Streaming's model is broken (Part II)

Welcome, artists & builders.

Today, I’m diving into streaming’s broken payout model. How it's used to steal billions from artists, how we can fix it & the real reason we haven’t yet.

Let’s go.

Stealing from Artists

Last week, it came out that a musician exploited streaming's broken model for $10 million—and is now being charged with streaming fraud.

But here’s the thing to understand:

This money was stolen from artists, not streaming platforms.

And this is just a drop in the bucket. 10% of streams are frauds. That’s $1.93 billion per year going to stream farmers instead of artists.

It’s completely broken.

How does this work? Is there a better way? And why does streaming keep using this model?

Well, it’s all about incentives.

Let me explain.

We get what we ask for.

Streaming’s pro-rata payout model is ripe for fraud.

• $10.99/mo to stream all you want

• All streams & money go into 1 pot

• Songs get paid based on their stream-share

Meaning you can pay yourself out more in royalties than it costs to generate them. Absurd.

Music’s primary business model encourages everything from money-laundering, arbitrage & stream bot armies.

Now AI makes the problem harder.

Here’s how Michael Smith conspired with the CEO of generative AI music company Boomy to exploit this flawed model.

1. He created 100,000+ songs with AI

2. Released them under fake artist names

3. Created 10,000+ fake family-plan accounts

4. Then streamed his songs billions of time with bots

Voila! — $10 million in royalties.

Bonus: an indictment from US federal prosecutors.

Change the incentives, change the outcomes.

We need to move from pro-rata to fan-powered royalties. AKA user-centric.

Instead of all your streams going into 1 bucket (where someone with bots spinning 24/7 can outweigh yours), your $10.99 goes to the share of songs you listen to each month.

Why?

→ Disincentivize Fraud: The math won’t work. If the maximum your streams pay out is 70% of your own subscription fee (the payout share), you can’t recover it by streaming your owned tracks. It kills this fraud overnight.

→ Incentivize Fandom: If a small number of people stream you a high share of their total, you’ll earn real money. Scale is no longer the only measure. Depth enters the equation.

People often say user-centric won’t drastically change who gets paid. They’re missing the point.

It’s all about incentives.
They drive everything.

Let’s finally get some good ones.

The real reason streaming hasn’t changed?

Streamers aren't incentivized to change it.

They benefit from the fraud:

→ More subs
→ More metrics
→ More revenue

And you need everyone on board.

So, it must come from the major labels.

But when they throw their weight around for change, they want evidence it will direct a higher share of the pie to them. This is why you get "artist-centric", not user-centric.

It's better, but it's not best.

We keep putting band-aids on bullet wounds with poorly targeted half-measures that harm indie artists more than anyone.

Enough with amateur-hour.

It’s time for a real payout system we can trust, where we’re no longer guessing which artists, fans & streams are real.

Both artists and fans deserve it.

Let’s get it done.

- Rob

PS: Don’t say I did’t warn you. This is from issue #10 “Streaming’s Model is Broken” in May of 2023.