DMN Pro Q1 Mini-Conference Preview: What Do Spotify’s Royalty Changes Mean for Streaming Fraud?

Nermina Mumic, Founder & CEO of Legitary (Photo Credit: Nermina Mumic)

It’s no secret that Spotify’s royalty changes have been introduced in part to address ‘noise’ uploads to the platform—what the platform and major labels consider low quality audio that shouldn’t generate royalties on par with ‘real’ artists. But what about outright fraudulent streams?Digital Music News is hosting an online webinar on January 24th exploring fraud prevention and liability reduction in music. Legitary’s Nermina Mumic will be joining us for a discussion on the ever-changing arena of streaming fraud, one of several discussions in this mini-conference.

What: Digital Music News’ Webinar ‘Missing Payments? A Look at Loss Prevention and IP Protection In Music’

When: January 24 | 11 am PT / 2 pm ET

Exclusive to DMN Pro Members: Want to join this event but don’t have DMN Pro yet? Here’s the first month free. Enter code 1MONTHPRO when registering HERE.With Spotify’s 1,000-song threshold now in effect, is this just another hurdle for fraudsters to jump over on their way to stolen royalties? For an answer to that question, DMN recently chatted with Nermina Mumic, CEO and founder of Legitary, a company dedicated to auditing and verifying music streaming data.

Speaking on Spotify’s royalty changes, Mumic says it’s unclear right now how those changes will impact how the fraudsters currently operate. “It might significantly increase fake streams as it might provide fake farms with a new source of income, ensuring that your songs all surpass the 1,000-stream threshold,” she shared. She’s speaking of streaming farms, which employ thousands of Spotify accounts (some stolen) to drive up fake listens to tracks. These services are against Spotify’s ToS for Spotify for Artists—yet the services are available to purchase online.

“In general, [the royalty changes] might yield challenges to not compensate for services rendered and attempt to distribute funds to others. Apple handles this differently by paying more royalties for better quality—like Dolby Atmos songs.”

Legitary is a music tech startup that powers the monetization of music rights. Legitary’s patented AI engine allows labels, publishers, and artists to audit their streaming revenues and value music IP. Nermina has a background as a data scientist, graduating from Vienna University of Technology with a master’s degree in Technical Mathematics.

As part of her PhD in Statistics, she developed and patented the Legitary algorithm. Legitary is an example of AI having a constructive use within the music industry—though that’s not always the case.

“AI will transform the music business much like digitization did,” Mumic told Digital Music News. “We’re uncertain about the exact implications, but every day sees the upload of thousands of songs entirely generated by AI. It is crucial for the music industry to guarantee compensation for the original art used by AI for training.”Several artificial intelligence companies have found themselves the subject of lawsuits over the use of artist materials to train models, including OpenAI, Midjourney, and Stable Diffusion. The outcomes on those cases may determine how AI music is compensated going forward, though identifying AI generated music may become increasingly harder.

“Identifying entirely AI-generated music will undoubtedly pose a significant challenge, Mumic confirmed, “as well as opening the question of its monetization. The legal framework must be adapted accordingly. Throughout all of these changes, it is essential to ensure that music creators receive fair compensation.”

What does fair compensation look like in a world where AI tools become an integral part of the process? The rapid pace of AI development since the end of 2022 has left many of these questions unanswered.The industry already struggles with making sure artists, creators, and rights holders are attributed properly through metadata so their royalties are paid out correctly. AI services like Matchtune can help identify missing royalties, but what recourse do artists have if they believe they’re missing payments?

“The first point of contact should be the distributor,” Mumic said. “If that doesn’t provide a solution, one should contact Legitary to conduct a data analysis. Following this analysis, it becomes clear whether they’re owed and if so, how much and where exactly something is missing. If payouts are indeed missing, it is advisable to consult with an auditing firm or lawyer for guidance on next steps or potential legal action.”