assets Control) compliance and further helps identify the individual. As distributors, we all have a responsibility to ensure that who we’re dealing with is actually who they say they are and truly the rightsholder. This is a challenge, but the effort is worth it.
Here are a few additional actions distributors can take:
Implement and Enforce Strict Content Verification Processes
Before content is published, implementing rigorous verification procedures can prevent the distribution of infringing material. This includes verifying the authenticity of tracks and ensuring that proper licenses are in place. Sony Music’s recent removal of over 75,000 AI-generated deepfake recordings highlights the importance of proactive content management.
Educate Artists and Labels on Ethical Practices
Providing clear guidelines about artificial streaming and its consequences is crucial. Educating stakeholders on the risks associated with fraudulent services and emphasizing the importance of organic growth can deter participation in unethical practices. Resources like Symphonic’s best practices for streaming safely offer valuable insights.
Collaborate Across the Industry
Forming alliances and working collectively can strengthen the fight against fraud. Initiatives like the MFFA demonstrate the effectiveness of industry-wide collaboration in addressing streaming fraud.
DSPs
Similarly, digital service providers (DSPs) need to be more discerning about what content gets ingested into their platforms. With more than 200,000 tracks being added on many of them each day, DSPs must take a more active role in creating more friction in the process of uploading music to dissuade and discourage fraudsters.
What DSPs can do to help:
Strengthen User-Generated Content (UGC) Systems for Issue Resolution
UGC platforms have developed systems that help identify and resolve disputes among parties without the need for extensive legal action. Strengthening these systems can enhance conflict resolution and reduce litigation.
Meaningfully Address AI in Music
At a minimum, AI-generated songs should be clearly labeled. Action is already being taken here with groups like AI:OK working on developing an AI Trustmark, but DSPs should already be adopting more stringent AI guidance. At Symphonic, we ask our clients whether they have used “Some,” “All,” or “No” AI in their content during the upload process to improve identification. We are also exploring partnerships to enhance AI detection and verification.
The bigger question remains: What is AI-generated music worth? DSPs could provide more guidance in this area, and implementing clearer rules now could drive more rapid and structured change while legal frameworks evolve. We are not anti-AI, but we support the idea that fully AI-generated content should be valued less than AI-assisted human-created content.
Develop and Implement Stronger Regulations for Distributors
As a result of fraud, distribution needs to be taken more seriously than it currently is. There are too many distributors with overly open policies who do not approach the matter responsibly. Instead of adding more distributors, we should consider working with the many reputable companies that already exist. And by extension, DSPs shouldn’t work with new distributors unless they are addressing fraud at the point of ingestion.
Coming Together
With fraudsters finding new and unique ways to commit fraud, distributors, DSPs, and other entities in the industry have come together to fight them. Chiefly, the MFFA, formed in 2023, continues to expand and add new members and anti-fraud initiatives. Since its inception, the MFFA has grown to more than 20 members. In addition to Symphonic, it includes Tunecore, CD Baby, Empire, Spotify, SoundCloud, Meta and many more. Those who are a part of the MFFA are beginning to continuously share information with each other so that we all know what to look for and stay informed as an industry on how best to fight fraud. This data sharing practice has already helped Symphonic reduce fraud, and from what we’ve heard, it is also doing the same for our partners in the MFFA.
I’ve continued to have these conversations at conferences and other industry events, and the enthusiasm for coming together to fight fraud is apparent. With the appointment of Michael Lewan as executive director, the work of the MFFA is going to accelerate quickly, and more companies will soon be able to join to expand the work they’re doing.
At the end of the day, there will always be more we as an industry can do to combat fraud because, like all things, it will continue to evolve. We need to make it harder for bad actors and fairer for real artists. As we’ve done already, distributors need to enhance their KYC efforts — if you don’t know who your clients are or have a way of identifying them individually, don’t work with them. On the other side, DSPs need to be more cognizant of what’s being ingested on their platforms and build some walls to slow down the process and enable fraud identification. We’ll continue to have these conversations and fight for a fair, safe, and trusted environment for artists, songwriters, and consumers to listen and submit music to.
Jorge Brea is the Founder and CEO of Symphonic Distribution, a 100% independent company offering full-service distribution, marketing, royalty collection, and more for record labels, artists, managers, and distributors alike with footprints in Tampa, Brooklyn, Nashville, Bogotá, Mexico, South Africa, Canada, and Brazil. Jorge is an active member of the Music FIghts Fraud Alliance, was named to Billboard‘s 2024 International Power Players list, won the Music Biz 2024 #NEXTGEN_NOW One to Watch Bizzy Award, and in 2023 was on the Tampa Bay Business Journal’s 40 Under 40 list.
GOIÂNIA, Brazil — As the global pandemic deepened, Brazilian country artist Alex Ronaldo watched his career ebb away. So the veteran music writer cooked up a side hustle: He took hundreds of demos he regularly received from aspiring artists — mostly in the sertanejo, or Brazilian country, genre — and put them out on Spotify under false names and fake artists, with fake cover art, all created from his luxury seafront condo.
In December, three years after he launched his illegal money-making scheme, prosecutors arrested and charged Ronaldo Torres de Souza, who performs under the moniker Alex Ronaldo, in the first prosecution of an individual in Brazil for streaming fraud. The sertanejo artist confessed to uploading more than 400 tracks by other artists under false names to Spotify that generated more than 28 million fake plays — using artificial intelligence to aid in the scheme.
The major labels, via Brazil’s recorded music association Pro-Música Brasil, along with Brazil’s anti-piracy body Association for the Protection of Phonographic Intellectual Rights (APDIF), cooperated on what they are calling Operation Out of Tune. “Simply put, streaming manipulation of this nature is theft — stealing directly from artists and betraying fans,” Victoria Oakley, the CEO of IFPI in London, said in a statement last week.
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As seemingly important as his arrest was, in Goiânia — the “Nashville of Brazil” — the case underscored to music executives how little was being done to tackle a more serious problem plaguing the Brazilian industry: the buying of fake streams by artists, managers and music label executives to prop up artists on Spotify’s charts.
