Valid from 1 January 2020, Spotify will automatically remove streams it identifies as “artificial” or “fraudulent” on the ad-supported tier, from its royalty calculation and usage reports.
Spotify will also continue to observe this activity on the premium-tier and will similarly remove streams it identifies as artificial and omit these from royalty and usage reporting in line with its existing process.
As a publicly-traded company, Spotify admits certain risks about its business to its investors (such as Morgan Stanley, T.Rowe Price Associates and Baillie Gifford), including this one, found in its 2019 annual 20-F report:
“We have in the past been, and continue to be, impacted by attempts by third parties to artificially manipulate stream counts. Such attempts may, for example, be designed to generate revenue for rights holders or to influence placement of content on Spotify-created playlists or industry music charts.”
How does Spotify deal with this risk? From the same annual 20-F Report:
“We use a combination of algorithms and manual review by employees to detect fraudulent streams and aim to remove fake user accounts created for the above purposes and filter them out from our metrics on an ongoing basis, as well as to require users to reset passwords that we suspect have been compromised.”
The consequences of not dealing effectively with ‘fake streams’ for Spotify could be financially dire, it admits:
“If in the future we fail to successfully detect, remove, and address fraudulent streams and associated user accounts, it may result in the manipulation of our data, including the key performance indicators, which underlie, among other things, our contractual obligations with rights holders and advertisers (which could expose us to the risk of litigation), as well as harm our relationships with rights holders and advertisers.”