In the first criminal case of its kind, a US musician and his co-conspirators stand accused of conspiracies to commit wire fraud and money laundering after allegedly using bots to inflate streams of AI-generated music on major digital streaming platforms and claiming millions of dollars in royalty payments. 

The indictment

In an indictment filed in a New York court in September, prosecutors accused Michael Smith, a musician with a catalogue of his own, of concocting and carrying out a scheme to generate millions of dollars in royalties from fraudulent streaming. 

Prosecutors allege that Smith and his co-conspirators – amongst them a music publicist, the CEO of an unnamed AI music company and a music promoter – created hundreds of thousands of AI-generated songs and uploaded them to streaming platforms including Spotify and Apple Music under fake artist names. Smith is accused of commissioning the creation of thousands of bot accounts with bulk-bought fake email addresses and using software to automatically stream the songs billions of times from those accounts from the web browsers of multiple virtual computers. 

According to his own calculations from 2017, Smith’s bot accounts were capable of generating approximately 661,440 streams per day – amounting, over the course of a year, to $1,207,128 in annual royalty payments.  The indictment estimated that Smith ultimately claimed and received more than $10,000,000 in royalties.

Terms of misuse

Streaming platforms’ terms of service and user guidelines will generally prohibit all of the behaviour noted above, from streaming manipulation to creating accounts with fake identities. Platforms are also becoming increasingly sensitive to the use of AI-powered bots in generating false plays – something that Smith was live to. To try and throw the platforms off the scent, Smith is alleged to have used VPNs and other concealment measures, including spreading the automated streams across thousands of songs. 

Suspicions were, however, raised: the indictment refers to multiple instances of streaming platforms and music distributors identifying that Smith’s tracks matched criteria used for streaming abuse and accusing Smith of breaching their terms of service. In each instance, Smith is said to have flat-out denied the accusations, thereby misrepresenting the nature of the streams to the complaining companies. 

How does this impact other artists?

Whenever a song is played on a digital streaming platform, the parties involved in making it become entitled to receive a (usually very modest) royalty payment per stream. The amount of money actually received by those parties varies depending on a number of things, including but not limited to their role – producers, for example, will usually (but not always) receive a smaller proportion than the lead vocalist on a sound recording – and the contracts they have negotiated in respect of the songs they have written, performed or produced. 

While the calculation and payout process differs slightly between songwriters (who are involved in writing the underlying compositions of songs), performing artists or producers (whose role is in performing on and creating the sound recording) and other rightsholders, the royalty income of everyone involved in creating the tracks represents a share of the relevant platform’s revenues, proportionate to the total number of streams of all songs on the platform, during the last royalty period. 

Given the pool-based approach to paying out royalties in the music industry, streaming fraud diverts funds from songwriters, singers, musicians and producers whose songs were streamed by legitimate listeners, to nefarious parties which use automation to inflate streams. 

Has this happened before?

Streaming fraud is a clear and growing problem for the music industry. While this case is the first of its kind in the US, across the pond (and then a little bit further on), a Danish man was handed an 18-month sentence by an Aarhus court for fraudulently inflating streams of hundreds of songs on streaming platforms. He was also found guilty of breaching musicians’ copyright in respect of 37 of those songs, which he had created by changing the tempo and length of existing songs and publishing them on the platforms in his own name. The Danish scheme saw the perpetrator become the 46th highest-earning composer in Denmark between 2014 and 2017. While platforms are taking action to protect musicians from the impact of streaming fraud – with Spotify, for example, introducing new fines for artificial streaming earlier this year – it continues to pose a significant threat to the music industry. 

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