The Record Industry's Fake Fight Against Streaming Fraud
10 min read

The Record Industry's Fake Fight Against Streaming Fraud

Hello, happy to be back from my summer break. A couple of quick notes. If you’re curious about future newsletter topics, please check out the calendar; also, I’ve put together lists of older newsletters and additional readings if you’d like to explore specific topics further. Also, if you’re a college professor or student, I’m always down to appear in a class and especially things in-and-around NYC, down to appear in person. And if you do enjoy my work, please recommend it to a friend or you can subscribe here if you’re able to monetarily support. Otherwise, let’s dive into fake plays, fake artists, illicit marketing tactics, and overzealous fan communities.

Over the last few years, the success of music streaming in boosting industry revenue presented a new source of concern: fraud. Stress about manipulated stream counts aren't simply about artists misrepresenting their popularity, otherwise known as marketing. The industry’s usage of a market share split of revenue, called pro-rata, makes artist manipulation an issue beyond previous questions of dubious metrics as in the difference between a record “shipped” and “sold”. If Jack Harlow gets 3% of the overall streams in a pay period, then he’ll receive 3% of the overall revenue. Unlike digital or physical sales, one’s consumption is directly tied to how much money each artist makes on the platform. Before, a Justin Timberlake album over Green Day might’ve meant one act got paid and another didn’t, but the purchase didn’t further tilt the scale. That level of concern is why countries like Brazil and Germany have attempted to do a harsher crackdown on streaming manipulation.

Over the next two issues I want to dive into the topic of streaming fraud and the prolonged controversy around “fake artists” and how both are symptoms of the current streaming paradigm. A few years ago, I gave a longer history of manipulating YouTube video counts by major artists like Avril Levine back in the late 00s and more contemporaneously Taylor Swift and Blackpink. Manipulation of fandom data could be seen in the days of Myspace, as cited by Jim Rogers in The Death & Life of the Music Industry in the Digital Age, where he interviewed a music journalist and former label owner Jim Carroll who suggested that even in the Myspace days, major labels would buy up fans to inflate the perceived popularity of artists. Manipulating streaming data in that context is part of a long tradition within the industry, so in trying to stomp it out is a new attempt at a fairly old problem. Now let’s get into the mess.

The paper ‘“Gaming the System?” The Politics of Algorithmic Manipulation in Digital Cultural Production’ by Brooke Erin Duffy, Emily Hund, and Caitlin Petre published in the journal Social Media + Society, makes a compelling argument on how to better understand the dynamic between platforms and alleged fraudsters and bad actors. The authors wrote: “Yet platforms’ discourses…position digital intermediary companies as disinterested judges of authenticity and virtue, whose intervention in cases of user contamination or malfeasance is necessary in order for a content meritocracy to continue to flourish on their platforms. This discursive framing implies that platforms do not have a vested interest in drawing and enforcing the line between algorithmic manipulation and authenticity.”

This portion really stands out when thinking about music streaming platforms because in nearly any topic about the topic Spotify, for example, are very quick to affirm their commitment to weeding out fraud. A flip side could be seen in Tidal, who were reportedly caught manipulating stats for Beyoncé, Kanye West, and Rihanna. The ambiguity and lack of auditing of streaming platform data basically leave it up to all parties involved to be trusted that they themselves aren’t shifting a few digits in a spreadsheet every week. Now this isn’t to leave record labels off the hook, because they’re the ones that invested in many streaming platforms, accepted the pro-rata payment model, and have been caught attempting to manipulate streaming metrics, as mentioned above.

Major streaming platforms and their label counterparts are often ready to take a clear stance against fraud, when it is weeding through illicit businesses looking to exploit their systems. Yet, the fact of reporting on fake streams often notes that garnering dubious streams can happen under the nose of an artist or a label. There just isn’t an economic reason for labels to push back against inflated streaming numbers because it means they can get paid more, and that the artists who allegedly manipulated Tidal’s number were investors in the company, only goes to show just how direct the benefit of such illicit behavior can be. Again the authors demanded in their paper a more serious consideration of how much control platforms hold in space: “The reality, of course, is that platforms do have material interests at stake in questions of what ‘counts’ as genuine content worthy of algorithmic amplification. This becomes especially  clear when considering what advice platforms furnish to content creators as alternatives to  practices they consider ‘gaming the system.’”

This original paper examines companies like Google and Instagram that make most of their revenue from advertisement, which are rather explicit in not wanting people to game their metrics. The companies sell ad placements in their feeds to firms that want to reach the massive audiences they hold. Fighting manipulation of their own metrics is directly inline with their business interest, where streaming platforms and labels aren’t so well aligned. Instead the system they’ve created in many ways exists to further promote such behavior since more streams just increase potential revenue and increases the notoriety of certain albums and artists.

