Tuesday, February 20, 2018

The great big Spotify scam: Did a Bulgarian playlister swindle their way to a fortune on streaming service? | Music Business Worldwide

A Bulgarian playlist-maker scammed the Spotify payout system for months last year – and could well have made themselves a millionaire off Daniel Ek’s platform.

That’s the shock claim being made by multiple high-level industry sources to MBW this week.

Music Business Worldwide can today reveal details of the alleged shakedown, which reached its height at the end of last summer.

The evidence we’ve gathered strongly suggests that one party sucked a vast amount of money – as much as $1 million-plus – out of the Spotify royalty pool, and away from legitimate artists and labels.

And the best/worst part of all? They probably didn’t break any laws in the process.

How did they do it? Read on…


The ‘scam’ was first spotted by a major label executive in late September 2017 – but by this point, it was almost certainly too late.

Two suspicious third-party playlists came to the attention of the major at this juncture – ‘Soulful Music’ and ‘Music From The Heart’.

Both of them were full of music attached to ISRC codes that linked back to an operation in Bulgaria.

And both of them appeared in the weekly, confidential global playlist chart sent around the industry by Spotify.


MBW has seen a number of these confidential Spotify charts, which are believed to rank playlists by the amount of revenue they generate in a given seven-day period.

On September 23, ‘Soulful Music’ and ‘Music From The Heart’ reached hitherto peak positions.

‘Music From The Heart’ sat at No.84 on Spotify’s global list, and No.22 on its US-only rankings.

‘Soulful Music’, meanwhile, was smashing it.

It climbed to No.35 on Spotify’s confidential global chart (up 29 places) and – unbelievably – at No.11 in the US.

Both of these positions for ‘Soulful Music’ (global and US) were higher than any major-label owned playlist.


Here’s where things start to enter Dodge City.

At the time, Soulful Music contained 467 tracks, all recorded by seemingly unknown artists with very little in the way of online biographies/presence.

You will note: this is an exceedingly large number of tracks for a playlist knocking on the door of Spotify’s Top 10 revenue-making playlists in America.

Even stranger: bewilderingly few people ‘followed’ the playlist.

According to data obtained using the playlist monitoring platform ChartMetric, MBW has discovered that during the third week of September 2017, just 1,797 people followed ‘Soulfu Music’.

What’s more, we’re told the vast majority of these 467 tracks were barely over 30 seconds long; the minimum unit of time needed to trigger a monetized play on Spotify.

See below for a screenshot taken at the time, and passed to MBW by a confidential source in recent days.


The story becomes even more intriguing when you dig into how many people were actually playing these tracks.

Our sources tell us that this data, within Spotify’s analytics, was pretty consistent: around 1,200 monthly listeners, with some variation, were hitting play on each ‘Soulful Music’ song.

So let’s bring all of this information together:

  • A Bulgarian individual or collective managed to run at least one third-party playlist – ‘Soulful Music’ – which generated so much revenue in September 2017, it landed at No.35 on Spotify’s global 100 chart. (We actually have a testimonial from a further trusted source that ‘Soulful Music’ went on to break the US Top 10 in late September, but we haven’t seen the evidence.)
  • However, ‘Soulful Music’ had less than 1,800 followers at the time.
  • What’s more, each of its 467 tracks were only attracting around 1,200 monthly listeners apiece.

Considering these numbers, how on earth could ‘Soulful Music’ beat down branded efforts from Sony, Universal and Warner to become one of the biggest playlists in the world?


There are only two possible answers to that question.

Soulful Music could – cough, splutter, sneeze – have been a completely legitimate niche playlist which was simply so addictive, 1,800 people just kept playing their way through it over and over and over.

Or – and this rather strikes us as the more likely scenario – an individual in Bulgaria set up circa 1,200 Spotify accounts, which continually played these 467 tracks on a loop, on random (thus why some songs had slightly different play counts to others).

In order to generate enough revenue to hit Spotify’s US Top 15 playlist rankings, all of these accounts must have been paid-for, premium subscriptions.

And it’s here that the genius of the (potential) ‘scam’ starts to become clear.


Let’s say that our friend the Bulgarian had laid out the money to purchase 1,200 premium accounts.

That would take a lot of work; they’d have to create individual email addresses and identities for each one.

