There’s no denying that Spotify has changed the music industry forever. In an industry where piracy was on the rise thanks to the likes of file sharing websites, Spotify has somehow managed to become a multibillion-dollar company while legally offering songs for free.
Founded in 2006, Spotify now has over 248 million monthly active users and is even listed on the New York Stock Exchange. But behind Spotify’s massive success, there is also a dark world of fraud and underground crime.
Similar to click farms that have become well known in recent years, Spotify has also been plagued by fake listeners and streaming farms who have been stealing advertiser’s money without them even realising. Not only is this defrauding advertisers out of millions, but it’s also even affecting some official chart results!
But before we dive deeper into streaming farms and how they operate, first we need to fully understand Spotify’s business model and how they make money.
Spotify’s Business Model
If you’ve ever used Spotify before, then you’re probably wondering how they make money while offering songs for free. Well, Spotify has two main monetization methods that help it make money and have turned it into a billion-dollar empire.
The first and most obvious way is their premium subscription service. Starting at $9.99 a month, these plans allow customers to listen to exclusive songs, higher quality bitrates and download songs on their mobile devices. As of 2019, Spotify reportedly has over 113 million paying subscribers which makes them hundreds of millions of dollars in revenue every month.
The second way Spotify makes money is through its advertising network that is used across all free Spotify plans. When free users listen to songs, they are sometimes interrupted by adverts that advertisers have paid to display to users. There can be anything from short radio like adverts to interactive mobile videos. According to some sources, the ad-supported revenue only makes up around 10% of their total revenue while the rest comes from their premium membership plans.
But Spotify doesn’t just keep all the money they make from premium accounts and ad revenue. To make their business model work, they also have to pay artists royalties for using their songs. Although the actual rate per stream can vary depending on the record label and popularity of the artist, it’s estimated that artists currently get between $0.0045 and $0.0084 per stream. Of course, some of this has to be split with management labels etc, but if the artist is independent (without a label) then they will get to keep most of the money.
So with artists being able to earn between $0.0045 and $0.0084 per stream, how much could an average artist expect to make?
For an artist getting around 100,000 monthly streams, the artist would earn between $450 and $840. It might not sound like a lot, but once you start hitting the big numbers the money can quickly add up.
Now you understand Spotify’s business model, how do streaming farms come into play, and why do people make them?
What Are Streaming Farms?
Streaming farms are a relatively new concept and were created to specifically take advantage of streaming platforms like Spotify. Similar to the likes of click farms where robots or workers artificially inflate social media metrics such as likes and follows, streaming farms artificially inflate the number of listens of a song.
The most surprising thing about streaming farms is that if you know what you are doing, they are relatively easy to make. In an article by Vice, one of their journalists William Bedell managed to create his own streaming farm that simulated thousands of fake listeners. To our knowledge, William is not some elite underground hacker that is used to making things like this, so this goes to show just how easy it is.
From looking at the screenshot above, his streaming farm took advantage of a range of web servers and used hundreds of free Spotify accounts to fake. By continuously listening to his own songs over and over again, William earned money for every stream just like every artist does on Spotify.
But if you’re not very techy, then you might think streaming farms are reserved for the top criminal gangs and fraudsters, but you’d be wrong. By doing a quick Google search, it’s actually very easy to find a range of websites that will provide thousands of listens for a cheap price.
And if you know where to look, you could probably find a robot already made to fake as many listens as you’d like.
Not only do these streaming farms earn artists money for every “fake” listen they receive, but it also influences a range of other things. If a song gets enough listeners then it can sometimes make it into popular and trending playlists to attract more genuine listeners. And if a song gets enough streams, then it could also make it into the top charts, as many charting companies now count Spotify listens as “purchases”.
With streaming farms being very easy to make and rent, their presence is having a huge effect on Spotify and their profits. After years of being kept a well-known secret, suddenly everyone is using streaming farms to make more money, increase their visibility and get traction on their songs. But with streaming farms becoming more and more popular, how are Spotify fighting back?
