Are Gangs Behind Music’s Streaming Fraud Problem?

In 2022, George White spoke about streaming fraud during a panel at the annual Music Biz conference in Nashville. Few music industry executives were willing to discuss the problem publicly at the time. This made several comments from White — who serves as vp of music licensing/head of publishing for SiriusXM and Pandora — all the more head-turning: This type of fraud, which usually involves the use of bots or stolen accounts to generate fake plays for audio, often resembled “a criminal enterprise,” White said. 

“Aggressive foreign nationals may well be responsible for generating royalties and funding” through streaming fraud, White added later. “Is it funding drug operations? Is it funding terrorism abroad? Who knows?”

At the conference, White’s “aggressive foreign nationals” line drew laughs from the crowd. But it appears less funny now: Svenska Dagbladet published an article this week indicating that Swedish law enforcement believes that gangs use streaming platforms to launder money related to their criminal activities. 

“Spotify has become an ATM for them,” an anonymous officer told the paper. “There is a direct connection to the gangs and therefore also to the deadly violence.” (“We have no evidence that money laundering occurred via Spotify,” a spokesperson for the streamer told Svenska Dagbladet.)

The paper also spoke with criminals who detailed the alleged money laundering scheme. Those sources said the gangs take money earned via illicit means and convert it into Bitcoin. They then use that currency to buy fake streams for artists they’re connected to. The royalties they subsequently collect from streaming services — while the article focuses on Spotify, this sort of fraud is an industry-wide issue that impacts all the streaming platforms — come out clean. 

The links between streaming fraud and “criminal enterprise” have been brought up outside of industry panels at SXSW and Music Biz. John Phelan, director of the International Confederation of Music Publishers, declared bluntly in 2020 that “there is a black market for pay-for-play.” 

In 2022, Brazilian authorities launched a sweeping operation to shut down sites that sold bot-generated streams. Although those sites were based in Brazil, the stream-juicing took place in Russia and Russian hackers helped with the efforts, according to Paulo Rosa, president of Pro-Música, Brazil’s trade organization for record labels and an IFPI affiliate.

“Digital music today is a fairly soft target for sophisticated and even relatively unsophisticated bad actors,” Morgan Hayduk, founder/co-CEO of Beatdapp, explained earlier this year. (Beatdapp, based in Vancouver, builds fraud detection software for labels, distributors and streaming services all over the world.) “They leverage the same tools used for other types of online fraud, like stolen account credentials and bots, to extract revenues from a large and growing online industry.” Beatdapp estimates that up to 10% of all streams may be fraudulent. 

This year, the U.S. music industry started to publicly call for better fraud mitigation efforts, name-checking the problem on earnings calls with financial analysts. On Wednesday, when Deezer announced plans to roll out a new streaming model in partnership with Universal Music Group, “tackling fraud” was one of four key pillars. Deezer promised “continuing to drive an updated, and stricter, proprietary fraud detection system, removing incentives for bad actors, and protecting streaming royalties for artists.”

“All the major DSPs are pretty active and pretty open to listening and engaging on the topic,” a senior executive told Billboard earlier this year. “Having strong technology controls, rules, and policies in place, and adding consequences when you violate those, are incredibly important components.” 

Svenska Dagbladet‘s report will presumably add a new layer of urgency for those hoping to minimize streaming fraud. But it can be hard to tell what, if any, progress is being made. The biggest streaming services share little to no information about the level of fraudulent activities on their platforms. 

The Centre National de la Musique (CNM), an organization that operates under France’s Ministry of Culture, published a report in January investigating the amount of streaming fraud in the French music industry. But Apple Music, YouTube and Amazon did not share data about fraud on their platforms. Deezer has been unusually transparent about its efforts to fight fraud relative to its peers; its executives have said that 7% of daily streams are identified as fake. 

A Spotify spokesperson told Svenska Dagbladet that “less than one percent of all streams on Spotify have been determined to be tampered with,” but added, “In order not to make it easier for someone trying to manipulate the system, we do not share details about specific methods.”