Brazilian music executives said a furious scramble for Spotify chart dominance is spurring artists to spend tens of thousands of dollars on fake plays for individual songs — and Spotify is doing little that they can see to stop it.
“Everything is bought and paid for here,” Gláucio Toledo, a sertanejo music manager, said about music streaming success in Brazil. “I know three people who got rich selling fake playlists. It has become an unfair competition in the digital world.”
Other industry observers are hearing similar concerns. “Brazil is on a lot of people’s minds across the industry, big and small,” says Morgan Hayduk, the co-CEO and co-founder of Beatdapp, a Vancouver-based company that specializes in streaming fraud detection. “When we talk to rights holders or to platforms there are questions about what they see in their Brazil data.”
One top music manager told Billboard that so-called stream brokers peddle 1 million streams for 50,000 reais ($8,750). That level of spending outpaces the average of around $4,000 that Spotify pays out for a million streams, this person said. The typical fraud scheme involves accessing fake-stream farms in Brazil or outside the country that use dozens if not hundreds of laptops and cell phones to run Spotify accounts continuously.
Spotify says it “invests heavily in automated and manual reviews” to prevent, detect and mitigate artificial streams on its platform. “When we identify stream manipulation, we take action that includes removing streaming numbers and withholding royalties,” a Spotify spokesperson said. “Bad actors are always evolving, so our dedicated fraud prevention team is always working to identify new trends and methods used to game the system.”
Nevertheless, competition to out-buy other sertanejo artists “is hindering other genres, such as funk, pop, MPB and electronic music, which sometimes struggle to make it into the top 10 or 15 because [the lists] are inflated,” says Raphael Ribeiro, CEO of AudioMix Digital, the Goiânia-based label and artist management company that launched several big sertanejo artists, including Gusttavo Lima, Jorge & Mateus and Wesley Safadão.
Fraud is also limiting the barriers to entry for less wealthy artists in Brazil. “Nowadays, it’s hard for an artist to break through if you don’t get involved in a scheme, if you don’t pay for streams, if you don’t create a bot, because there’s a lot of money involved,” Ribeiro says.
Heavy stream-buying could at least partly explain sertanejo’s dominance in Brazil over the past several years. Seven of the top 10 most-played tracks on streaming platforms last year were sertanejo, according to Pro-Música, with Felipe & Rodrigo’s live version of “Gosta de Rua” grabbing the top spot.
In Brazil, streaming success on Spotify strongly impacts touring and sponsorship fees for artists. Top concert earners include Jorge & Mateus and Lima, the latter of whom is so popular that until two weeks ago he was publicly weighing a run for president of the country next year. (He said he would focus instead on conquering the Spanish-language Latino music market.) Reaching the top 50 on Spotify typically boosts an artist’s touring fee to at least 300,000 reais (about $52,000), two Brazilian music managers said.
Brazil’s overall recorded music market is among the fastest growing in the world. Last year it grew 21.7% to 3.49 billion reais ($609 million) to land in ninth place on IFPI’s global ranking (88% of revenues came from on-demand streams), despite the country’s currency remaining historically weak compared to the U.S. dollar. That’s up more than double from the $296.2 million and 12th place it held in 2020, according to IFPI’s annual Global Music Report.
Allegations of an underground market in Brazil for buying and selling fake streams to prop up artists first began to spread during the pandemic, when a senior manager at a streaming platform and one executive at a major label — both based in Brazil then — told Billboard that stream-buying by big-name artists was prevalent, especially in sertanejo — and that indie and major labels were involved.
Fraudsters have had a head start on Brazilian investigators. The public prosecutor’s office in the state of Goias, where Goiânia is located, only organized a cybercrime unit last year. And prosecutors acknowledged that the Torres de Souza probe, which involved authorities in two other states, piggy-backed on reporting by Brazilian news site UOL — largely because none of the more than 50 composers who were victimized reached out to authorities first, they said.
Still, Brazil has done more than most countries.
Previous law enforcement efforts have focused on shutting down websites peddling fake streams and stream-ripping services, rather than on rooting out individual fraudsters. Pro-Música president Paulo Rosa told Billboard in 2022 that most of the illicit activity affecting Brazil was being conducted outside the country by mirror sites in Russia. Last year, Operation 404, a global anti-piracy effort, dismantled the top three most popular stream-ripping mobile apps in Brazil, while another initiative, Operation Redirect, targeted illegal music sites in Brazil associated with malware distribution.
“There have been very few streaming cases channeled through proper authorities anywhere around the world,” Hayduk says. “To see three in Brazil is still a meaningful number.”
Homegrown Streaming Fraud
That said, Torres de Souza’s case showed that a relatively uncomplicated streaming fraud operation can go undetected for years. At his apartment in Recife, in the northeast of the country, the artist, who has 13,000 monthly listeners on Spotify, used fake documents and emails to register other artists’ demos with distributors. Then he published the songs on Spotify and social media platforms under fake names and fake artists, using AI-generated fake cover art.
The heart of the scheme involved setting up 21 computers that ran the open-source program Sandboxie on various internet browsers, which could generate up to 16 virtual computers on each machine. That meant he could have up to 2,000 browser windows open simultaneously pumping out mostly Spotify streams for the music he illicitly appropriated, prosecutors described in their 90-page complaint.
Investigators found a wall of laptops generating millions of illicit Spotify streams at the condo of Ronaldo Torres de Souza in Recife, Brazil.
Courtesy of the Public Prosecutor’s Office of the state of Goiás, Brazil
Investigators seized computers and hard drives containing thousands of demos and hundreds of pieces of cover art. Torres de Souza ran the computers 24 hours a day, only disconnecting them when he traveled to avoid starting a fire, Fabrício Lamas, a prosecutor with Goiânia’s cybercrime unit, CyberGaeco, tells Billboard.
In the first year or so, the sertanejo artist relied on demos from aspiring artists to generate his illicit income. Then in the past year, he turned to fast-evolving AI programs to also create fake music, prosecutors said.
By all accounts, Torres de Souza, 47, was acting alone in the scheme. His wife of more than a decade was oblivious to what he was doing with a wall full of laptops running Spotify accounts all day long, according to prosecutors.
