Streaming fraud is a massive issue for the music industry with some estimates putting annual losses over $1 billion.
This is a significant issue for all who are releasing music on streaming platforms.
And while I dug into the breakdown of the matter in last week’s YouTube video, let’s talk specifically about why this is an issue and what the solution might be.
Streaming royalty payments are… weird
The fundamental reason this problem exists has everything to do with how streaming royalties are paid to artists in the first place.
No one gets paid directly for their streams. Instead, it’s all paid out of one giant pool.
It goes like this: Spotify’s annual revenue in 2022 was roughly $12.4 billion. That means they make about a billion dollars a month (let’s all take a collective pause to catch our breath on that one).
Furthermore, according to a post I found from 2015, which is definitely dated information, Spotify processes roughly 1 billion daily streams.
This means Spotify sees rough 30 billion streams per month in 2015 numbers, so let’s take a little mathematical liberty and say Spotify now processes 50 billion streams per month in 2023 and makes $1 billion per month exactly for ease of math.
For ease of math, let’s also assume this entire amount goes toward paying artists streaming royalties (we all know this isn’t true, but we’re keeping it simple here).
Spotify takes all this money, throws it into one big pot, and then pays out every single artist whose music has been consumed on the platform according to the number of streams they have received as a percentage of the pie.
So if you got 1 billion streams within that timeframe, you’d be entitled to 1/50th of the pie or 2% of that $1 billion ($20 million).
If you get 100 streams, well, you’ll get a lot less.
Now this is a gross oversimplification of how this works, but the point is this: the more streams you earn, the higher your payout as a percentage of the pie, regardless of how many total streams there are.
So, theoretically, you could dump an additional 50 billion streams into the system and be entitled to half of the money, regardless of where those streams came from (50 billion + 50 billion = 100 billion; 50 billion / 100 billion = 50%).
It doesn’t matter that you diluted the pot by doubling the number of streams in it, you still get half.
The flaw is in the way the system is designed, and that very flaw can be easily exploited for financial gain.
And people are doing it in droves.
A system that can be gamed
Let’s go full nerd for a second.
According to Goodhart’s Law, “When a measure becomes a target, it ceases to be a good measure.”
There are numerous instances throughout history where this very idea has been showcased.
One such example is the Great Hanoi Rat Massacre. In 1902, French authorities in present-day Vietnam wanted to control the city’s rat population. To do so, they began offering a bounty for every rat killed. To collect the bounty, all one needed to do was provide a severed rat tail as proof.
What could go wrong?
The issue arose, of course, when more and more rats without tails began to appear throughout the city.
It turns out, people had been catching rats, cutting off their tails for the money, and then rereleasing them so they could breed and make more rats which could then be caught and have their tails cut, and so on.
The city’s population found a system that could be exploited for financial gain and, as a result, the measure became the target and ceased to be a good measure.
This is exactly what is happening with streaming.
Streams are the measure by which we determine the success or failure of a song in today’s music industry, and, more importantly, they are the measure by which we are compensated.
The issue is that now streams have become the target, and because they have become the target, they have ceased to become a reasonable measure of success.
Especially when they can be so easily created out of thin air via bot farms and fake Spotify accounts.
Much like a tailless rat rereleased into the wild to breed, every bot farm that successfully produces fake streams to receive the accompanying royalty payment paves the way for others just like it.
Until something changes.
The game must adapt
Until Spotify, Apple Music, Deezer, et al. can get on the same page and decide to pay artists according to their streams rather than using the current “lump and dump” formula, this problem is going to continue.
My hope is that we’ll see a shift in how streams are paid over the next several years to prioritize additional incentives that are more difficult to manufacture out of thin air.
I also hope to see an increase in multiples for artists that actually drive traffic to DSPs instead of those who simply capitalize on listeners who are already there (selfishly, this would be a huge advantage for those of us who are running ads).
But until the powers that be feel enough pressure on their collective wallets, I fear the problem is likely to continue.
Streaming fraud is a massive issue for the music industry with some estimates putting annual losses over $1 billion.
This is a significant issue for all who are releasing music on streaming platforms.
And while I dug into the breakdown of the matter in last week’s YouTube video, let’s talk specifically about why this is an issue and what the solution might be.
Streaming royalty payments are… weird
The fundamental reason this problem exists has everything to do with how streaming royalties are paid to artists in the first place.
No one gets paid directly for their streams. Instead, it’s all paid out of one giant pool.
