[Editor Charlie sez: Cherie Hu presents a good argument for why artists and fans should demand the “user centric” royalty, or what Chris Castle calls the “Ethical Pool” approach that he’s working on.]
Fraud is applicable because there’s a tangible price tag involved in the consumption of a song: Labels and other rights owners are paid on a pro-rata basis, according to proportional volumes of on-demand streams. The average per-stream payout may not look like much — $0.004 for Spotify, slightly more for services like Apple Music and Tidal ($0.008 and $0.012, respectively), although exact rates depend on the type of artist or song….
But they can add up. A top hit like Ed Sheeran’s 2017 monster “Shape of You” would distribute millions of dollars in performance royalties to its songwriters and even more to the master-rights owner. Using Goldman Sachs’ projection that the streaming sector will hit $34 billion by 2030, millions of dollars in fraudulently acquired funds could be making their way through the royalty chain. Though unlike Twitter, which wiped out 6% of its users, the number of fake music streamers has not been determined. Says one major label head: “It’s not something we’re currently concerned about, but that’s not to say we won’t be in the future.”
“Music streaming payouts are a zero-sum game,” says another industry insider. “It is imperative that services are vigilant and sophisticated in their controls to ensure that streaming fraud doesn’t dilute payments to the artists who have rightfully earned those payments”….
Here’s how “playola” works at playlist-promotion companies like Spotlister: A customer pays the company to secure prominent placement of a song on key playlists, such as those on Spotify. When a track is uploaded, it is analyzed and its metadata is used to send it to the most appropriate playlists.
[Chris Castle says: Remember that high profile criminal payola cases were prosecuted under state law commercial bribery statutes and not only the federal anti-payola or plugola laws. Alan Freed pleaded to commercial bribery for actions which are literally nothing compared to what Spotify does every day. While the federal payola laws apply to FCC licensed radio stations, commercial bribery prohibitions are not restricted to radio–so Internet companies need to take this a lot more seriously. “Because Internet” is less of a defense every day.]