The scheme wasn’t always that sophisticated. The sertanejo artist ascribed fake male artist names to some songs that had female singers. And some AI-created cover art didn’t even refer to actual songs. Fake artist “Regis Costa,” for example, had cover art for “Taça de Vinho” (Wine Glass) — with an image of a martini glass instead of a wine glass — but there was no such song on the album.
Prosecutors estimated Torres de Souza generated more than 300,000 reais ($52,000) in illicit royalties from the first 400 or so songs identified. They expect that number to grow significantly when they gain access to his bank account in a few months, as proscribed under Brazilian banking law.
Torres de Souza faces a potential prison sentence of more than 10 years for the fraud scheme, Lamas said. Prosecutors and his attorney José Paulo Schneider said the music artist cooperated fully in their probe and expressed remorse for his actions. He was released from jail and is awaiting trial.
“This operation, when they got to Alex Ronaldo, was just the tip of the iceberg, but [investigators] didn’t look at the bigger picture,” Schneider says. “There are many artists who use this kind of non-organic reproduction to be able to make their songs go viral — in short, to monetize them.”
Blame Game
The length of Torres de Souza’s potential sentence could come down to who claims they were a victim, which is not so clear, Lamas says.
“There is a lot of confusion,” the prosecutor says. “The composers’ associations, the record companies’ associations and the streaming companies say, ‘We are not victims.’ But who is paying? The streaming companies, who say, ‘We don’t pay them, we pay the distributor’? It’s kind of a blame game.”
Goiânia prosecutors criticized Spotify, saying the company chose not to collaborate. “In this specific case, there was no delivery of platform information,” says prosecutor Gabriella de Queiroz Clementino. “Spotify stated that it had no interest in the criminal investigation.”
A Spotify spokesperson denied that charge. The platform “cooperated fully with the authorities to provide all requested information and certainly did provide an explanation about its processes to detect and mitigate artificial streams,” the spokesperson said, noting that Spotify “continues to be collaborative during this investigation.”
Lamas says prosecutors “are aware of other situations” involving steaming manipulation but would not provide further detail. “For us to effectively combat this, the state needs better collaboration from the companies that receive this data,” he adds.
For music industry officials who see stream-buying happening in Brazilian country music with impunity, new fraud probes couldn’t come soon enough.
“To me, the greatest harm from this [fraudulent stream] activity is that it generates a lack of credibility in the market,” says Marcelo Castello Branco, president of the Brazilian Union of Composers (UBC). “There will come a time when even the consumer will not believe these numbers.”
Alexei Barrionuevo is Billboard’s former International Editor.
Though making and distributing music has become easier than ever, the number of tracks being uploaded to digital service providers has fallen — not increased — in the last two years.
In the first quarter of 2023, an average of 120,000 tracks were being uploaded to DSPs each day, up from 93,400 in 2022, according to Luminate. That number dropped to 103,500 for the full year of 2023 and fell further to 99,000 last year, according to the company’s recently released 2024 year-end report. Normally, a decrease in the amount of new music tracked by Luminate wouldn’t merit much attention. But a 4% annual decline in new tracks is notable when today’s creators have an unprecedented number of tools to make music — including easy-to-use digital audio workstations like BandLab and generative artificial intelligence apps such as Suno — and can tap into global distribution.
Music professionals Billboard spoke to for this story pointed to numerous possible explanations for the drop in new tracks, with anti-fraud measures being the most widely cited reason for the decline. Bad actors are known to upload large numbers of tracks through do-it-yourself distributors before hacking into users’ streaming accounts to stream the songs. Erik Söderblom, chief product officer for music distributor Amuse, cites Spotify’s policy changes announced in 2023 to discourage labels and distributors from uploading tracks used to inflate streaming activity for the drop. “It has been a successful way for both of them as a DSP and us as a distributor to discourage fraudulent actors who abuse the system by releasing and monetizing large volumes of audio files through artificial streams,” he says.
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Beatdapp, which can identify when users’ accounts are hijacked and turned into bot farms that unknowingly stream music, has seen fraud rates decrease on the platforms it works with, says CEO Morgan Hayduk. While a small 4% decline in the scheme of millions of new tracks suggests there’s still ample music for these bot farms to illegally stream, Hayduk believes the financial penalties are having their intended effect. “I do think the DIY space is taking their end more seriously and trying not to be a conduit for this,” he says.
French streaming service Deezer introduced an “artist-centric” royalty payout scheme in 2023 to combat fraud and prioritize professional music over “functional” music such as background noise and nature sounds. But given Spotify’s far larger user base, the platform’s anti-fraud measures get more credit for creating outcomes favorable to artists and record labels. For instance, in 2023, Spotify began levying penalties on music distributors and labels when fraudulent tracks they uploaded had been detected. As a result, experts tell Billboard, better policing at the source of the problem could have resulted in distributors being wary of working with some creators.
While the anti-fraud measures may have had the intended effect and prevented some tracks from being uploaded, DistroKid, another self-serve distributor of independent artists, actually sent more tracks to DSPs in 2024 than the prior year. “There wasn’t a decrease in tracks uploaded to streaming services through DistroKid in 2024,” a company spokesperson said in a statement to Billboard. “The average number of tracks uploaded to streaming services each day steadily increased throughout the year.”
As for other, lesser factors, a likely candidate is Spotify’s 2023 decision to set a minimum threshold for royalty payouts at 1,000 streams. The policy received mixed reactions. Some critics called the threshold a penalty for developing artists who rely on royalties to help build their careers. But cutting off payments to the outer reaches of the long tail put Spotify in sync with major labels’ recent push for royalty accounting schemes that reward professional artists at the expense of, as Universal Music Group CEO Lucian Grainge put it in 2023, “merchants of garbage.”
Ending the practice of cutting tiny royalty checks may help DSPs’ goal of prioritizing professional musicians over a sea of unwanted content, but “may also dishearten early-stage artists who struggle to grow their project,” says Söderblom. As a result, fewer uploads would mean fewer new tracks could enter Luminate’s database. Will Page, author of Pivot: Eight Principles for Transforming Your Business, believes that the payout threshold likely had “a material effect on what Luminate gets to count.” After Spotify set a threshold for payouts at 1,000 streams, an artist would experience diminishing returns from uploading more unpopular music. According to Luminate, 93.2 million of the 202.2 million tracks in its database were streamed fewer than 10 times. Page, Spotify’s former chief economist, estimates that 99% of the 99,000 new tracks in 2024 made the recording artist less than $100 in royalties last year.
