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Music Stream: About Fraud & Royalties

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Payouts from streaming services are a hot topic right now. Some musicians have released figures showing that their long-term earnings from streaming services including Spotify are extremely good, while other artists still seem to be suffering as labels and distributors and streaming services themselves make profits. However, pay-outs do not exist in a vacuum. There are other issues such as fraud and the complex web of neighbouring rights that can also affect your experience as a musician with streaming services.

Is streaming fraud a threat?

There are two recent examples of people specifically exploiting Spotify in order to gain money and publicity. For example, LA band Vulfpeck released a silent album on Spotify called Sleepify. You can check out the promotional video for the project here.

The album consists of tracks that last just over 30 seconds, as this is the time a song has to be played for on Spotify to qualify as really being streamed. The band asked fans to repeatedly stream the 'album' while sleeping, in order to raise money for their next tour. Each night spent sleeping with this song would earn the band $4. Vulfpeck allegedly earned $20,000 from this stunt, alongside a lot of publicity! However, Sleepify has now been taken down from Spotify, and nobody knows whether Vulfpeck will really receive their royalty cheque or not! Although it would definitely benefit musicians and the music industry as a whole to upload real, quality releases, it is extremely interesting at this stage of the streaming industry's development to observe the kind of challenges and responses that bands are creating. The problem is that Vulfpeck's scam principle takes money from other artists, as Spotify pays out streaming royalties from one pot that is shared between its whole catalogue. With that in mind, it would be good if all streaming services carefully checked their uploads, to avoid all of us losing money at the expense of a joke!

Another example of streaming fraud was by a Melbourne hacker Peter Filimore, who managed to earn $1000 royalties from Spotify. His goal was to investigate security flaws in Spotify's system, and he managed this pretty successfully – beating Pink, Nicki Minaj and Flume to the top of the digital charts with what he also confesses is terrible music, randomly made by algorithms. Filimore is quoted with a cynical conclusion: "As it turns out, you're doing it wrong if you want to make money in music by being a musician." by SC Magazine. However, you don't have to give up your career in music for one in the hacking scene just yet!

For one thing, the publicity these stunts have attracted should encourage Spotify and other streaming services to check their catalogue more carefully – this can only be a good thing, as it means that your genuine releases will have more space if there is a strict policy enforcing the removal of scam uploads. Furthermore, these examples highlight that there are still flaws in streaming payments, and that the system can and should be improved. If you can only make money (even temporarily – it is unlikely that either party will actually receive the profits) by using an algorithm or a gimmick that gets you far more plays than any actual album or track would receive, then surely something isn't quite right. In spite of some artists' positive responses to streaming, it is clear that the original, genuine model needs improvement.

Spotify's response that Vulfpeck's album "seems derivative of John Cage's Work" could have suggested that they took the issue fairly light-heartedly, or that they do not see this kind of fraud as a major threat (at least to their own income?), but this statement actually shows that the opposite is true:

"Spotify are working to stamp out any fraudulent streaming activity across our service. We use a model that determines when a product has "abnormal" streaming activity, which is determined using a combination of the following factors, among others:

  • Number of streams the album received in the past week;
  • Number of users who stream the album;
  • Total number of streams / Total number of users who stream the track;
  • Number of tracks on the album;
  • Number of "short length" tracks on the album ( < 60 seconds);
  • Number of "short length" streams on the album ( < 60 seconds);
  • Territorial activity.

Products that reach a certain threshold of abnormal activity are flagged by our model as likely to be fraudulent and are removed from Spotify".

Why are royalties still hard to pin down?

Music industry expert Ari Herstand recently wrote a post discussing his experience with Sound Exchange, an independent non-profit performance rights organisation which collects and distributes digital performance royalties to featured artists and copyright holders for neighbouring rights. This organisation is the equivalent of GVL in Germany (Gesellschaft zur Verwertung von Leistungsschutzrechten mbH, or society for the collection of neighbouring rights). We will be writing more about GVL and the problems involved in copyright collection in a future blog post. For now, you can read in full about Ari's experience with Sound Exchange here – it's a very worrying example, which will hopefully be improved upon due to the exposure that it has now received. The main point of the post is that you need to be vigilant in checking the actual operating process of whichever streaming service you want to upload your music to.

Here is an extremely helpful infographic showing how musicians do make money from digital music streaming services. The thing to remember is that there are always biases, and different ways of presenting information, alongside different experiences depending upon your situation as a musician, songwriter and rights holder. The endless possibilities surrounding labels, distributors and rights holders are what make it so hard to tell whether you are really receiving everything you should be or not. The operating systems used by each different streaming service or internet radio service are equally complex, with different rates according to how much is funded by advertising and subscriptions, and how much music is made available to actually download, or stored in cloud format.

These are some of the main things to check and think about when deciding to register with a streaming service. They will help you keep track of your royalties later on!

  • Do I have to be working with/create a label to upload my tracks?
  • Do I have to have a digital distributor to upload my tracks?
  • Do I have to register twice if I am both the composition and sound recording rights holder?
  • Has the streaming service correctly uploaded all my submitted songs? (In Ari's case, Sound Exchange had only uploaded 8 of his 70 songs, not including the most popular ones. This problem also took over a year to solve, in spite of him informing them about it.)

The future

More and more digital distribution services are offering support to the musicains they work with in this area. This means that you don't need to rely upon a label to have some expert guidance and administration in collecting the royalties that you are entitled to from streaming services.

Recent suggestions that Apple will acquire Beats Music along with its new streaming service show that this business model is not going anywhere fast, though it is constantly changing. Our previous blog on the future of the streaming payment structure discusses some ideas from WiMP's CEO, showing how democratic artist payment that is aligned with listeners' habits is a future dream, but not yet near fulfilment. Do we need more fraudulent gimmicks before streaming services really start to pay out democratically? Musicians and journalists have already started to highlight the problems that streaming poses to musicians, in order to get the necessary improvements started now!

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