Fraudulent activities in the music industry, particularly through fake streams, are costing the sector billions of dollars each year. According to Beatdapp, a streaming technology company, approximately 10% of all song streams are fraudulent, leading to a loss of $2bn to $3bn annually from the global music industry. This significant impact highlights the detrimental effects of fraud gangs on the industry as a whole.
Recent data from Luminate, a music data provider, revealed that global streaming witnessed a 33% increase last year, with a staggering 7.1 trillion song streams recorded in 2023. Despite this surge in streaming activity, the revenue generated from streaming amounted to $19.3bn for the same year, representing over two-thirds of the industry’s total revenue. The International Federation of the Phonographic Industry shared these striking figures, emphasizing the dominance of streaming in the music sector.
Andrew Batey and Morgan Hayduk, the co-chief executives of Beatdapp, shed light on how fraud groups operate within the digital music supply chain. By impersonating artists and uploading millions of songs on streaming platforms, these groups engage in fake streams using either fake or stolen account details. Consequently, they wrongfully receive royalty payments that should rightfully go to legitimate rights holders. This deceptive practice not only impacts artists but also affects managers, agents, lawyers, labels, and distributors who are deprived of their rightful earnings.
To combat fraudulent activities, streaming services have implemented fines and revised royalty payment structures. For instance, Spotify now penalizes labels and distributors for “flagrant artificial streaming” on their content. Phil Kear, assistant secretary general at the Musicians’ Union, suggested a shift to a “user-centric” accounting model to address fraud effectively. This model would allocate a listener’s subscription fee to the artists they actually listen to, preventing the exploitation of the system by fraudsters.
In conclusion, the prevalence of fake streams orchestrated by fraud gangs poses a significant threat to the music industry’s financial integrity. By adopting innovative strategies and collaborative efforts among stakeholders, the industry can work towards minimizing fraudulent activities and ensuring that artists and rights holders receive their fair share of earnings. The ongoing battle against fraud in the music sector underscores the importance of implementing robust measures to safeguard the industry’s financial ecosystem.