It would also be expensive. A nice easy calculation shows why: 1,200 X $9.99-per-month would mean an outlay of $12,000 per month (although this could be reduced by family plans and other discounts).

That’s the monthly outgoings.

Now let’s work out the potential monthly revenue generation.


Our sources tell us that the average track duration of the 467 songs in Soulful Music was 43 seconds. (The top third of the playlist – the most visible bit – actually contained the longest tracks, presumably so that, at a glance, it appeared like the list could be legit.)

There are 86,400 seconds in a day.

The potential amount of total ‘listens’ that a single individual premium Spotify account could rack up within this playlist across a 30-day month? If they were playing songs continually, 24 hours a day, seven days a week?

Just over 60,000.

60,000 monetised tracks ‘listens’ across 1,200 premium accounts in the same month period?

A total of 72 million plays.

A conservative estimate of Spotify’s per-track average payout to recorded music rights-holders is $0.004 per play.

Multiplied by 72 million, and you get the potential monthly payout of the ‘Soulful Music’ scam.

$288,000.


What’s more: if bots were being used to skip tracks on Spotify before they finished – at the all-important 30-second monetisation point – you would be able to  squeeze in 103m plays across 1,200 accounts in 30 days.

Total potential payout at $0.004 per play?

$415,000.


Now, remember that these calculations are across just one playlist.

Don’t forget that The Bulgarian had at least one other playlist (that we know of) doing comparable numbers.

The only reason he or she got caught was because they were, essentially, too successful.

Eventually, a major label flagged the issue to Spotify, who, we’re told, deleted the vast majority of the 467 tracks in the ‘Soulful Music’ and ‘Music From The Heart’ playlists in October 2017.

‘Eventually’ is a key word here.

Our sources indicate that the scam – and don’t forget we’re presuming it was a scam – was running for four months before action was taken.

Going off our numbers above, that could easily have resulted in a payout, across the two playlists, of somewhere north of $1m.

(‘Soulful Music’ and ‘Music From The Heart’ continue to appear on Spotify, minus the vast majority of their original tracks, which were deleted in October. They’ve also been nowhere near Spotify’s global 100 playlists since this clampdown.)


What’s most mind-boggling here isn’t actually that Spotify may have in any way been defrauded by The Bulgarian. Because, as we pointed out, technically this person needn’t have broken any laws.

Ultimately, all of these accounts were being paid for. Therefore, in terms of Spotify’s business, the company gained the appropriate amount of income and subscribers.

Money in the bank, more subs to tell Wall Street about… what’s the harm?

“Spotify was sharing this weekly detailed data with the major labels, Merlin and other rights-holders for months before it was flagged up,” says one MBW source.

“All the while, it looks pretty plain that somebody was using purchased library music to extract hundreds of thousands, perhaps millions, of dollars, out of a royalty pool that would have otherwise gone to them and their artists.

“You can’t completely blame Spotify for this, because every one of these accounts was presumably attached to verifiable income.”

“We are continuing to invest heavily in refining those processes and improving methods of detection and removal, and reducing the impact of this unacceptable activity on legitimate creators, rights holders and our users.”

MBW got in touch with Spotify about what went on before publishing this article.

A company spokesperson stopped short of confirming the swindle, but did give us this statement:

“We take the artificial manipulation of streaming activity on our service extremely seriously. Spotify has multiple detection measures in place monitoring consumption on the service to detect, investigate and deal with such activity.

“We are continuing to invest heavily in refining those processes and improving methods of detection and removal, and reducing the impact of this unacceptable activity on legitimate creators, rights holders and our users.”


And it’s here we leave things, amid the murky unknowns of a practice that, before October 2017, was going on right under Spotify and the major labels’ noses.

Spotify tells us it’s now “improving methods of detection and removal”. But the big question remains: are the scammers out there improving their methods too?

Are there others, like our Bulgarian friend, purchasing multiple premium Spotify accounts and rinsing playlists stuffed with cheap music to which they own the rights?

If so, how many of these Spotify scammers exist – and how much money are they generating?

Are they operating at a lower commercial level than The Bulgarian and, therefore, not outing themselves by appearing on weekly top global playlist charts?

Crucially: what does all of this mean for the solidity of valuations for music’s biggest companies?

And even more crucially… what does it mean for the veracity of Spotify’s paying audience as the company begins its high-stakes escalation towards the New York Stock Exchange?Music Business Worldwide

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