Music industry losing billions to streaming fraud, experts warn
According to Beatdapp, a streaming technology company, fraudulent streaming activities are costing the music industry billions of dollars each year. Beatdapp’s co-chief executives, Andrew Batey and Morgan Hayduk, estimate that 10% of all song streams are fraudulent, resulting in a loss of $2-3 billion (£1.6-£2.4 billion) annually for the global music industry.
The latest figures published by Luminate, a music data provider, show a 33% increase in global streaming last year, with 7.1 trillion song streams recorded in 2023. This contributed to the $19.3 billion in streaming revenue reported by the International Federation of the Phonographic Industry (IFPI), which represents the global recording industry. In fact, streaming now makes up more than two thirds of the industry’s total revenue.
Batey and Hayduk explain that fraud groups operate by impersonating artists and uploading millions of songs onto streaming services. They then play these songs from fake or stolen accounts, collecting royalty payments that should have gone to the rightful owners of the songs. This not only affects the artists, but also other stakeholders in the digital music supply chain, as the fraudulent activity reduces the overall pool of money generated through subscription fees and advertising revenue.
To combat this issue, streaming services have implemented fines and changes to their royalty payment models. For instance, Spotify introduced fines for labels and distributors when “flagrant artificial streaming” is detected on their content. However, experts like Phil Kear, assistant secretary general at the Musicians’ Union, suggest that a more effective solution would be a “user-centric” accounting model. This would distribute a listener’s monthly subscription fee directly to the artists they listen to, rather than a pool that is then divided among all artists based on overall streams.
Kear believes that the current model disproportionately benefits major labels and artists, and also enables fraudulent activity by allowing fraudsters to make a profit by manipulating the distribution of streaming revenue. A user-centric model would not only ensure that artists are paid fairly, but also deter fraud by eliminating the potential for profit. As the music industry continues to grapple with the impact of streaming fraud, this solution may offer a viable way forward.