Anti-fraud measures and artist-centric royalty schemes may not account for all of the decline, though. Another factor could be a natural ebb in the supply of music. Söderblom sees 2022 as “a great year for DIY” because many artists had additional time to work on new music due to the COVID-19 pandemic. “The combination of accessible music production and distribution tools and a more or less global lockdown led to a huge influx of releases,” he says. “As the world returns to normal, it seems natural to see the volume of new uploads decline.” The same could be true of video creators. Last week, MIDiA Research declared that “the pandemic-induced content creation boom has peaked” after time spent creating content such as YouTube videos dropped in the second quarter of 2024 — marking the first decline since 2021.
Similarly, the 120,000 tracks uploaded daily in 2022 may have marked a peak of musicians uploading their back catalogs to distributors. MIDiA Research’s Mark Mulligan has surveyed amateur and semi-professional creators for five years. “A lot of them are in their 40s and 50s, and probably a lot are people who have been playing in bar bands and whatever else,” says Mulligan. “And they say, ‘Oh, we’ve got these demos. Let’s put them on Spotify.’ And so, they had a lot of back catalog that hadn’t been digitized before to put up there.” Those tracks weren’t necessarily new, but they were new to DIY distributors and streaming platforms. Once the backlog runs out, these artists may not have any other recordings to distribute.
Yet another explanation is the rise of social media as a destination for new music. Music streaming platforms and DIY distribution have leveled the playing field and given every artist an opportunity to reach listeners around the world. Still, many artists have realized they aren’t the next Taylor Swift and can’t get much traction at services such as Spotify and Apple Music. Streaming can work wonders for big artists, but the promise of democratization “has lost a lot of sheen,” says Mulligan. Small artists who don’t attract a crowd at Spotify can use social media or user-generated platforms such as Audiomack to connect with listeners. “They would rather have a small fan base who they can interact with than a large audience they can’t interact with,” he says. “Add that with the remuneration issue and it’s a much less compelling premise to go on streaming now than it was three, four years ago.”
If Mulligan’s hypothesis is true, the artist-centric approach adopted by Spotify, Deezer and others could end up hurting its biggest proponents: the major labels. Streaming platforms have essentially told long-tail artists, “We’re not going to stop you from coming in, but you’re not really welcome,” says Mulligan, which he thinks could have unintended consequences somewhere down the road. “Stop a generation of artists coming in,” he says, “and there’s a really good risk that you’ll inadvertently stop a generation of fans coming in if those artists go elsewhere to build their fan bases.”
A criminal investigation has been launched into suspected fraud at U.K. collecting society PPL after the organization discovered “suspicious activity” on a small number of member accounts.
PPL said one staff member had been dismissed following an internal investigation it carried out over several months earlier this year. The alleged crime is now being investigated by The Metropolitan Police, the CMO said in a short statement.
“We recently became aware of suspicious activity on a small number of member accounts. We immediately conducted an internal investigation, and one employee was dismissed,” said a spokesperson Thursday (Dec.19). The organization said it was “working with the limited number of impacted members to rectify accounts.”
PPL is the second largest of the United Kingdom’s two main collecting societies and licenses recorded music on behalf of labels and artists to U.K. radio and television broadcasters, as well as its use in bars, nightclubs, shops and offices.
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Last year, the 90-year-old organization — which has more than 110 neighboring rights agreements in place with international CMOs, including SoundExchange and the Alliance of Artists and Recording Companies (AARC) in the United States — collected revenues of £285 million ($356 million), its highest ever annual total. In 2023, PPL paid out £247 million ($309 million) to almost 165,000 performers and recording rights holders.
Record industry sources tell Billboard that the suspected embezzlement is believed to have involved an individual or individuals posing as recording artists who were not registered as PPL members and then fraudulently claiming royalties on their behalf.
Billboard understands that PPL discovered the scheme when the real artists tried to register as members earlier this year. Sources say that the fraudulent royalty claims are believed to have taken place over a number of years, possibly as far back as 2016, with the fraudulent transactions believed to total around £500,000 ($625,000).
PPL said it was unable to comment on the case while a criminal investigation is underway and declined to answer questions on when it discovered the suspicious activity, the timeframe of the alleged offense or whether the impacted member accounts relate to U.K. artist members or overseas partner CMOs. The Metropolitan Police has been approached by Billboard for details.
The criminal investigation into suspected embezzlement at PPL comes as the music business battles on multiple fronts against fraudulent activity and rampant copyright infringement on a global scale.
In November, Universal Music Group (UMG), ABKCO and Concord Music Group filed a lawsuit against Believe and its distribution company TuneCore, accusing them of “massive ongoing infringements” of their sound recordings, seeking $500 million in damages (Believe refutes the claims). One month earlier, TikTok cited issues with “fraud” as its reason for walking away from renewing its license with Merlin, a digital licensing coalition representing thousands of indie labels and distributors.
There have also been several high-profile cases against individuals accused of defrauding streaming platforms, rights holders and collection societies in recent years.
In 2022, two men in Phoenix, Arizona pled guilty to claiming $23 million worth of YouTube royalties from unknowing Latin musicians like Julio Iglesias, Anuel AA, and Daddy Yankee despite having no actual ties to those artists.
More recently, a North Carolina musician was indicted by federal prosecutors in September in the first ever federal streaming fraud case. Prosecutors allege Michael Smith used two distributors to upload “hundreds of thousands” of AI-generated tracks, and then used bots to stream them, earning him more than $10 million since 2017.
To try and curb the rise in fraudulent activity the music business has been ramping up its efforts to stop money being illegally siphoned out of the royalty pool.
Last year, a coalition of digital music companies, including distributors including TuneCore, Distrokid and CD Baby, as well as streaming platforms Spotify and Amazon Music, launched the “Music Fights Fraud” task force. The past 12 months have additionally seen Spotify and Deezer change their royalty systems to include financial penalties for music distributors and labels associated with fraudulent activity.
