Why Major Labels and Spotify Love Fake Artists

Hello, hello. I received a number of nice words about my last newsletter on the fake streams, so excited to continue that conversation this week. Before we do, if you enjoy this newsletter consider forwarding it to a colleague or friend; and if you have some extra cash you can subscribe here. These couple thousand word emails take quite a bit of time, so I cannot right now offer y’all more content but more readers and/or subscribers certainly helps justify all the time devoted here. Now, let’s see why major labels are “signing” metaverse rappers.

When I wrote about streaming fraud earlier this month, a core theme was that major streaming platforms and labels ought to hold more responsibility for the cracks within their own system. Notable instances of fraud are often perpetrated by the world’s largest record labels, so if it's such a problem then multi-billion streaming companies should invest more resources into addressing it. However, much of the industry narrative leans on blaming “pirates” and other small scale perpetrators that are operating on the margins of this overall system. My less vindictive view on these“bad actors” is informed by this week’s topic of “fake artists”, and how repeatedly the same streaming platforms and labels are often the main actors in attempts to undermine working artists and push narratives to hurt them. So, let’s talk about that “AI rapper” named FN Meka.

Here are some headlines from the last 18 months by Music Business Worldwide: “This robot rapper has 9m followers on TikTok. The company that created him thinks traditional A&R is ‘inefficient and unreliable’”; “Capitol Records just signed a virtual artist, FN Meka. He has over 10 million followers on TikTok.”; “Capitol drops ‘robot rapper’ FN Meka, as project is accused of being an ‘insult to the Black community’”. The gist of the story is that FN Meka is a creation of Factory New, a company that headed by Anthony Martini, the current CEO of Royalty Exchange, which was another fledging attempt to convince fans that they should own fractional shares of songrights. (I wrote about this topic late last year, as a way of highlighting that a core proposal of many music NFTs projects already exists and isn’t highly sought by fans.) Martini in an interview with MBW was pretty blunt about FN Meka being a naked branding exercise and hypothesized that real artists are outmoded because people are only interacting with them via screens anyway. (No one tell Martini about radio.) This clear marketing stunt worked enough for someone at Capital Records to jump on board, until people found racist old posts and simply asked the “What the fuck is this?”

Ultimately though, until the public outcry caused everyone to walk back the project, the marketing stunt was working perfectly. Headlines proclaimed him an “AI rapper” and obviously speculation continued about what this might be for actual musicians, again ignoring this was a venture by a company that also released a song called “I Love Bitcoin'' by something named Lil Bitcoin. This brand exercise sought to leverage cultural legitimacy by emulating a past trope (“Record Labels Signs Artists for Millions of Dollars”) and suggesting it’ll be the first step towards replacing “real” artists. (Much like Uber’s nonsense decade long narrative around automating its service with driverless cars, that’s never to fruition.) While this blew up in everyone’s face due to industry pushback, examples like Crypton’s Hatsune Miku or the semi-anonymous YouTuber Corpse Husband reveal the lines between technology and artist are being blurred but this was clearly an obscene marketing stunt.

Over five years ago, Music Business Worldwide were early to catch onto the fact Spotify was filling its most popular playlists with music composed by artists on Epidemic Sound, who shares investors with Spotify, and agreed to provide them with music at a discount to help Spotify control its costs when paying out to music rights holders. The company continuously denied the accusations but additional reporting would show that basically the initial criticisms were on the mark. (This whole saga was an early motivating factor for my newsletter, so you can find some of my earlier writing on the topic here.)

However, the core issue with these fake artists and playlists did not change once media attention turned away. Many of Spotify’s largest mood based playlists are still packed with this music, so the big pool of revenue that’s generated by streams on the platform remains intentionally diluted. What’s frustrated many a few years ago is that many of these playlists used to feature music from musicians on smaller labels that were swapped out for faceless muzak. (I should mention the New York Times Popcast also covered this topic while I was in the middle of writing this, so check out their episode as well!) That point got lost over the years, the more Spotify denied and as attention waned but the concern over Spotify flexing its power to pick winners and losers is worth holding, as academic research would point towards the cultural impact of Spotify is hard to ignore even if other data may question the economic punch.