It goes like this: Spotify’s annual revenue in 2022 was roughly $12.4 billion. That means they make about a billion dollars a month (let’s all take a collective pause to catch our breath on that one).
Furthermore, according to a post I found from 2015, which is definitely dated information, Spotify processes roughly 1 billion daily streams.
This means Spotify sees rough 30 billion streams per month in 2015 numbers, so let’s take a little mathematical liberty and say Spotify now processes 50 billion streams per month in 2023 and makes $1 billion per month exactly for ease of math.
For ease of math, let’s also assume this entire amount goes toward paying artists streaming royalties (we all know this isn’t true, but we’re keeping it simple here).
Spotify takes all this money, throws it into one big pot, and then pays out every single artist whose music has been consumed on the platform according to the number of streams they have received as a percentage of the pie.
So if you got 1 billion streams within that timeframe, you’d be entitled to 1/50th of the pie or 2% of that $1 billion ($20 million).
If you get 100 streams, well, you’ll get a lot less.
Now this is a gross oversimplification of how this works, but the point is this: the more streams you earn, the higher your payout as a percentage of the pie, regardless of how many total streams there are.
So, theoretically, you could dump an additional 50 billion streams into the system and be entitled to half of the money, regardless of where those streams came from (50 billion + 50 billion = 100 billion; 50 billion / 100 billion = 50%).
It doesn’t matter that you diluted the pot by doubling the number of streams in it, you still get half.
The flaw is in the way the system is designed, and that very flaw can be easily exploited for financial gain.
And people are doing it in droves.
A system that can be gamed
Let’s go full nerd for a second.
According to Goodhart’s Law, “When a measure becomes a target, it ceases to be a good measure.”
There are numerous instances throughout history where this very idea has been showcased.
One such example is the Great Hanoi Rat Massacre. In 1902, French authorities in present-day Vietnam wanted to control the city’s rat population. To do so, they began offering a bounty for every rat killed. To collect the bounty, all one needed to do was provide a severed rat tail as proof.
What could go wrong?
The issue arose, of course, when more and more rats without tails began to appear throughout the city.
It turns out, people had been catching rats, cutting off their tails for the money, and then rereleasing them so they could breed and make more rats which could then be caught and have their tails cut, and so on.
The city’s population found a system that could be exploited for financial gain and, as a result, the measure became the target and ceased to be a good measure.
This is exactly what is happening with streaming.
Streams are the measure by which we determine the success or failure of a song in today’s music industry, and, more importantly, they are the measure by which we are compensated.
The issue is that now streams have become the target, and because they have become the target, they have ceased to become a reasonable measure of success.
Especially when they can be so easily created out of thin air via bot farms and fake Spotify accounts.
Much like a tailless rat rereleased into the wild to breed, every bot farm that successfully produces fake streams to receive the accompanying royalty payment paves the way for others just like it.
Until something changes.
The game must adapt
Until Spotify, Apple Music, Deezer, et al. can get on the same page and decide to pay artists according to their streams rather than using the current “lump and dump” formula, this problem is going to continue.
My hope is that we’ll see a shift in how streams are paid over the next several years to prioritize additional incentives that are more difficult to manufacture out of thin air.
I also hope to see an increase in multiples for artists that actually drive traffic to DSPs instead of those who simply capitalize on listeners who are already there (selfishly, this would be a huge advantage for those of us who are running ads).
But until the powers that be feel enough pressure on their collective wallets, I fear the problem is likely to continue.
Streaming fraud is a massive issue for the music industry with some estimates putting annual losses over $1 billion.
This is a significant issue for all who are releasing music on streaming platforms.
And while I dug into the breakdown of the matter in last week’s YouTube video, let’s talk specifically about why this is an issue and what the solution might be.
Streaming royalty payments are… weird
The fundamental reason this problem exists has everything to do with how streaming royalties are paid to artists in the first place.
No one gets paid directly for their streams. Instead, it’s all paid out of one giant pool.
It goes like this: Spotify’s annual revenue in 2022 was roughly $12.4 billion. That means they make about a billion dollars a month (let’s all take a collective pause to catch our breath on that one).
Furthermore, according to a post I found from 2015, which is definitely dated information, Spotify processes roughly 1 billion daily streams.
This means Spotify sees rough 30 billion streams per month in 2015 numbers, so let’s take a little mathematical liberty and say Spotify now processes 50 billion streams per month in 2023 and makes $1 billion per month exactly for ease of math.
For ease of math, let’s also assume this entire amount goes toward paying artists streaming royalties (we all know this isn’t true, but we’re keeping it simple here).
