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Just How Pervasive Is Streaming Fraud? – Billboard - Billboard

While the full scope of the problem remains unclear, new information provides insight into the challenges faced by indie labels and distributors on Spotify.
By Elias Leight
For years, the music industry has whispered about the dangers of fraudulent streams, which boost some artists’ play counts and skew royalty payouts. This activity takes place covertly — often hidden with technical measures, such as bot networks — so it has been hard to get a sense of the scale of the problem, let alone what might be done to address it. But Billboard recently obtained numbers that offer some insight at the level of fake streams detected in one small corner of one large platform.
A fake stream can be thought of “anything which isn’t fans listening to music they love,” according to a definition offered by Napster’s former chief commercial officer, Angel Gambino, at a 2019 panel. The goal of racking up these artificial plays can be generating royalties or fraudulent popularity, and experts say there are a few ways to do it: leveraging Bot networks, human-run click farms, or fake or stolen user accounts. Combating this activity has become “a growing concern” across the music business, according to one senior executive at a distribution company who spoke on the condition of anonymity.
Each month, the Merlin Network, which handles digital licensing for numerous indie labels and distributors, sends members a report detailing the percentage of fraudulent streams on Spotify generated by their artists or catalogs. In the Merlin system, which accounts for roughly 15% of the global market, 2.5% of ad-supported streams didn’t qualify as “fans listening to music they love” in February, according to a pair of indie label executives who viewed the latest report. Those sources said that, the same month, 1.2% of the plays from premium Spotify accounts in the Merlin system were deemed fraudulent.
Fake streams are hardly unique to Spotify — or Merlin. Roc Nation’s distribution arm Equity had fraud levels higher than 10% at one point last year, according to one insider with knowledge of its operations. (Roc Nation declined to comment.) Artists and labels may even be pulled into fraudulent activity unwittingly by hiring third-party companies that claim to offer legitimate streams but actually resort to bolstering numbers via bot networks or click farms.
“Stream manipulation is an industry-wide issue that Spotify takes seriously,” a Spotify spokesperson said in a statement to Billboard. “We provide our partners with consistent and transparent reporting on the actions that we take against streaming manipulation efforts, including the withholding of streaming numbers and royalties.”
Merlin, like Spotify, said that it “takes fraudulent activity extremely seriously.” “We believe that addressing this challenge requires a collaborative effort between digital partners, rights holders, and across the music ecosystem,” CEO Jeremy Sirota added.
Why is streaming fraud so important? Streaming services typically pay music rights holders according to their percentage of total plays on the platform in a specific territory. That means that, if any fraud goes undetected in a particular region, “even basis points [.01%] of market share being redirected into fraudsters’ hands have a material impact on everyone who shares in music revenue,” says one music industry source with experience fighting faking streams. (The reports sent to Merlin labels and distributors indicate that money from these fraudulent streams was returned to the revenue pool.)
The impact of fake streams isn’t just financial; some aspiring artists purchase these plays presumably hoping that they can turn artificial numbers into real popularity. “In a media environment where everyone is competing for attention and share-of-ear,” the source with experience fighting faking streaming continues, “using fraud to manipulate organic placement on the charts and playlists that shape tastes has cascading effects.”
One thing that worries the executives who spoke with Billboard about Merlin’s fraud reports: an increasing portion of Spotify’s premium streams appeared to be fake. The problem started primarily on the free tier, says one executive at a Merlin label, but “now it’s split.” And since streams from paying subscribers are the most important source of revenue for most labels, executives believe fraud at this level is more dangerous. (Again, the reports indicated that this fraud was detected in time to prevent payouts from going to the wrong rightsholders.)
The public battle against streaming fraud has been led by the International Federation of the Phonographic Industry, the trade organization for the global recorded music industry. IFPI’s strategy has been to go after sites that offer plays for cash, presumably because it’s easier than chasing individual perpetrators. The organization has scored key legal wins in Germany, where it persuaded courts to shut down a number of stream-boosting outfits, and in Brazil.
Of course, wiping out fake streams completely is an impossible task. “Streaming services’ most realistic ambition should be to ensure it remains at the margins,” Mark Mulligan, managing director for Midia Research, told Billboard in 2021. But the distribution executive who spoke for this story worries that this vision is a long way from the current reality.
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