The dark side of music streaming - BBC Trending podcast, BBC World Service

Key Concepts

• Streaming Fraud: Manipulating streaming numbers to illegitimately collect royalties.
• AI-Generated Music: Music created using artificial intelligence, allegedly used in the scheme.
• Bots: Automated computer programs used to simulate streams.
• Royalty Pool: The collective revenue from subscriptions and ads on streaming platforms, distributed to rights holders.
• Proportional Distribution: Royalties are paid out based on the percentage of total streams a rights holder's music receives.
• Distribution Companies: Services that help artists upload music to streaming platforms (e.g., Tunecore).
• Billboard Charts: Official music charts in the US.
• Wire Fraud Conspiracy, Wire Fraud, and Money Laundering Conspiracy: The charges against Michael Smith.

The Michael Smith Case: An Alleged AI Streaming Fraud

The Arrest and Accusations

• In early autumn in Cornelius, North Carolina, Michael Smith, a musician, was arrested in an FBI raid on September 4th of the previous year.
• He is accused of using AI to create and stream music and illegally collecting over $10 million in royalties.
• Prosecutors have labeled the case the "first of its kind."
• If convicted, Smith could face up to 60 years in prison.

Jonathan Hay's Involvement and Suspicions

• Jonathan Hay, a music publicist, worked with Smith in 2012. Smith booked 40 consultations with Hay.
• They formed SMH Records and aimed to get features with rappers to penetrate their fan bases.
• In 2016, they launched "One Shot" on BET, a talent show with celebrity judges like RZA, DJ Khaled, and T.I.
• Hay and Smith had a falling out over concerns about payment to people on the show.
• Later, Smith suggested they work together again after Hay experienced a home invasion.
• They released a jazz record, "Jazz (Deluxe)," which hit Number One on the Billboard Jazz Contemporary Album chart in January 2018.
• Hay noticed the album charted for only one week and then dropped, which he found unusual.
• Hay also noticed suspicious streams from Vietnam and Pakistan on Smith's Christian song, "Beautiful Day."
• Distribution companies like Tunecore removed their music due to streaming fraud in 2019.
• Hay went to the police and then the FBI, who showed interest in the case.
• Hay had previously alerted Billboard that his and Mike's tracks shouldn’t be on the charts, but Billboard stated that everything checked out.

How Streaming Royalties Work and the Alleged Scheme

• Streaming platforms create a royalty pool from subscriptions and ads.
• In 2023, Spotify paid out $9 billion to music rights holders.
• Royalties are distributed proportionally based on stream percentage.
• The FBI accuses Smith of using AI to create hundreds of thousands of songs and bots to stream them billions of times.
• The FBI claims Smith used over 1,000 bot accounts simultaneously.
• This allegedly led to Smith receiving over $10 million in royalties.

Goldy Locks' Perspective

• Goldy Locks, a musician and business owner, collaborated with Smith and defends his character.
• She believes Smith is being made an example of.
• She argues that many artists are unhappy with streaming payouts and that Smith may have simply found a way to benefit from the system.
• She doesn't know anything about the wire fraud stuff.

Legal Status and Potential Implications

• Smith has pled not guilty to wire fraud conspiracy, wire fraud, and money laundering conspiracy.
• If convicted, he would be the first person convicted of streaming fraud in the US.
• The case could set a precedent for future prosecutions.

Beatdapp's Perspective on Streaming Fraud

• Andrew Beatty, CEO of Beatdapp, believes the Smith case is "kindergarten fraud."
• He says professional scammers load millions of songs and slowly play each one to avoid detection.
• The indictment against Smith states he had over 200,000 AI-generated songs on streaming services.
• Beatty believes the Smith case is just the tip of the iceberg and that the DOJ and FBI will pursue larger cases.
• He estimates that at least 10% of all music streams are fake.

Final Thoughts

• Jonathan Hay feels vindicated and believes the case could level the playing field in the music industry.
• Smith was still making music until his arrest, even working with Snoop Dogg.
• Spotify claims to invest heavily in preventing artificial streaming and that only a small proportion of Smith's royalties came from them.
• The case has exposed the industry-wide problem of music streaming fraud, but the true scale remains unknown.

Conclusion

The Michael Smith case highlights the potential for fraud within the music streaming industry. The alleged use of AI and bots to generate streams and collect royalties raises questions about the integrity of the system and the distribution of revenue to legitimate artists. While the outcome of the case remains uncertain, it has already sparked a conversation about the need for greater transparency and regulation in the streaming era.