The researchers Jeremy Wade Morris, Robert Prey, and David B. Nieborg in the paper ‘Engineering Culture: Logics of Optimization in Music, Games, and Apps’ pointed out The Pocket Gods, a British band, released an album in 2019 that featured 30 second tracks explicitly to draw attention to the streaming monetization system. The work shined a light on the absurdist limits of not only Spotify’s streaming system but also the agreed upon monetization regime of the major labels. If thirty seconds of a play results in monetization, then don’t make a song a second longer. That’s the logic of this system but when outside actors (a small time band, third party firms committed to "fake plays", or an artist fan community as we’ll get into) poke holes into that system and optimize their behavior towards it the specter of fraud is raised and accusations, and occasionally legal prosecution, are made.

The recursive nature of this bizarre system is even seen in how certain online fan collectives and record labels interact with each other to induce fraud-like behavior. Again this behavior appeared in the early days of YouTube, especially around Vevo, but in 2022 not only are fans geared up to repeatedly stream their favorite act, within certain niches K-Pop companies are encouraging fans to buy multiple copies of a single to boost its ranking on commercial charts. (Nicki Minaj’s latest single “Super Freaky Girl” hit no. 1 in the United States explicitly due to digital song sales, just exploiting another loophole in the charting space.) Not only does this increasingly involve international fans pooling money into buying up multiple copies of one release but it also takes the shape in social media posts and endless press hyping of artist “success” that is again retold as the power of fandom.

The paper ‘Captivating Algorithms: Recommender Systems as Traps’ by Nick Seaver hints at this issue by directly questioning the value of recommendations. He interrogates how recommendations went from a qualitative thought in wondering if people enjoyed music presented in front of them into simply viewing consistent engagement as an end in itself. The goal isn’t about getting “good” music people in front of people but simply keeping them engaged which can help generate more advertisements and might screw creators into doubling down into making works and encouraging behaviors that reflect this in endless content consumption rather than appreciation. Streaming platforms and trade publications reinforce this with various ranking charts and labels further legitimize these products as where fans should direct their attention.

Jung Min-jae, a South Korean music critic, gave a specific example in a recent interview with Korean JoongAng Daily: “To boost sales, entertainment companies have been randomizing album packaging designs and collectible components inside. The CD market was thought to have collapsed in the mid-2000s due to digital downloads, but then boy band TVXQ saw huge success with its 2008 album “Mirotic,” selling over 500,000 copies. After that, entertainment companies got bolder — vicious even — with their marketing tactics.” Music labels and agencies right now are creatively digging deeper for methods to exploit those fans. But this type of engagement doesn’t receive headlines for being fraud but instead as Min-jae said “A negative consequence of this obsession with numbers is that only the commercial side of albums gets emphasized, not the actual music. The numbers are mostly for fans and the industry to self-celebrate, ‘Look, we sold over 60 million copies last year!’”

This industry created problem is the core business of the company Beatdapp that claims streaming fraud is as high as 10% in certain markets. I can’t help but think of any issue in need for a true third-party and not-for-profit oversight in the music streaming it’d be in streaming. Something that certainly didn’t exist in the era of physical sales. This could push all parties involved to address issues of fraud but would remove much of the power these companies hold in policing what is good and bad behavior. When Weverse, HYBE’s digital storefront, encourages the fans who create reports on how to properly stream albums to buy up multiple album copies that’s innovation, but a company offering illicit streams to promote a song is a concern for industry panic. The hypocrisy knows no bounds.

Unheard Labor

Last month, Broadcast Music, Inc. (BMI) nixed its sales plans, likely facing the same economic headwinds (inflation, rising interest rates, etc.) that are pushing down the valuations of music catalogs. A couple weeks later the company announced a 10% staff reduction, again ready to point the finger at less than ideal financial conditions, along with seemingly a broader organizational restructuring. Hopefully folks are able to quickly find new work but this points to another sign the record industry may not be as immune from macroeconomic shifts as is often told to potential investors.

In a surprise trade groups representing songwriters and streaming platforms came to an agreement over the Photorecord IV decision that would include an increase for songwriters, while also making some other tweaks to the royalty calculations. This echoes what I wrote about last month in that even though the last few years of CRB rulings have been contentious, there appeared to be some clear industry consensus that going forward with extensive litigation over these deals isn’t helpful. Though again, it’d be great if songwriters were given better representatives than the National Music Publishers Association, so the fight continues.

