It’s no secret that streaming fraud exists. It’s a thing of great concern for the music business, and a giant challenge (aka game of whack-a-mole) for music streaming platforms like Spotify to deal with.
Now, an explosive new report from Svenska Dagbladet in Sweden focuses on the end purpose of streaming fraud on Spotify for organized criminals: laundering money.
According to the newspaper, crime networks with links to drugs and deadly violence have for years been using the platform for this purpose.
Svenska Dagbladet supports these claims by citing protected sources – including four actual criminal gang members based in Sweden and an anonymous police agent.
The article states that the police unit to which the anonymous police investigator belongs believes that “Spotify has become a criminal tool” and that “they suspect that the gangs launder money from drug dealing, robberies, fraud and assassination missions, via the platform,” which “can amount to many millions each year”.
They allegedly do so by converting proceeds from criminal activities into Bitcoin via “cash-in-hand deals” with crypto traders they meet on Facebook.
They then use that crypto to acquire fake streams for artists with links to gangs and collect the money paid out for those streams.
“Spotify has become an ATM for them,” the anonymous cop is quoted as saying. “There is a direct connection to the gangs and therefore also to the deadly violence,” he says.
They also claim that this practice is particularly prevalent in what they call the “gangster rap” scene in Sweden and with rappers who allegedly have links to crime.
“I don’t want to sell people out, this is very sensitive. It’s about more than buying streams,” one of the sources is quoted as saying. “If you’re a network and you want to attract kids and you have a rapper who’s going big, that’s half the job for you. It is very good for recruiting purposes.”
As previously noted by MBW, this number only represents the ‘fake streams’ that services can actually detect; it doesn’t include the ones they don’t find.
Tthat same report indicated that hip-hop/rap music represented 84.5% of fraudulent streams detected amid Spotify’s top 10,000 tracks during 2021.
However, as we noted in January, to a degree, this is to be expected because hip-hop is the dominant genre in the French market (accounting for more than 50% of the top 10,000 tracks on Spotify and 40% on Deezer, according to the report).
The CNM explains further however, that compared to the total number of streams generated by hip-hop and rap in 2021, fraudulent streams represented a small share of the genre’s total listens, with a 0.4% share on Spotify and 0.7% on Deezer.
Svenska Dagbladet says that it reached out to Spotify for a comment and that the platform via its Nordics-based communications manager said that, “We have no evidence that money laundering occurred via Spotify”.
Svenska Dagbladet added that the platform did, “not want to participate in an interview with SvD” but did, however, issue a statement to the newspaper attributed to “a spokesperson”:
The Spotify statement claims that “while there is more work to do”, its “automated processes and manual monitoring are market leading” and furthermore, that “less than one percent of all streams on Spotify have been determined to be tampered with”.
“Less than one percent of all streams on Spotify have been determined to be tampered with”.
Spotify spokesperson, in a statement issued to Svenska Dagbladet
Said Spotify: “Manipulated streams are a challenge for the entire industry and a problem that Spotify is working hard to combat. It is important to know that Spotify does not make any payments directly to artists, but to rights holders and distributors. It is equally important not to misunderstand the extent of the problem with manipulated streams. Thanks in part to the fact that our payouts are not real-time, our systems detect and address anomalies before they reach material levels.
“We have also improved the identification of artificial streams and developed faster measures to take as soon as we become aware of them. For example, we can withhold payouts, adjust streaming statistics down and completely suspend users from the platform. There is always more work to do, but our automated processes and manual monitoring are market leading – less than one percent of all streams on Spotify have been determined to be tampered with. In order not to make it easier for someone trying to manipulate the system, we do not share details about specific methods.
“We are one of the few streaming services that publish information about our measures to combat manipulation of streams in industry studies. We are members of the Music Fights Fraud Alliance where several players in the industry work together to combat fraud on various platforms, and we provide artists with educational materials that show the damage that manipulation of streams brings.”
Identifying streaming fraud, and tackling it, have been big priorities for the music business this year.
In January, Universal Music Group boss Sir Lucian Grainge called out “bad actors” for using illegitimate means to suck royalty revenue from music streaming services; Grainge argued that these platforms’ dominant ‘pro rata’ payout model needed to change.
Four months later, in May, after tracks created on AI music app Boomy were deleted by Spotify for suspected streaming fraud, MBW argued that the debacle proved that ‘pro-rata’ really must go – and urgently.
During Sony Group Corporation’s annual presentation to investors on May 24, Stringer called for tougher enforcement by digital service providers (DSPs) – plus, potentially, an anti-fraud-minded switch to a new music streaming royalty payout model.
“Fraud on key DSPs is a problem that must be eliminated through aggressive enforcement by these DSPs and distributors, or by changing payment methods [i.e. royalty payout models] to better reduce the incentive for fraud,” Stringer said during his presentation.
That same month, France-born music streaming service Deezer set out its own strategy to address fraudulent streaming activity on its platform.Music Business Worldwide