“I feel like that guy in Don’t Look Up,” says Andrew Batey, co-CEO/co-founder of streaming fraud detection company Beatdapp. “I’ve been yelling about the comet coming for years, and so many people haven’t taken it seriously. Now, I think it’s arrived.”
On Nov. 4, Universal Music Group sued TuneCore and its parent company Believe in a $500 million copyright infringement lawsuit, claiming that TuneCore’s “business model” of letting users upload a massive volume of songs for a low flat rate is powered “by rampant piracy” and that TuneCore “makes little effort to hide its illegal actions.”
According to the lawsuit, some of these uploads are remixed or sped up versions of UMG hits and titled with slight misspellings of the artists or works they are infringing — like “Kendrik Laamar,” “Arriana Gramde,” “Jutin Biber” and “Llady Gaga.” UMG also alleges that TuneCore has “taken advantage of the content management claiming system” on YouTube “to divert” and “delay… payment of royalties” that belong to record labels.
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The nine-figure lawsuit serves as a searing indictment of the way one of the world’s largest DIY distributors is allegedly conducting its business. It’s also being viewed as an indictment of the business model of DIY distribution as a whole because, as Jamie Hart — founder of publishing administration company Hart & Songs — explains, “These problems are definitely not unique to TuneCore.” Throughout her career, Hart has spent time at SoundCloud and at Downtown’s YouTube royalty collection service AdRev (now part of FUGA), learning about the intricacies of rights management online, and why it can get so messed up. “This is happening across all self-upload distribution companies at a big rate, and it has been happening for years.”
Along with users profiting from content containing copyrighted material that doesn’t belong to them (sometimes colloquially referred to as “fraud,” “fraudulent content,” or “modified audio” in certain contexts), experts say DIY distributors are also usually the pipes that let in an excessive amount of songs that will be used in “streaming fraud” schemes — a term used to describe the process of artificially juicing stream counts to siphon money out of the royalty pool.
Batey and fellow Beatdapp co-founder/co-CEO Morgan Hayduk see this is the start of a serious crackdown on distribution companies like TuneCore, with “a small window for [distributors] to get on board” and clean up their issues with infringement and fraud before it leads to serious consequences. For those unwilling to put in the extra effort to prevent much of the illegal activity on their services, the Beatdapp leaders fear the financial penalties from streaming services or lawsuits from rights holders, like UMG, could be harsh enough to put some of the small players out of business and lead to consolidation.
“We don’t want to see consolidation,” Hayduk says. “It’s healthy to have a lot of distributors in the market, for users and for our business, too. We want to see them clean up their act, but they need to start now.”
Over the last few years, there have been a number of efforts made to address the growing problems in DIY distribution — from streaming fraud to copyright infringement to sheer volume. Last year, TuneCore, Distrokid, CD Baby, Symphonic, Downtown and more joined together to form the Music Fights Fraud coalition, an attempt to self-police these issues through a shared database. (Since then, Beatdapp alleges that there has only been an increased amount of streaming fraud across the industry.) Spotify also announced new amendments to its royalty payment models in an effort to curb these issues, including financial penalties for distributors and labels that perpetuate fraud.
But this fall, a number of high-profile instances of anti-fraud regulation have started popping up in quick succession. In September, federal prosecutors indicted a North Carolina musician in the first ever federal streaming fraud case, alleging he used two distributors to upload “hundreds of thousands” of AI-generated tracks, and then used bots to stream them, earning him more than $10 million since 2017.
Then, in October, TikTok cited issues with “fraud” as its reason for walking away from renewing its license with Merlin, a digital licensing coalition representing thousands of indie labels and distributors. Instead, TikTok reached out to Merlin members individually — something which TikTok says could help them curb fraud from specific members, but which Merlin calls an excuse to “fractionalize” its membership and “minimize” TikTok’s fees for indie music.
Experts are torn about whether or not the problems at these DIY distributors will be easy or hard to solve. One DIY distribution employee, who requested anonymity, says stopping bad activity is a never ending game of “wack-a-mole” and that it is “impossible to catch everything” even with a quality control team. “There’s so much content pushed through at once that a lot slips through the cracks.” They add, however, that there is too much of an emphasis on “quantity over quality” at these companies and that they need to hire more quality control personnel than they have right now.
But Larry Mills, senior vp of sales at Pex, a company that provides tools for content identification and rights management, believes “it actually isn’t that hard of a problem to solve. Some distributors and DSPs are just making a business decision to use lesser technologies that aren’t tuned to finding modified audio or covers until they are forced to.”
Beyond contracting a third-party service, like Pex or Beatdapp, or spending a millions on more full-time staffers, there are also much more simple measures that can be taken. Greg Hirschhorn, CEO/founder of distributor Too Lost and a member of the Music Fights Fraud coalition, said in an October interview that his company has seen significant success by simply requiring users to submit a photo ID and a selfie before uploading songs to Too Lost. “There’s no hiding from it, and it’s easy,” Hirschhorn says. “If you break the law using our site, I have your information, and I can just send it to local law enforcement or to the streaming service.” Hirschhorn claims he has offered to implement this same service for fellow MFF members, but he says no one has taken him up on it.
According to Mills, the new UMG lawsuit against Believe has encouraged more action. “Thankfully, people are starting to take this seriously. Our phones are certainly ringing more since [the UMG lawsuit],” he says.
An employee at one of the DIY distributors also has seen a change in attitude about these problems in light of the UMG lawsuit. “A lot of us [in distribution] have been talking about this lawsuit,” this person says. “This is a systemic issue in distribution. No company is blameless … Other distributors should be f-cking nervous.”
For those in the business of helping artists and writers collect their rightful royalties online, like Hart and Jon Hichborn, founder of royalty tracking company Records on the Wall, “There’s too much responsibility on the rights holder,” as Hichborn puts it, to police their copyrights. “It’s mind boggling. I track down royalties 24/7. Imagine if I wanted to be a musician who was writing and performing? There would not be enough time in the day to do it all.”