A Note of Financialization

There is quite a bit of curious news this week. The ICM Crescendo Music Royalty Fund announced buying the “commission rights” from Albert Grossman, the former manager of Janis Joplin, along with many other artists. What are “commission rights” truthfully I don’t know and would appreciate anyone telling me. Music Business Worldwide reported on Firebird Music Holdings buying a share of Red Light Management, the first public known move by the newly started firm that includes ties to the Fred Davis and Joe Ravitch of the Raine Group. The company is allegedly looking to invest into management companies, catalog, and other music assets, I’d be super curious where/when the money was raised for this project. In another “where’d they find the money” news item, MBW reported on a new special-purpose acquisition company called Vistas Acquisition Company II that’s looking to raise $200 million. This is the second major SPAC by Jacob Cherian, who led Vistas Media Acquisition Company, which merged with the middle eastern streaming service Anghami to go public earlier this year. (The stock currently sits down 70%, but why keep track of that!) This wasn’t explicitly said to be in music but looking at Cherian recent work that may not be a bad guess, so anyone’s guess what unprofitable firm will be made public.

Over the last few weeks the Financial Times led by Anna Nicolaou is drilling into the struggling song asset class with a focus on the Hipgnosis . Her reporting, alongside Kaye Wiggins, revealed that Merck Mercuriadis sold off a majority of Hipgnosis Song Management to the Blackstone Group last year and the cratering stock price of the publicly listed Hipgnosis Songs Fund is preventing the company from raising money, as its debts continue to mount. The Blackstone-backed Hipgnosis Songs Capital is reportedly still bidding for Pink Floyd's catalog, which is increasingly looking like the catalog no one wants but is too afraid to admit as such. Either, read these stories and see why this particular market is continuing feel the impact of interest rate spikes.  Kobalt Music Group is looking to sell off to Francisco Partners, a technology investment firm, which last year acquired a majority stake in Native Instruments. This follows Kobalt’s year plus venture to shed off parts of its business to the highest bidder.

Triller Raises $200 Million Ahead of IPO Relaunch in Q4 (Exclusive) - The Wrap / Triller Sued Again Over Unpaid Bills, This Time By App Consulting Firm / Sony Lawsuit Claims Triller Hasn’t Paid in Months But Is Still Using Its Music Catalog (Subscription)

Triller, a short from video app / professional fighting conglomerate, raised $200 million from Clearvue Partners, Falcon Capital, and Fubon Financial, all companies that were reportedly interested in helping the company go public last year when its valuation was still $5 billion, which is allegedly now closer to $3 billion. Those previous connections could help explain how the company is still raising money despite facing lawsuits from both Sony Music and Phiture, a mobile app consulting firm, over a lack of payments. If Triller wasn’t repeatedly caught fudging metrics and not paying top talent, I’d say it was still a lower tier tech firm but with the years of mismanagement and bad press I can only imagine that Q4 IPO date continuing to slip away.

What do the World’s Biggest Music Companies Really Think About the Economics of Streaming? - Music Business Worldwide

Even if the UK’s Competition and Markets Authority did not move to investigate the oligopoly held by the major labels, the comments from across the industry are worth reading. Opinions ranged from UMG’s bullishness on the overall industry, the Beggars Group’s critique of major label dominance, and Sony Music Entertainment saying they face healthy competition from distribution companies like Tunecore. Industry narratives varied so much firm to firm; this helped clarify why the CMA didn’t move to a fuller study, as key parties painted radically different portraits of the industry.

Why Pop’s Biggest Stars Are Staying Put for Long Residencies - The New York Times

An exploration of the post-pandemic touring trends, where bigger artists are making fans come to them; both in a way to keep expenses low and to reduce jobs associated with large crew touring.

What Happens When Content Supersedes the Creator? - Midia Research

Tatiana over at Midia Research teases out the impact of TikTok on content creators with a warning that the company’s video format supports engagement metrics but not musicians, or any creator on the platform.

Instagram, TikTok, and the Three Trends - Stratechery

Ben Thompson usually writes with a pom-pom in each hand representing his preferred tech firms. This piece perturbed me with imagining a future where TikTok abandons human content for AI-spawned works interspliced with endless advertisements. Tatiana’s piece already made those connections, which show that maybe more should be considered about TikTok beyond its effectiveness as a marketing tool.

AdRev Co-Founder Noah Becker Leaves Company - Billboard (Subscription)

Billboard’s reporting on millions of dollars being stolen from major Latin musicians, appears to have now led to the departure of former AdRev co-founder Noah Becker. That a company like AdRev, which collects YouTube royalties, exists at all reveals significant holes within the current streaming infrastructure. Still, I remain ever curious if other schemes and misdoings could be found in these under-the-radar middlemen tech firms.