Audio streaming platform Spotify has a fake artist problem, and these scammers are gaming the system.

Spotify’s streaming model makes it easy for scammers to manipulate the algorithms that determine song royalties, experts say. Scammers hack the algorithms and send large amounts of money into their bank accounts.

Here are three things to know.

1. The root of the Spotify problem

Due to the increasingly passive nature of music consumption, Spotify users really don’t pay attention to the artists or song titles that pop up in searches. This creates an opportunity for abuse, jazz critic Ted Gioia reported in his blog, The Honest Broker. One of the founders of Stanford University’s jazz studies program, Gioia wrote the book “Music: A Subversive History.”

When Spotify users ask Alexa or some other digital assistant to find background music, they will rely on a pre-curated playlist, according to Gioia. Fake artists can pop up in the playlist without the user even noticing.

Gioia tested his theory by requesting a jazz playlist. Names popped up that even this jazz critic had never heard off.

Sad if true. The music industry equivalent to retailers creating and pushing their own (crappy) product brands where they get higher margins? https://t.co/9lkgdwjVGM

— Martin Charlier (@marcharlier) April 13, 2022

2. Streaming makes scams possible

This type of scam wasn’t possible before streaming, according to Gioia.

“People obviously listened to music while studying or working, but they either picked out the record themselves or relied on a radio station to make a choice,” he wrote. “Radio stations were sometimes guilty of taking payola, but a human being could be held accountable even in those instances. But with AI now making the decisions, everything can be hidden away in the code.”

I wonder if this was Spotify's plan all along: grow market share using real musicians, then switch to fake ones. If so it's a uniquely sinister version of the strategy of focusing on growth first, then margins.https://t.co/IjZPcyudBj

— Paul Graham (@paulg) April 12, 2022

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3. Fake artists have been around for a while. Is Spotify in on it?

In 2017, Vulture published a report suggesting that Spotify games its own royalty system by creating and promoting in-house or “fake” artists. A year earlier, the industry blog Music Business Worldwide wrote a piece suggesting that instead of licensing the content and paying out royalties to the song rights holders, Spotify was paying producers a flat fee to create tracks for its playlists. By doing so, Spotify would control the master copyright.

“I wonder if this was Spotify’s plan all along: grow market share using real musicians, then switch to fake ones. If so it’s a uniquely sinister version of the strategy of focusing on growth first, then margins,” tweeted tech investor Paul Graham on April 12.

The problem isn't the 'fake artists' (The term is inaccurate IMO)
The problem (if one views it as one) is people settling for (assumedly) lower quality music.

— Jere Toikka (@jere_toikka) April 12, 2022

Photo: Spotify logo sign in the financial district of lower Manhattan, New York, November 10, 2020 (John Nacion/STAR MAX/IPx 2020 11/10/20)