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The Boomy/Spotify Streaming Fraud Debacle Proves 'Pro-Rata' Must Go Urgently

by Tim Ingham, Founder / Publisher at Music Business Worldwide, May 4, 2023

The music industry is facing a serious issue with streaming fraud, and the recent scandal with Boomy, a service that sold fake Spotify streams to artists, highlights the need for urgent action. The pro-rata system, which divides streaming revenue based on total streams, rewards fraudsters and disadvantages smaller artists. Experts argue that it's time to switch to the user-centric model, where each subscriber's payment is allocated to the artists they listen to. This would eliminate the incentive for fake streaming and create a fairer distribution of revenue.

The Boomy case is just one example of the many fraudulent practices in the streaming industry. Some services use bots to generate fake streams, while others manipulate playlists and algorithms to boost their numbers. These practices not only hurt honest artists but also harm the reputation of streaming platforms and diminish the value of music.

“We use a combination of algorithms and manual review by employees to detect artificial streams and aim to remove such artificial streams or non-bona fide user accounts created for [fraudlent] purposes and filter them out from our metrics on an ongoing basis,” reads the latest annual SEC report from Daniel Ek‘s company, issued in February.

“However, we may not be successful in detecting, removing, and addressing all artificial streams and any related user accounts.”

The pro-rata system was designed to distribute revenue based on the popularity of each song and artist, but it has several flaws. For instance, it rewards fraudsters who can generate millions of fake streams and takes money away from smaller artists who have a loyal but niche fan base. Moreover, it favors mainstream music over niche genres, as the former tends to dominate the most-streamed playlists.

The user-centric model, on the other hand, would distribute revenue based on each subscriber's listening habits. If a subscriber listens to 90% of their music to one artist, that artist would receive 90% of the subscription revenue. This model would create a more direct relationship between fans and artists and incentivize artists to engage with their fans and create quality music. It would also make it harder for fraudulent practices to succeed, as the revenue would be distributed based on genuine listening.

Some streaming platforms have already switched to the user-centric model, and others are considering it. However, the major players like Spotify and Apple Music are hesitant to make the change, as it would require significant changes to their infrastructure and licensing agreements. But experts argue that the cost of inaction is much higher, as the streaming industry is facing a crisis of trust and legitimacy.

In conclusion, the Boomy scandal is a wake-up call for the music industry to take action against streaming fraud and switch to the user-centric model. It's time to prioritize fairness, transparency, and integrity in the distribution of streaming revenue, and to create a system that benefits both artists and fans.

MBW Reacts is a series of analytical (and occasionally opinionated) articles from Music Business Worldwide written in response to major recent entertainment events or news stories.

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