MBW is well versed on the subject of so-called ‘fake streams’ on Spotify. You may recall that in July 2017, we uploaded our own track to Spotify, and then paid for over 10,000 plays on the service.
Spotify didn’t flag our streams as suspicious, and had we not published details of our nefarious deed on this very website, we expect those plays would have earned us about $40 in royalties. (In the wake of our exposé, Spotify pulled down our epic instrumental, Pinky Hue, from its service. For shame.)
Since then, of course, quite a lot has happened at Spotify.
For one thing, its annual revenues have grown by over $2.5bn (from $4.85bn in 2017 to $7.59bn in 2019), upping the stakes of such ‘fake’ plays; and, of course, SPOT’s become a public company – floating on the NYSE in April 2018 – with a current (Coronavirus-hit) market cap valuation of $25.5bn.
We have in the past been, and continue to be, impacted by attempts by third parties to artificially manipulate stream counts. Such attempts may, for example, be designed to generate revenue for rights holders or to influence placement of content on Spotify-created playlists or industry music charts.
“If in the future we fail to successfully detect, remove, and address fraudulent streams and associated user accounts, it may result in the manipulation of our data, including the key performance indicators, which underlie, among other things, our contractual obligations with rights holders and advertisers.”
Spotify SEC filing
How does Spotify deal with this risk? From the same annual 20-F Report:
We use a combination of algorithms and manual review by employees to detect fraudulent streams and aim to remove fake user accounts created for the above purposes and filter them out from our metrics on an ongoing basis, as well as to require users to reset passwords that we suspect have been compromised.
The consequences of not dealing effectively with ‘fake streams’ for Spotify could be financially dire, it admits:
If in the future we fail to successfully detect, remove, and address fraudulent streams and associated user accounts, it may result in the manipulation of our data, including the key performance indicators, which underlie, among other things, our contractual obligations with rights holders and advertisers (which could expose us to the risk of litigation), as well as harm our relationships with rights holders and advertisers.
Just as well, then, the global record industry is on SPOT’s side in this battle.
Today (March 3), the IFPI, which represents the recording industry worldwide, announced that the Berlin District Court has issued an injunction against the operator of Followerschmiede.de, a prominent stream manipulation site.
According to an IFPI press release: “The injunction orders the Germany-based Followerschmiede.de, which creates “plays” on a digital service provider that do not represent the actual consumption of music by a genuine consumer, to discontinue that activity.”
Who is that mystery “digital service provider”? MBW’s sources suggest that this is a specific reference to Spotify – whose investors must be pleased to see the effective shutdown of a site which sold fake Spotify streams in one of the globe’s biggest recorded music markets.
Followerschmiede.de, which is no longer live as a website in the wake of the injunction, also sold ‘fake’ followers on Instagram, as well as plays on YouTube and other services.
“Stream manipulation undermines [fair pay for artists and labels] – whether by undermining the accuracy of charts, royalty payments to music creators or otherwise – and cannot be tolerated.”
According to IFPI: “This action is the latest development in the global recording industry’s ongoing strategy to tackle the issue of stream manipulation as it continues to invest in and enable the development of the legitimate digital music market around the world.”
Frances Moore, chief executive, IFPI, said: “Those who create music must be remunerated fairly and accurately for their work and investment. Stream manipulation undermines this – whether by undermining the accuracy of charts, royalty payments to music creators or otherwise – and cannot be tolerated.
“Streaming platforms need to find a robust technical solution to this issue. For our part, we are prepared to take legal action against these sites, as shown by this action in Germany, and we will continue to do so wherever necessary worldwide.”
“This should be seen as a signal to other manipulation services that we are prepared to take action against them.”
Dr. Florian Drücke, Chairman & CEO, BVMI, said: “We took this action as part of our commitment to protect the legitimate legal market for music and to hinder any fraudulent services seeking to undermine it.
“This should be seen as a signal to other manipulation services that we are prepared to take action against them.”
Last year, IFPI, alongside its member companies and national groups, joined a broad industry coalition in signing a code of best practice aiming to detect and prevent stream manipulation.
However, some (including MBW) questioned the effectiveness of a voluntary code in a world where streaming manipulation can feasibly benefit any singular party.Music Business Worldwide
