How Music Distributors Are Tackling Streaming Fraud

Publish date: 2024-07-17

(HYPEBOT) – With music fraud on the rise, here’s what industry professionals are doing about it at the distributor level.

by Jorge Brea of Symphonic Blog

With more than 125,000 tracks being uploaded to music services each day, streaming fraud in all of its forms has increasingly become one of the most important topics of the modern music industry. With the widespread adoption of music streaming, the proliferation of DIY artists, and the democratization of distribution that allows almost anyone to upload music to a DSP, we’ve seen a commensurate increase in music fraud – to the tune of 5-10% of all streams, according to Beatdapp. Here’s what we, as a distributor, are doing about it.

Let’s Talk About Fraud…

Whether that fraud comes through streaming farms, account hacking and impersonation, music leaks, track manipulation, or scores of other techniques, fraudsters have been taking advantage of distributors and DSPs to redirect royalties away from rights holders and artists and into their own pockets to the tune of millions per year. This issue is exceedingly complex and requires a high level of nuance not only to detect but also to solve and prevent. However, this it’s not about just one industry stakeholder. We all need to work together to solve this problem — labels, publishers, DSPs, and distributors alike. As someone who is passionate about this issue, I went to my team at Symphonic Distribution and my counterparts at other distribution companies to discuss how we could fight this to the best of our ability.

Know Your Customer

At Symphonic, we started by turning our focus to KYC (Know Your Customer) efforts when we noticed an increase in fraud. We bolstered many of our departments, including legal and data intelligence, and we established new rules with our payment providers. But nothing proved as effective as identity verification. We made a conscious decision at Symphonic – based on a template established by fellow music distributor Too Lost – to make sure that whoever we are doing business with is a verifiable person. We teamed with identity verification company IDenfy, which completes a biometric scan of a potential new client’s driver’s license, passport, or some other form of photo identification, along with a selfie.

None of this personal data goes into Symphonic’s systems – we only receive the results from iDenfy. If they don’t check out, we review their account and provide additional attempts to be verified. If they still cannot be verified as a person, we terminate their account (or accounts).

Since implementing this process, streaming fraud on Symphonic has decreased by upwards of 50%+ (per monthly sign ups) with additional steps being taken to create more improvement.

We liken this ID verification system to the bouncer at a club.

They check ID, compare the photo, make sure there’s no issues with it, maybe ask a few questions, and if there are any red flags, we ask for alternate methods before turning someone away. This does two things for us:

It keeps our users and their copyrights safe.

It allows us to identify fraudsters at the base level and flag them so they can’t use our platform again.

This type of verification is a game changer for all distributors because we know most fraudulent accounts come from the same entities and in many of the same locations. With these steps, we can identify multiple accounts that are tied to the same verification information, allowing us to ban all of them at once and prevent bad actors from being verified again in the future.

Symphonic is committed to our clients, we’re committed to clean data, and we’re committed to a better music industry, and best of all this doesn’t change our mission. Any “real” person can still upload their music and reach the world with their message. It takes a couple of steps, but it makes sure that their songs don’t get stuck competing with fakes and fraud.

“causing friction for current or potential users is frowned upon…”

For many other distributors and others in the DIY/indie space, causing friction for current or potential users is frowned upon – they think it will scare away business and reduce their revenue. But as long as entry points to streaming services can be easily sidestepped, the fraud will continue, and it won’t get any easier to deal with. It’s more costly to clean up from bad actors than to keep the stage clean to begin with. In fact, we’ve found that this approach was nearly universally accepted by Symphonic’s users because it makes them feel safer with us. We need to establish these kinds of identification thresholds to foster a better industry.

Beyond ID verification, there are plenty of other ways and places for distributors to find fraud and prevent it, including using data to identify suspicious patterns, being proactive about data quality maintenance, working with DSPs to collect all the information needed to identify fraud on their end, communicating and educating artists, and more. Detecting and deterring fraud is always evolving – sadly, as long as there’s a way to make money, someone is going to try to figure out new ways to steal it. However, one of the most important things you can do is use new business to review and inform you about your existing business. There’s no better place to learn from than your own clients.

At the end of the day…

One person or company won’t solve this issue. We all need to work together, and it all starts with knowing your business, knowing your customers, being proactive, and requesting the information you need to make it happen. There’s no silver bullet, but we can make every effort to make it as difficult as possible for fraud to exist in the first place.