How Spotify Is Losing Millions To Streaming Farms
According to the creator of the streaming farm from the Vice article, he was reportedly earning $30 a day from fake listens to his songs. It might not sound like a lot, but that was from a very low scale farm and the profits could be increased massively if he made the network bigger.
To date, the biggest investigated instance of streaming fraud took place in 2017 and generated an estimated $1 million in fraudulent payouts. And the worst thing about it is Spotify has done little to nothing to ensure advertiser’s money isn’t stolen by fake listeners. The fraudster, believed to be from Bulgaria allegedly used 1,200 separate premium Spotify accounts to listen to 467 tracks on repeat. They then racked up over 72 million listens in a month which equates to anywhere from $288,000 to $415,000 in royalties per month. Who said crime doesn’t pay?
With very little to no detection methods in place, fake listens on Spotify has become a big market and is reportedly losing the company and advertisers millions a year. In a recent Rolling Stone article, one record label estimated that fake streams could be costing artists over $300 million a year.
But it’s not just fraudsters that are taking advantage of Spotify’s system, normal bands are also taking advantage of Spotify without breaking any laws.
One band called Vulfpeck, made $20,000 from a silent album they released in an effort to raise money for them to go on tour. The band released a 5-minute album that consisted of 10 songs ranging from 31 to 32 seconds long. All of these songs were completely silent and the band encouraged their fans to listen to them on Spotify. The result was that the band made $20,000 in royalties from their album before it was removed by Spotify (although they never specified why). Although the band didn’t use any streaming farms or robots to listen to their songs, the band still took advantage of Spotify’s system to make money.
How Streaming Services Can Combat Fraud
With almost anyone being able to earn money from Spotify, many people are taking advantage of their system to the point where something needs to be done. At the moment, no streaming services publicly discuss or disclose their anti-fraud systems. Although it is highly likely that a lot of them do have some kind of detection system in place, most of them are manual and not very accurate.
Recently, the music industry just released a “code of best practices” to help tackle streaming fraud, but in reality, it’s just a list of rules that are made to be broken. Without proper detection algorithms, streaming fraud is only obvious when someone is abusing the system with silent albums. More sophisticated operations are much harder to detect, especially if they use lots of different accounts.
In a recent article in the Rolling Stone, the author Tim Ingham came up with a range of ideas to solve streaming fraud. One of the best ideas was to fight the problem together with all the music companies joining together to combat the fraud. This would involve the top streaming services coming together to donate money to help fund the creation of stream fraud detection software instead of just having a free for all.
Other ideas include penalties for label management employees and artists who participate in streaming fraud, as well as chart penalties to discourage artists from buying listens to make their songs popular.
Although eradicating streaming fraud completely might be impossible, there are definitely things streaming platforms can do to massively reduce it.
Streaming Fraud Vs Click Fraud
Despite taking place on different platforms, streaming fraud and click fraud share a lot in common. The first and most obvious thing is that both involved fraudulent activity in the form of fake listens or fake clicks to defraud advertisers out of millions every year. But both industries are tackling the problem differently.
Streaming farms and streaming fraud isn’t exclusive to just Spotify, and can happen on any streaming platform that pays artists. Just like click fraud can happen on any PPC network out there.
However, the incentives are dramatically different. People who commit click fraud on PPC ads are either looking to waste their competitors budget to increase their CPA, or click ads on their own websites to make money. But users who take part in streaming fraud primarily have monetary incentives as they want to make a profit from streaming their songs.
When it comes to PPC fraud, there are plenty of 3rd party click fraud detection services out there for advertisers worried about fraudsters clicking on their ads. But for streaming services, the detection is only in-house, and relies on the company to stop fraud.
In terms of which is easier and more profitable, we would have to say that streaming fraud is. Not only is the detection very minimal, but without any 3rd parties helping tackle the issue, everything is left to the streaming service.