A North Carolina resident was arrested and charged this week for allegedly defrauding music streamers by generating "hundreds of thousands of songs with artificial intelligence," and using "bots" to stream the AI-generated tunes billions of times, according to federal prosecutors' statements.
52-year-old Michael Smith of Cornelius, North Carolina, ran a highly successful scheme in which he obtained over $10 million in royalty payments over a period of seven years between 2017 and 2024. According to U.S. Attorney Damian Williams, "Michael Smith [allegedly] fraudulently streamed songs created with artificial intelligence billions of times in order to steal royalties. Through his brazen fraud scheme, Smith stole millions in royalties that should have been paid to musicians, songwriters, and other rights holders whose songs were legitimately streamed. Today, thanks to the work of the FBI and the career prosecutors of this Office, it's time for Smith to face the music."
Smith's AI and bot accounts scheme was honestly quite impressive, well orchestrated, and meticulously curated to be as successful and longstanding as it was prior to the arrest. Over the past several years, Smith created thousands of automated bot accounts on all of the major music streaming platforms; Apple Music, Spotify, YouTube Music, Amazon Music, and other less well-known platforms. He additionally used software to have the bots constantly stream songs that he owned the rights to. Smith estimated that he was able to use the automated accounts and profiles to generate about 661,440 streams per day, which translated to approximately $1,207,128 in annual royalties, according to the Justice Department release. In order to avoid getting flagged for over-streaming a single song, Smith spread the bot accounts across thousands and thousands of songs. This helped him elude both the spam safeguards that many streaming platforms have as well as the authorities for many years, according to the federal indictment brought by the Southern District of New York.
Setting this admittedly dramatic armchair heist aside for a moment, let's take a minute and zoom out. How about a little math? If we take roughly 660,000 streams and multiply it to 365 days for a calendar year, that gets you to 240,900,000 streams, which we've just been told equals about $1.2 million dollars. In other words, we're talking about over 200 streams to make a single US dollar through various music streaming platforms. We know that, on average, Spotify pays artists between $0.003 and $0.004 per single stream, which is often deemed within the industry as the lowest paying outlet for artists. Apple Music pays significantly more, according various music reporting outlets, at an average of $0.01 per stream. Of course, all of these numbers are not reality and should be taken with a pinch of salt. Spotify and many other platforms pay variable sums based on the listener's subscription plan to their service, their country or origin, regulation (or more often, lack thereof), and so on.
The muddying of the waters regarding how much money artists actually receive and are due is intentional so that no artist can hope to have any solid understanding of how much revenue they bring TO the platform versus how much is actually put back into their pockets. Spotify has made approximately $46 billion dollars in revenue between 2020-2023. And while the platform is saturated with copious amounts of content from untold numbers of artists ranging from bedroom musicians to arena acts, it doesn't take an official audit to realize that artists by and large are getting absolutely hosed by tech companies that are little better than glorified middlemen. It's apparently not fraud to rip off artists endlessly, but don't dare turn that around on a multi billion dollar platforms!
This also comes in the wake of reporting going as far back as 2017 by outlets such as Vulture reported on the very rampant and often difficult to quantify grift within streaming platforms of automated cover bot artists and artists blatantly ripping off popular songs on a routine basis while being added to playlists and garnering hundreds of thousands of plays, all within the framework of people accidentally listening to the "we have x at home" version of the artist they were actually intending on searching for and streaming.
This phenomenon was explored even further by internet personality Adam Faze, who curated a playlist of identical (or near-identical) tracks, all with different artist names and song titles. Faze created a playlist that had at minimum 49 different versions of the same song under various names and titles. The songs that get recreated and regurgitated can be quasi-covers, AI-generated nonsense, or simply dead air that runs long enough to hit monetization. One source claimed that about 20 people are behind over 500 so-called "projects" (and there's only one Garry Brents, folks). And while Spotify and many of the other platforms claim that they don't have a bot problem and, more ominously, do not curate these instances themselves, investigative reporters say otherwise.
An anonymous source within one major streaming company revealed to journalist Murray Stassen in Music Business Worldwide,
“The songwriters and producers of these tracks are either paid a fixed fee per track or a combination of a low advance and reduced royalty rate and it works because these ‘labels’ can guarantee millions of streams through their own network of search engine-optimized DSP playlists and YouTube channels…. make no mistake, all DSPs are engaging in the above. Spotify is taking more heat because they are the largest and most transparent, whereas Apple, Amazon, Deezer and Tencent makes it much more difficult for journalists like yourself to see what is happening since there are no stream counts, writer or even label credits.”
It is important to note that Spotify has denied all claims that they intentionally create these algorithmic game playing bot accounts or pseudo artists, but the fact remains that it's either intentional fraud or abysmal quality control that allows fraud and plagiarism to run amuck on platforms that are supposedly supposed to be the medium that connects the art of artists to their fans, and pays royalties to the actual songwriters and rights holders. It's been recently reported that AI bot artists have been able to infiltrate numerous verified metal acts as well, which brings further scrutiny and skepticism to these massive tech companies' abilities to rise to the challenge of quality control and security in the face of hacks and artificial intelligence morphing together to leech off one of the few income streams still available to artists.
So while there is no doubt that Smith committed fraud, and most importantly took the revenue and royalties that would have supposedly gone to other actual artists and songwriters that created their music instead of ripping it off from others, the fraudulent, murky waters that have been created by streaming giants like Spotify, Apple, Amazon, Youtube, and the like have brought us to this moment. Artists are underpaid and their music gets ripped off on these platforms ad infinitum. At best, the big streamers have shown that, while they are able to make ungodly amounts of money through the portal that they've created for people to consume art, they lack the care, security, and quality control to instill confidence that those on their platform will not be plagiarized and have their streams stolen. At worst, they're possibly in cahoots to intentionally steal streams and songs from verified artists and rights holders to even further their profit margins. TL;DR: the current music streaming business is hopelessly fucked, and the only people that actually get screwed are the artists and those who want to support them. Oh, and Michael Smith.