Still, the continued dysfunction and challenges stemming from DIY distributors has birthed a lucrative cottage industry for companies like Pex, Beatdapp, Hart & Songs, Records on the Wall and more that are designed to clean up the mess that is protecting copyrights and collecting royalties on the internet today. “My business unfortunately does thrive on everybody screwing up,” laughs Hichborn. “It’ll never go away.”
It’s unclear what the future looks like for DIY distributors. While Beatdapp foresees “extinction” for distributors that don’t get their act together, Hirshhorn predicts great change “in the amount of quality control, the amount of KYC [“know your customer” checks], the amount of diligence required,” but he doesn’t see it as an apocalyptic event. As he’s found with the implementation of ID checks, even if the scale of songs a distributor releases goes down some, a distributor can still thrive. Too Lost, he says, is doing better than ever, earning over $50 million in annual revenue this year.
“At the end of the day, you just shouldn’t be able to make money on the internet — whether it’s from music, gaming, or the creator economy — if you don’t disclose exactly who you are,” Hirshhorn says. “That just makes total sense… The music industry is always slow to adopt any changes, but this is what the future will look like.”
Independent music trade bodies have hit out at TikTok for boycotting collective license talks with Merlin by seeking to strike direct deals with its indie label members, accusing the platform of trying to divide the sector and “drive down the value” of music.
Licensing talks between TikTok and Merlin, which negotiates digital licenses for a coalition of more than 30,000 independent labels and music companies, representing 15% of the global recorded music market, abruptly ended late last month when “TikTok walked away before negotiations even began,” according to a letter Merlin sent to its members on Friday (Sept. 27).
The London-headquartered indie rights organization, which counts the labels 4AD, Domino, Matador, Subpop, Partisan, Warp, XL Recordings and Secretly Group among its members, said that TikTok told them that it would not be renewing its license deal, due to expire Oct. 31, and was instead looking to licence its members directly.
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A spokesperson for TikTok confirmed Monday (Oct. 1) that it was “committed to entering into direct deals with Merlin members in order to keep their music on TikTok.”
One of the reasons TikTok has given for not renegotiating its deal with Merlin is its concerns over alleged streaming fraud, which a TikTok spokesperson told Billboard specifically relates to a handful of Merlin members delivering songs or remixes of songs that they don’t own the rights to.
Addressing those allegations, Merlin told members it has worked “productively and collaboratively with TikTok” on streaming manipulation and fraudulent content “and until now, no concerns have been raised.”
Executives and trade bodies from across the independent music sector have also called into question TikTok’s reasoning for not renewing its deal with Merlin, while also slamming its attempts to boycott collective licensing with the company.
Brussels-based independent labels trade body IMPALA, which represents over 6,000 indie music companies in Europe and has previously criticized TikTok for the low returns it pays to rightsholders, said it strongly opposed TikTok’s attempts to boycott Merlin.
“Given the timing, it seems clear that TikTok’s real intention is to fragment the sector and drive down the value of independent music, rather than deal with streaming manipulation,” said Mark Kitcatt, chair of IMPALA’s streaming group, in a statement on Thursday (Oct. 3).
“Record labels have entrusted their rights to Merlin to negotiate on their behalf and by TikTok going directly to rights holders they are disrespecting the licensing agreements that are in place,” added Dan Waite, chair of IMPALA’s digital committee. “Like a supermarket chain negotiating directly with individual farmers for the price of their milk, it’s difficult to see how this can work out in the farmers’ favour.”
Referencing TikTok’s cited concerns around streaming manipulation, IMPALA’s executive chair Helen Smith questioned how seeking direct deals with Merlin members would better address the issue than renewing a collective license. “This feels like a smoke screen for boycotting Merlin given the history and the timing and the fact the whole industry is working hard on this important issue,” said Smith in a statement.
“TikTok’s claim that leaving Merlin would alleviate fraud is technically and effectively incorrect,” Gee Davy, interim CEO of the U.K.-based Association of Independent Music (AIM), tells Billboard. She claims that TikTok can already choose which music catalogs it uploads through the Merlin deal, and stresses it is by the industry working together “and TikTok re-engaging with Merlin that the industry will fight online fraud.”
“The resource required to close deals and manage a large number of independent music relationships, take down unlicensed music, and handle fraud separately across a number of participants would surely outweigh any gains,” says Davy. “And that’s aside from any reputational issues that arise from TikTok claiming to respect independent music while in practice showing that they don’t respect the licensing choices of independent music businesses.
“Many smaller labels and artists will be locked out of any direct licensing, which will sour relations as well as set back many years of work by Merlin, AIM and others in improving equitable access to the market and diversity of music available to consumers. We urge TikTok to speak to us and consider the bigger picture and; most of all, to recognise the inadvertent damage their actions have caused and return to discussions with Merlin.”
Those sentiments were echoed by Dr. Richard Burgess, president of the American Association of Independent Music (A2IM), who earlier this week told Billboard: “TikTok’s refusal to negotiate a deal with Merlin isn’t just a setback — it’s a threat to the whole music ecosystem.” Burgess said the dispute “isn’t just about Merlin; it’s about properly recognizing the value of artists and their music.”
The Brussels-based International Music Publishers Forum (IMPF) has also urged TikTok to reengage and strike a licensing agreement with Merlin, calling its attempts to “circumnavigate” collective licensing “a thinly veiled attempt to divide independent labels and drive down the price of music.”
“Merlin’s members have entrusted their rights to the organisation in order to uphold transparency, efficiency and fair remuneration. That must be respected,” said IMPF in a statement.
Merlin is the third music organization this year, after Universal Music Group (UMG) and the National Music Publishers’ Association (NMPA), to express challenges in renewing music licenses with TikTok. In February, UMG’s failure to reach a deal with TikTok led to the removal of its entire catalog of hits from TikTok for about three months.
In April, after publicly supporting UMG’s position against TikTok, the NMPA allowed its TikTok license, which was used by a number of indie publishers, to lapse as well. It has not been renewed. A spokesperson for TikTok says that many of the indie publishers have now established their own direct licenses with the short-form app.