Spotify takes all this money, throws it into one big pot, and then pays out every single artist whose music has been consumed on the platform according to the number of streams they have received as a percentage of the pie.
So if you got 1 billion streams within that timeframe, you’d be entitled to 1/50th of the pie or 2% of that $1 billion ($20 million).
If you get 100 streams, well, you’ll get a lot less.
Now this is a gross oversimplification of how this works, but the point is this: the more streams you earn, the higher your payout as a percentage of the pie, regardless of how many total streams there are.
So, theoretically, you could dump an additional 50 billion streams into the system and be entitled to half of the money, regardless of where those streams came from (50 billion + 50 billion = 100 billion; 50 billion / 100 billion = 50%).
It doesn’t matter that you diluted the pot by doubling the number of streams in it, you still get half.
The flaw is in the way the system is designed, and that very flaw can be easily exploited for financial gain.
And people are doing it in droves.
A system that can be gamed
Let’s go full nerd for a second.
According to Goodhart’s Law, “When a measure becomes a target, it ceases to be a good measure.”
There are numerous instances throughout history where this very idea has been showcased.
One such example is the Great Hanoi Rat Massacre. In 1902, French authorities in present-day Vietnam wanted to control the city’s rat population. To do so, they began offering a bounty for every rat killed. To collect the bounty, all one needed to do was provide a severed rat tail as proof.
What could go wrong?
The issue arose, of course, when more and more rats without tails began to appear throughout the city.
It turns out, people had been catching rats, cutting off their tails for the money, and then rereleasing them so they could breed and make more rats which could then be caught and have their tails cut, and so on.
The city’s population found a system that could be exploited for financial gain and, as a result, the measure became the target and ceased to be a good measure.
This is exactly what is happening with streaming.
Streams are the measure by which we determine the success or failure of a song in today’s music industry, and, more importantly, they are the measure by which we are compensated.
The issue is that now streams have become the target, and because they have become the target, they have ceased to become a reasonable measure of success.
Especially when they can be so easily created out of thin air via bot farms and fake Spotify accounts.
Much like a tailless rat rereleased into the wild to breed, every bot farm that successfully produces fake streams to receive the accompanying royalty payment paves the way for others just like it.
Until something changes.
The game must adapt
Until Spotify, Apple Music, Deezer, et al. can get on the same page and decide to pay artists according to their streams rather than using the current “lump and dump” formula, this problem is going to continue.
My hope is that we’ll see a shift in how streams are paid over the next several years to prioritize additional incentives that are more difficult to manufacture out of thin air.
I also hope to see an increase in multiples for artists that actually drive traffic to DSPs instead of those who simply capitalize on listeners who are already there (selfishly, this would be a huge advantage for those of us who are running ads).
But until the powers that be feel enough pressure on their collective wallets, I fear the problem is likely to continue.
Whenever you're ready, there are four ways I can help you:
Subscribe to the Newsletter: Join our growing network of artists, creators, and entrepreneurs by receiving The One Thing directly to your inbox every week.
Book a Consultation: Schedule a one-on-one call with me to improve your marketing across paid advertising, social media, and more.
The Spotify Traffic Accelerator: Join the hundreds of artists who have successfully learned to automate their growth on Spotify using paid ads on Instagram.
Become a DuPree X Artist: Hire our team to manage your marketing across streaming platforms and social media so you can focus on what matters most—making music.
Whenever you're ready, there are four ways I can help you:
Subscribe to the Newsletter: Join our growing network of artists, creators, and entrepreneurs by receiving The One Thing directly to your inbox every week.
Book a Consultation: Schedule a one-on-one call with me to improve your marketing across paid advertising, social media, and more.
The Spotify Traffic Accelerator: Join the hundreds of artists who have successfully learned to automate their growth on Spotify using paid ads on Instagram.
Become a DuPree X Artist: Hire our team to manage your marketing across streaming platforms and social media so you can focus on what matters most—making music.
Whenever you're ready, there are four ways I can help you:
Subscribe to the Newsletter: Join our growing network of artists, creators, and entrepreneurs by receiving The One Thing directly to your inbox every week.
Book a Consultation: Schedule a one-on-one call with me to improve your marketing across paid advertising, social media, and more.
The Spotify Traffic Accelerator: Join the hundreds of artists who have successfully learned to automate their growth on Spotify using paid ads on Instagram.
Become a DuPree X Artist: Hire our team to manage your marketing across streaming platforms and social media so you can focus on what matters most—making music.