Amid the streaming fraud controversy, the US Department of Justice last week charged North Carolina resident Michael Smith with three criminal counts related to a “A scheme to create hundreds of thousands of songs with artificial intelligence and using automated programs called ‘bots’ streaming AI-generated songs billions of times“or Spotify App told the MBW portal that they contributed less than 1% of the US$10 million in royalty payments generated between 2017 and 2024.
“Spotify invests heavily in automated and manual analysis to prevent, detect, and mitigate the impact of artificial streaming on our platform,” a Spotify spokesperson told MBW via email.
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Spotify added: “In this case, it appears that our precautions worked and limited the royalties. [Michael] Smith managed to recover from Spotify about $60,000 of the $10 million listed in the indictment. Given that Spotify typically accounts for about 50% of streamshare, this shows how effective we are in limiting the impact of artificial streaming on our platform.” The US attorney’s office charged Smith “fraudulently obtained more than $10 million in royalty payments through his scheme” between 2017 and 2024.
Spotify reports independent artist and record label revenue in 2023. Photo: Disclosure/Spotify
Smith faces charges of wire fraud, wire fraud conspiracy and money laundering conspiracy, each of which carries a maximum sentence of 20 years in prison. The indictment against Smith, unsealed in the U.S. District Court for the Southern District of New York, describes an unnamed streaming service that detected Smith’s activity as streaming fraud and withheld his payments in early 2019.
According to MBW, at least one news source has identified the streaming service — called “Streaming Platform-1” in the indictment — as does Spotify, based on the wording of its terms of service, as cited in the indictment.
“In or about March 2019, Streaming Platform-I notified the music distribution company (“Distribution Company-3”) for which Michael Smith, the defendant, was employed, that Streaming Platform-I believed Smith had engaged in streaming fraud,” the indictment states.
“Soon after that, [Smith] communicated directly with Streaming Platform-I to deny that he was involved in streaming fraud and asked Streaming Platform-I to return his music.” With the growing problem of streaming fraud in the music industry, Spotify has shown signs that they are taking the issue seriously and have developed tools to detect it.
Spotify – independent artists and record labels to generate nearly R$22.3 billion in 2023. Photo: Disclosure/Spotify
In May last year, Spotify blocked access to certain songs created with the music-making platform. IA Boomingafter detecting “artificial streaming” of tracks created by Boomy. At last count, according to MBW, Boomy says it has been used to create more than 20 million songs.
Also last year, Spotify began implementing changes to its royalty payment model, including a policy to financially penalize music distributors, including record labels, when fraudulent streaming of songs they upload is detected. Spotify also joined streaming platforms Amazon Music English: Cloud Voicetogether with similar music companies Trust, KINGDOM, DistroKid English: Masters United to form Music Against Fraudregarded as “an unprecedented alliance aimed at eradicating streaming fraud.”
According to Beatd Appa music data company that calls itself a “leading fraud detection authority”streaming scam pull closer $2 billion in artist royalties annually. Although the US Attorney’s Office described Smith’s case as “the first criminal case involving artificially inflated music streaming”This case is not the first to occur outside the US.
According to MBW, earlier this year a 53-year-old man in Denmark was sentenced to 18 months in prison after a court found that he had artificially inflated the streaming numbers of 689 songs he uploaded to streaming services, including Spotify, Apple Music and YouSee Musik. Prosecutors initially claimed that the defendant earned DKK 4.38 million ($635,000) from the fake streams, but were ultimately only able to prove winnings of DKK 2 million ($290,000). The Danish Human Rights Alliance called the verdict “historic” and sent “a strong signal about the seriousness of the challenge of broadcast manipulation.”