Unless a swift resolution can be found between TikTok and Merlin — or Merlin’s label members choose to negotiate individual license deals with the ByteDance-owned platform — hit songs from artists like Nirvana, Phoebe Bridgers, Diplo, The Lumineers, Mac Demarco, Madlib, Mitski, Thundercat, Wet Leg and Coolio could start to be removed from TikTok on Nov. 1.
Nine sites that were selling fraudulent streams have been taken offline, according to IFPI and Music Canada.
IFPI, the worldwide recording industry association, and Music Canada, a trade group that represents major Canadian labels, filed a legal complaint with the Canadian Competition Bureau against the sites, accusing them of selling false plays and streams to manipulate streaming service data. The nine connected sites, the most popular of which used the domain name MRINSTA.com, have since gone offline (though you can still see them via the Wayback Machine).
“Streaming manipulation has no place in music,” stated Lauri Rechardt, the IFPI’s chief legal officer. “Perpetrators and enablers of streaming manipulation cannot be allowed to continue to divert revenue away from the artists who create the music.”
As streaming has grown in popularity, so have efforts to game platforms’ royalty models. Vancouver-based fraud detection software company Beatdapp estimates that as many as 10% of music streams are fake. Fake streams are often generated through streaming farms, which use bots to automatically stream particular songs and boost their stats.
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Canada recorded 145.3 billion streams in 2023. – Rosie Long Decter
Warner Music Canada’s Head of A&R Leaves to Start New Management Company, SWING
It was only January of this year that Victoria, B.C. pop-funk act Diamond Cafe announced his signing to Warner Music Canada. Now, George Kalivas, the man who signed him, is breaking off on his own to manage him — and building a whole new company around the artist.
SWING is launching as a Toronto-based management company with Diamond Cafe as its first artist, though Kalivas says the eventual plan is to “evolve into a full-service record label in no time.”
Kalivas started in marketing at Warner Canada seven years ago, handling domestic artists signed to the label and international releases signed to subsidiaries like Atlantic and 300. But he had “one foot in A&R,” he says, which became official two years ago when Kristen Burke became label president.
His first signing was Crash Adams, a Canadian pop duo known for viral TikTok trends. After the joint launch of 91 North Records by Warner Canada and Warner India, Kalivas helped sign the label’s second artist, AR Paisley. A long-simmering Canadian rapper, Paisley hit the top 10 of the Billboard Canadian Hot 100 this year with “Drippy,” a posthumous collaboration with the late Punjabi-Canadian superstar Sidhu Moose Wala.
But it was Diamond Cafe that made Kalivas realize the time was right to strike off on his own “I haven’t seen a triple threat artist like him — writer, performer and producer — in 15 years,” he says. “He’s next level.”
As publishing and song catalogs become a major money-maker in the music industry, artists like Diamond Cafe, who can work both in front of and behind the scenes, are being scouted heavily. For SWING, it’s enough to structure a whole new company around. – Richard Trapunski
Texas Songwriter Livingston Debuts on the Canadian Hot 100 With ‘Shadow’
Texas singer-songwriter Livingston is making a splash on the Canadian charts this week.
The 21-year-old has landed on the Canadian Hot 100 for the first time with his single “Shadow,” which debuted at No. 100. The ominous single, which finds Livingston warning about the dangers we pose to ourselves, shows off his belt and falsetto over keyboard stabs and jittery percussion. “Shadow” is also performing well on the iTunes charts and has gathered over 1 million YouTube views since its Mar. 7 release.
Livingston’s new album, A Hometown Odyssey, also found a spot on the Canadian Albums chart this week, debuting at No. 92. Livingston first gained popularity as a teenager on TikTok during the pandemic and signed shortly thereafter with Elektra Records. His website states that he “reclaimed his independence” from his major label deal a year ago. Hometown Odyssey is independently released.
Independence seems to suit Livingston well. Though he isn’t charting on the U.S. Billboard Hot 100 or Billboard 200 yet, sometimes rising American artists — like Benson Boone — perform better in Canada before gaining steam in the United States. – Rosie Long Decter
The Recording Industry Association of America (RIAA) welcomed the latest edition of the United States Trade Representative’s (USTR) Notorious Markets Report on Tuesday (Jan. 30), which provides an annual run-down of various forms of copyright infringement, including digital music piracy.
Digital music piracy is not front-of-mind for many listeners in the age of streaming; even the industry itself has focused more of its recent frustration on streaming fraud and the popularity of rain sounds, at least in public comments made in the last year.
However, global music piracy inched up in 2022, according to a March 2023 report from MUSO, a U.K. technology company, which tracked over 15 billion visits to music piracy sites that year.
The USTR’s new report highlighted a handful of sites — including 1337X, Krakenfiles, Rapidgator and Ssyoutube — where people go to stream or download songs illegally. “Ssyoutube is reportedly the most popular YouTube ripping site globally, with over 343 million visitors just in April 2023,” the USTR noted in one example.
“We appreciate the report’s prioritization of thefts that target the music community such as stream-ripping,” said George York, the RIAA’s senior vp of international policy, in a statement.
Overall, music is less of a concern in this year’s USTR report relative to 2023’s. The document’s primary focus is the “potential health and safety risks posed by counterfeit trademark goods.”
The USTR was heartened by the fact that “this year many e-commerce and social commerce platforms took solid steps toward initiating additional anti-counterfeiting practices and adapting to new circumvention techniques used by counterfeiters.”
“Several platforms filed public submissions outlining their implementation of new anti-counterfeiting tools, including releasing educational campaigns, increasing identity verification requirements, and implementing faster and more transparent notice-and-takedown processes,” the report continued. “Additionally, several platforms have invested in artificial intelligence (AI) and machine learning technologies as a way to scale up and quickly adapt traditional anti-counterfeiting measures such as text and image screening.”
The RIAA had asked the USTR to highlight another aspect of AI, according to comments submitted in October, though it was not ultimately included in the report.
At the time, the RIAA noted that “the year 2023 saw an eruption of unauthorized AI vocal clone services that infringe not only the rights of the artists whose voices are being cloned but also the rights of those that own the sound recordings in each underlying musical track. This has led to an explosion of unauthorized derivative works of our members’ sound recordings which harm sound recording artists and copyright owners.”
