In today's digital music landscape, streaming fraud has become a prevalent issue that affects musicians and independent artists worldwide. Manipulating the streaming system allows fraudsters to generate fake streams and steal royalties meant for hardworking artists. However, there is hope on the horizon!

A recent initiative led by major independent distribution companies, along with Spotify and Amazon Music, aims to eradicate streaming fraud through a global task force. But why is this problem so pervasive, and what can artists do to protect themselves? Let's delve into the issue and explore a solution that could revolutionize the industry.

Understanding Streaming Fraud:

Streaming fraud is not a new phenomenon. Due to the pro-rata payment model employed by most streaming platforms, it becomes relatively easy for unscrupulous actors to game the system and siphon money from artists and labels.

Under this model, royalties are paid out based on how well a track performs in comparison to all other tracks on the platform. Consequently, even if you never listen to certain popular artists, a portion of your subscription fee goes to them because they have a significant number of streams.

Exploiting this system, fraudsters employ tactics like employing bots to repeatedly stream tracks or adding songs to playlists they control, artificially inflating stream numbers.

The Game of Whack-a-Mole:

Digital service providers (DSPs), such as Spotify and Apple Music, have made strides in detecting fraudulent activities and taking action against them. However, it has become a constant game of whack-a-mole, as fraudsters continue to adapt their techniques.

Unfortunately, navigating this murky landscape is especially challenging for indie artists and labels, who may struggle to differentiate legitimate marketing agencies from nefarious ones. This distinction becomes apparent when an artist's music is suddenly removed due to fraudulent streaming activity, leaving them out of pocket and disillusioned.

The Power of User-Centric Payment Model:

While coalitions and fraud detection systems play their part, the ultimate solution to streaming fraud lies in transitioning from the pro-rata payment model to a user-centric payment model. The user-centric model operates differently; if a listener pays a monthly subscription fee and exclusively listens to one artist, that artist receives all of the listener's payment, minus the platform's commission.

This model shifts the focus from maximizing overall streaming numbers to nurturing dedicated fanbases.

Success Stories and Industry Support:

Companies like SoundCloud have already been testing the user-centric payment model, and the results are promising. According to a report from Midia Research, nearly 65% of artists with fewer than 100,000 listeners earned more money using this payout model. TIDAL also experimented with a user-centric model but discontinued it in favor of their TIDAL Rising program.

However, SoundCloud's Chief Content Officer anticipates an increasing number of artists and labels opting for the user-centric model as they roll out new programs like SoundCloud for Artists.

The Major Label Challenge:

Adopting a user-centric payout model may face resistance from major labels, as it could potentially impact the earnings of their superstar artists. Lucian Grainge, CEO of Universal Music Group, acknowledges the flaws in the current system but proposes an "artist-centric" model that could inadvertently favor major label artists. However, it is essential to focus on fairness and level the playing field for all artists, regardless of their affiliation.

Industry-Wide Adoption and Aligning Interests:

To implement the user-centric payout model, broad industry alignment is crucial. Streaming platforms, labels, and artists must come together to create a system that rewards fan engagement and discourages fraudulent activities.

Spotify has expressed its willingness to switch to a user-centric model if there is industry-wide consensus on this change.

Conclusion:

Streaming fraud continues to plague the music industry, impacting independent artists' livelihoods. However, a shift from the pro-rata to a user-centric payout model holds the key to combating this issue.

By aligning interests, artists, labels, and DSPs can create a fairer system that rewards genuine fan engagement. It's time for every label and every DSP to embrace the user-centric payout model and empower artists to monetize their dedicated fanbases fully.

Together, we can eradicate streaming fraud and create a more equitable future for musicians worldwide.

Source: Ari Herstand, Ari's Take

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