Ben Morgan in the paper ‘Revenue, Access, and Engagement via the i-house curated Spotify playlist in Australia’ explores the narrative arrival of the editorial playlist into the Australian record industry. Immediately critical of the media narrative of streaming being the “new radio”, Morgan highlights just how much self-mythology was needed by platforms like Spotify to sell their new product to users. Playlists should be contextualized as simply an option within the toolbox of how to market one’s music, but interviews with industry professionals show just how quickly the power of playlists was adopted. Often acceptance or skepticism about the medium could be split between professionals within the top artists that account for over 90% of music consumed on these platforms (major and big indies; artist managers) and the rest of the artists that see little finance benefit from streaming (bedroom artists, small independent labels). The concern about fake artists in a way is mostly of those artists who’ve accepted the new paradigm.

In July, the United Kingdom’s Competition and Markets Authority released its study on music and streaming, which included a couple relevant stats about playlists. The study observed that over half of plays generated on Spotify playlists come from user-made playlists. Then looking at the three other major platforms for YouTube, Apple, and Amazon nearly half of listening happens completely outside of any playlists. This would show that a majority of music consumption happens outside of these much hyped promotional channels. These stats don’t fully convey how fans discover new music on these platforms but even discovery is often an overstated concern with industry professionals. The obsession is about what’s always going to be next, rather than providing real guidance to sustain what exists now. That eat or be eaten mentality is a narrative streaming platform that finds numerous ways of seeding.

The concern around replacing “real” musicians with fake ones is exacerbated by certain narratives espoused by these companies. In the book Hearing the Cloud the author Emile Frankel, cites reports on Spotify hiring for machine learning roles with the assumption being that the company is looking to lean even further into non-musician made music to fill their playlists. Or even Sony Music Japan saying their goal is to build “The largest virtual talent development and management project in history.” The technological paranoia around these new technologies attempting to usurp traditional artists isn’t entirely misplaced. However, one needlessly not spin themselves into a knot over projects that are highly expensive, and clearly aiming to exploit copyrighted material across video games, social media, and whatever potential branded opportunity awaits them. If one is an aspiring musician or wants to work with “real” musicians then this should be a simple sign to avoid and reject the art further down this path. This virtual-first reality isn’t one that is preordained.

This isn’t to cede ground towards these noxious products but rather to suggest the concerns about fake artists populating playlists should further delegitimize these new cultural forms. If Spotify wants playlists full of underpaid session musicians that should be reported on and made explicit that this is content that isn’t helping traditional working musicians and that such practices should be examined and regulated. That Capitol Records “signed” FN Meka, much like UMG’s embarrassing KINGSHIP Bored Ape Yacht Club venture, these should be examples of what is wrong, not right, with the industry. The narrative of artists being displaced and without any agency to stop it is one that only serves those making these digital tools. However, there are plenty of music communities and scenes that don’t need to shrink themselves into this market share driven paradigm that’s coveted by big labels and streaming platforms.

Unheard Labor

The German performing rights organization GEMA commissioned a study on the economics of music streaming and the results revealed deep dissatisfaction with the current paradigm. Nearly 90% of musicians felt streaming services weren’t paying enough, over half thought streaming platforms kept too much money, and there was a desire for more transparency around playlisting and algorithmic recommendations. Again this mirrors similar studies from the United Kingdom and the United States but shows that while the industry is constantly ready to proclaim boisterous headlines about growth, many artists remain unsatisfied by this still maturing system. An example of a country seeking to address these artist concerns is Ireland who’ll be launching a basic income program for over 2,000 artists, including over 500 musicians, where they’ll receive over $300 a week. Certainly wishing good luck to those receiving this benefit and to the government organizers of this initiative.

A Note of Financialization

Earlier in September, Kobalt Music Group confirmed its reported sale for $750,000,000 to Francisco Partners, with smaller investments from Dundee Partners and MUSIC by Matt Pincus. The former worked with KKR to buy up Kobalt Capital, which included SONGS Music Publishing that was sold by Pincus to Kobalt Capital back in 2017 for $160 million. Earlier this year Pincus raised $200 million for MUSIC and its first publicly announced deal involves buying up part of a company that he already previously sold to a few years prior. The merry-go-round cannot stop.

