By: Piyush Senapati
INTRODUCTION
In September 2024, news broke out of the arrest of a music executive in the US for scamming streaming applications such as Spotify of 10 million dollars in the form of royalty payments. His modus operandi was simple- he created hundreds of thousands of songs using Artificial Intelligence [hereinafter ‘AI’], and uploaded them on streaming platforms. He then created thousands of false accounts on these platforms, popularly known as ‘bot accounts.’ Using a certain software, he caused these bot accounts to stream his AI generated songs thousands of times every day – raking in millions of dollars in royalties. This is a perfect example of the phenomenon that has come to be known as digital streaming fraud in the music industry, a process that uses automation to stream songs multiple times in order to receive higher royalties from the platform, as opposed to legitimate streaming by accounts operated by actual individuals.
While the phenomenon of digital streaming fraud is not yet as pervasive in India as it is in the west, with the massive growth of streaming in the country as a mode of music consumption in the past few years- it is only a matter of time before western trends are reflected here too. Thus, in the first part of the blog series, the article deals with why it becomes important to address the problem, a description of the methods by which digital streaming fraud functions, and how competition law may apply to the same. In the second part, the article will examine how consumer law and laws against computer fraud may address the issue, and ends with certain recommendations and solutions.
WHY IS IT IMPORTANT TO ADDRESS DIGITAL STREAMING FRAUD?
The advent of streaming on platforms such as Spotify, Apple Music, etc. fundamentally changed the pattern of music consumption all over the world. Gone are the days of buying physical albums or playing songs on the radio- your favourite songs are a just a click away. Erstwhile, a major chunk of an artists’ income would constitute of revenue from album sales. However, streaming has cut that income significantly. While the goal of this article is not to evaluate this shift, this aspect is important to note as digital streaming fraud on platforms like Spotify poses the danger of cutting into artists’ income even further.
The reason behind this lies in the method of revenue distribution employed by streaming platforms, i.e., the revenue pool model. Essentially, the subscription fees a listener pays to the platform gets divided amongst all the artists on the platform in proportion to the streams they have on the platform. In other words, where all the revenue generated from all the music that is streamed is pooled together. The revenue is then distributed proportionately amongst all the artists on the platforms based on the number of streams they generate. For example, if an artist X’s music generates 10% of all the streams on the platform, they will be entitled to 10% of the proceeds from this revenue pool. What digital streaming fraud does is cut this common pie of revenue into smaller and smaller slices- it diverts the revenue that would have otherwise gone to legitimate artists with real consumers to fraudsters who use these tactics to create the appearance of legitimate streaming. In fact, a study revealed that 10% of all streaming activity is fraudulent, costing the music industry a whopping 2 billion dollars that may have otherwise gone to actual musicians. In an era where most artists earn peanuts from streaming– this is particularly concerning. Beyond just taking up a portion of the royalties that ought to go to deserving artists, streaming fraud also has negative consequences for consumers. The artificially boosted popularity a song accrues also skews with the streaming services’ data analytics, disrupts the algorithms, and recommends consumers music less relevant to their tastes. This in makes it harder for consumers to discover music created by genuine but lesser-known artists.
THE METHODS OF DIGITAL STREAMING FRAUD
The most pervasive method of digital music streaming fraud is the one described in the introduction above, where automated bots repeatedly play a song in order to artificially boost its stream count. This is also popularly known as stream farming. Other tactics include creating manipulated versions of already existing songs (such as by pitching them up or slowing them down) to divert streams away from the original ones, knows as carbon copying or ghosting tracks. Beyond causing a financial loss to the right holders in the original songs, they are also instances of blatant copyright infringement. In a competitive industry where streaming is an important component for chart placements in addition to being a source of income, it is not surprising to know that in addition to bad faith actors, even major recording labels and their artists engage in these tactics, sometimes in collusion with the streaming platform itself. Or in other instances, streaming platforms themselves have been accused of streaming fraud themselves to further dilute the shares of legitimate artists in the revenue pool. For instance, in 2016 Spotify was accused of creating fake artist profiles and uploading AI generated music for them, which ended up garnering billions of streams and resultingly millions of dollars in payouts. Indeed, the rise of generative AI with its ability to create songs or modify already existing songs supplements many of the methods described above.
HOW COMPETITION LAW CAN COMBAT DIGITAL STREAMING
In March 2024, an interesting development took place in Canada. As a result of a complaint before the Canadian Competition Bureau by International Federation of the Phonographic Industry (hereinafter ‘IFPI’) and Music Canada (organisations representing the recording industry worldwide and in Canada, respectively), nine consumer facing websites that offered streaming manipulation services were taken down. The complaint alleged that those websites violated provisions of the Canadian Competition Act, 1985 [hereinafter ‘Canadian Act’], by misleading consumers and distorting their impression regarding what content merits their attention, and undermining the accuracy of music industry charts. Indeed, Section 74.01(a) of Canadian Act imposes civil liability on a person who for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever makes a representation to the public that is false or misleading in a material respect. It is important to note that in this provision, the representation needs to be false or ‘misleading in a material aspect’- and thus, the general impression given to the consumers becomes important to evaluate whether a conduct will be hit by this provision or not. Further, the representation needs to be material, i.e., likely to influence an average consumer into buying or using a product or otherwise altering their conduct. The argument is simple- artificially boosting streams for any songs definitely creates a false general impression of popularity in the consumer’s mind and is likely to influence their choice regarding whether to play that song or not, in addition to influencing the algorithm’s probability of recommending that song.
Where Indian law is concerned, consumer misrepresentation is dealt with not under the Competition Act, 2002, but under the Consumer Protection Act, 2019. Where the Indian competition law is concerned, the Draft Digital Competition Bill, 2024 [hereinafter ‘Draft Bill’], if enacted in its current form, contains provisions that may apply on such conduct or at least certain instances of such conduct. Under Section 11, the Draft Bill contains imposes an obligation against self-preferencing on entities. This means that they cannot prefer their own products and services or those of third parties with which they have arrangements over the products and services offered by other third-party business users on their platform. When applied to the case of digital streaming fraud, provisions against self-preferencing may cover those situations wherein the streaming platform itself is creating ghost tracks or where the streaming platform enters into agreements with record labels or certain artists to artificially boost the streams of their songs. However, provisions against self-preferencing would apply when the streaming platform itself is in the wrong- they would be inapplicable for lone actors, such as the case of the music executive highlighted in the introduction. While this provision could provide a potential avenue to hold streaming platforms accountable, implementational difficulties would remain, as distinguishing between ghost tracks created by the platforms or third parties would be difficult.
(Piyush Senapati is a law undergraduate at the National Law University, Jodhpur. The author may be contacted via mail at piyush.senapati@nlujodhpur.ac.in)
Cite as: Piyush Senapati, Digital Streaming Fraud – Dealing With the ‘Smooth Criminals’ of the Music Industry (Part 1), 15th July 2025 <https://rmlnlulawreview.com/2025/07/15/digital-streaming-fraud-dealing-with-the-smooth-criminals-of-the-music-industry/> date of access.
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