In a statement following the USTR’s latest release, York “urge[d] the organization to take “a close look in the future at emerging piracy challenges presented by AI, including the widespread illegal use of copyrighted sound recordings and artist names, images, and likenesses to generate invasive and unlawful voice clones and deepfakes.”
When Morgan Hayduk and Andrew Batey founded Beatdapp — a company which helps streaming services, labels, and distributors detect streaming fraud — at the end of 2018, they faced a major obstacle: The music industry was reluctant to acknowledge that streaming fraud was a problem.
“It used to be verboten to speak publicly about [it],” Hayduk told Billboard last year. “It was all behind closed doors. But I don’t think you can fix a problem until you accept its existence.”
The climate has changed dramatically recently. Last year, Universal Music Group began calling for changes to the streaming model, arguing that fraud and things like white noise and rain sounds were scooping up royalty income that should be going to actual artists. And Beatdapp announced on Friday (Jan. 19) that it’s entering into a strategic collaboration with UMG as well as partnering with SoundExchange (which collects performance royalties from digital radio stations and broadcast companies like SiriusXM) and the streaming service Napster.
“We’re at a point now where there’s a consensus that we have to address the problem” of streaming fraud, says Michael Nash, chief digital officer and executive vice president for Universal Music Group. “Beatdapp have really focused on understanding the problem and working with a number of different platforms to provide a very clear perspective about the scope of the problem. Providing that kind of leadership, driven by data analysis, has been really important.”
Hayduk defines streaming fraud as the leveraging of “bots, stolen accounts or manipulated platform features” to steal streaming income. The practice “hurts everyone who makes a living in the music industry and, left unchecked, creates this promotional race to the bottom where everyone believes they have to cheat to succeed,” he told Billboard last year.
“In an industry where it’s already hard to make something and then promote something and then get paid,” Batey added, “you should at least get paid correctly.”
As Beatdapp widens its network of partners, it gets access to more streaming data — the company was analyzing 2.2 trillion streams in 2023, up from hundreds of billions in 2022 — which in turn allows the company to improve its understanding of how fraudsters manipulate the streaming ecosystem and get better at identifying suspicious listening patterns.
“Napster provides Beatdapp with a daily feed of all usage on Napster’s services, and Beatdapp then uses its detection filters to identify likely stream manipulation activity based on certain (high) confidence levels,” explains Matthew Eccles, the streamer’s svp and general counsel. “Napster will then ensure that the streams identified by Beatdapp are removed from royalty reports for all licensors so that the market share calculations for all labels are not affected.”
Napster’s view is that it is helpful to engage a third party to detect stream manipulation because “it eliminates potential questions of bias when the results come back,” Eccles continues. “Third parties can help achieve consistency across the industry in relation to what is and what is not considered to be streaming fraud.”
Beatdapp also announced on Friday that it had raised an additional $17 million, money that will go towards hiring new data scientists and senior leadership and expanding into Europe and Asia.
“With the volume [of music on streaming services] jumping the shark over value — more than 150 million tracks and more than 100,000 uploaded every day — this has created a lot of issues,” Nash notes. “That level of volume has created a context for a lot of bad actor activity.”
Tackling these issues is complicated, but cracking down on fraud is “the least controversial item on the agenda,” Nash adds. “There aren’t a lot of advocates for fraud.”
While Spotify is planning to start penalizing labels and distributors for egregious instances of streaming fraud, Apple Music quietly rolled out its own strengthened fraud protections — including hitting repeat offenders with “financial adjustments” — more than a year ago, according to an email obtained by Billboard that the platform sent to music industry partners in March. Apple Music’s internal metrics indicate that the policy has already led to a 30% drop in streaming manipulation.
In the March email, the streamer defines manipulation as “the deliberate, artificial creation of plays for royalty, chart, and popularity purposes” as well as “the delivery of deceptive or manipulative content, like an album of 31-second songs.” “In October [2022], we launched new tools and policies designed to prevent stream manipulation on Apple Music,” the email explains. “Since we launched the new tools, manipulated streams have accounted for only 0.3 percent of all streams.”
That 0.3 percent figure is lower than the stats cited by some of Apple Music’s rivals. A Spotify spokesperson told a Swedish newspaper earlier this year that “less than one percent of all streams on Spotify have been determined to be tampered with,” while Deezer has said that it finds 7% of plays to be fraudulent. (This comparison only goes so far, though, because each service might define fraud differently, and not all of them have ad-supported tiers.)
In a statement, an Apple Music spokesperson said the platform “takes stream manipulation very seriously. Apple Music has a team of people dedicated to tracking and investigating any instances where manipulation is suspected. Penalties include cancellation of user accounts, removal of content, termination of distributor agreements, and financial adjustments.”
When Apple Music emailed industry partners in March, the streaming service noted that “despite the low percentage [of fraud], manipulation remains a widespread and persistent problem: That 0.3% of streams came from more than 85,000 albums across hundreds of record labels.”
As a result, the email indicates the company outlined a sharper anti-fraud policy in October 2022, promising to take “remedial actions against content providers with repeated and significant stream manipulation.” This means of incentivizing reform has worked for some — half the distributors that were flagged for fake streaming have reduced manipulation on their content by over 45%, the company said.
To help labels and distributors figure out where fraud is occurring, Apple Music’s email says the platform started sending daily reports detailing “a content provider’s albums with streams held in review.” “After each review,” the email goes on, “we remove manipulated streams and release legitimate plays. At the end of each month, content providers also receive a report with all excluded streams.” (Spotify has now also ramped up the reporting it provides to labels and distributors, according to one executive at a distribution company, “adding a new dimension of seeing repeat offenders.”)
“This all happens before Apple Music pays royalties and tabulates charts,” the email noted. “We block wrongdoers from the primary advantages of stream manipulation and redirect royalties to valid plays of content.”
The last six months have seen a flurry of companies committing publicly to fraud mitigation. More than half a dozen distributors formed “a global task force aimed at eradicating streaming fraud” in June. And when Deezer announced a new partnership with Universal Music Group in September, Michael Nash, UMG’s executive vp and chief digital officer, promised that “fraud and gaming, which serves only to deprive artists their due compensation, will be aggressively addressed.”