Other deals of note: Chuck D sold a large chunk of his catalog to Reach Music Publishing, who previously sued in 2019. Bruce Fairbairn sold a number of rights to Round Hill Music; Reservoir Media, along with PopArabia, continues its middle eastern expansion with a purchase of Voice of Beirut. Concord Music continues its press release printers by this time buying L.A. Reid’s HitCo record label and Future sold his publishing to the BlackRock and Warner Music Group collab Influence Media Partners. Last, HarbourView Equity Partners reportedly paid $40 million for the “income stream” from Usher’s part of RBMG Records, who signed Justin Beiber earlier in this career, and got some of the publisher’s share of the Florida Georgia Line’s catalog. I cannot imagine gilding the lily more in acquiring these assets. Billboard did the company a solid and interviewed its founder Sherrese Clarke Soares, which provided zero information and read like a press release for potential investors. Hopefully the right Mr. Moneybags read it.

Content Technologies, a 2020-founded firm interested in South Korean intellectual properties and technology, announced that its asset management arm CT Investments is creating an exchange-traded fund (ETF) with the moniker KPOP. The company pitch is that it will allow American investors to directly more easily invest in Korean entertainment firms like HYBE, JYP, or Kakao. While, hard to imagine a more post-pandemic idea than creating an ETF explicitly for South Korean entertainment firms, gotta give them credit for knowing how to market a niche. I forgot the best part: It’s listed under KPOP. KPOP!

6 Links 2 Read

How Wall Street Stormed the Music Business - The Financial Times (Subscription)

A great summary of the build up and now slow deflation of the song asset bubble. The reporting provides a clear portrait of those still committed, if not overly so, in marking up higher valuations on song rights regardless of broader macroeconomic headwinds.

Music’s Top Money Makers: The Highest-Paid Executives and Stockholders at Publicly Traded Companies - Billboard (Subscription)

Nice to see just how money continues to funnel upward in the record industry. All with cute infographics to boot!

Fighting to Survive, Tencent-Backed Indian Music App Gaana Turns to Subscriptions - Reuters

Gaana isn’t looking great. Facing increased competition from domestic (Wynk Music, Resso) and international (Spotify, YouTube) streaming services, the platform is reportedly seeing growth stagnation and layoffs with its sibling firms within Times Internet, an Indian media conglomerate. That may explain why the company is abandoning its free tier in an attempt to increase revenue after a year plus of failing to find a new buyer or raise more money. This is curious since Netflix and Roblox are both actively pivoting towards advertisements, which may create an interesting contrast of how various platforms can swap business tactics.

What To Do in a Recession - Resident Advisor

Interviews with union organizers, nightlife workers, and advocacy groups point folks to ways of potentially dealing choppy economic waters ahead. There’s plenty of solid advice here but overall I appreciated the desire to anticipate potentially disadvantageous macroeconomic winds and how that might impact one’s community.

Minimal Oversight and Few Obvious Repercussions Leave YouTube’s Royalty System Ripe for Abuse - Billboard (Subscription)

Loopholes within YouTube’s monetization system continue to reveal themselves with more critical reporting on this part of the digital music supply chain. Unsurprisingly, YouTube put out a story championing how much money ($6 billion) it paid out last year; but similar to blackbox collections from the Mechanical Licensing Collective, more skepticism should be shown at topline numbers. The company, the longest running player in the streaming space, should be held to a high standard in making sure money gets into the right pockets of artists.

The Rise of Mobile Gambling Is Leaving People Ruined and Unable to Quit - Vice / America’s Bad Bet on Sports Gambling - Compact Magazine

Many reservations I hold of crypto/web3/etc. can be found in how it mirrors online gambling, a potentially fairly negative activity for certain people. The music industry is not as bold as say gaming with burrowing elements of gambling (see: Loot Boxes), but the push towards physical and NFTs shows the industry isn’t immune.