What’s the darn problem with the current allocation of music streaming royalties (Pro-Rata)? - Part 2 - UCPS and Fraud

Context

I am currently writing some articles on #UCPS in particular and alternative?#paymentmodels?in general. Some of these posts will relate to specific parts of a study I authored for PRO MUSIK - Verband freier Musikschaffender e.V. . Others will contain food for thought on important discussion points beyond the scope of that paper.?

My current focus is on the potential problem with the current payment model, #prorata - starting with what I believe NOT to be the problem. Feel free to read my initial post on the matter - about whether or not mainstream artists benefit from Pro-Rata.

Another thing you will hear or read often in relation to #usercentric is that it will end #streamingfraud.

Myth #2: The problem with Pro-Rata is Stream Manipulation & Fraud

Do we have a problem with fraud in the #musicindustry and within the #musicstreaming business in particular? You bet we do. In fact, it’s one the most infuriating things not only in music, but in any other business as well. So is it worth being tackled? Of course it is and the various initiatives to address the problem - with participation from rightsholders and DSPs alike - are to be highly commended.?

Disclaimer?

The views expressed here are my own personal ones and do not necessarily represent the position of my current employer or any other people or entities I have worked for or with.

In terms of the #prorataproblem however - you will have guessed it - there is a BUT. And that caveat is that no matter what the #paymentmodel and therefore the rules around #revenueallocation, certain actors will always try to game the system. This will not change if e.g. a User-Centric model were to be introduced.?

What changes with the payment model are the rules that govern how you maximize your revenue. Therefore, the tactics that are most lucrative in the eyes of fraudsters will change. So whoever aims to increase their financial returns via #streamingmanipulation will change their ways. But manipulation and fraud as a concept will live on.?

That doesn’t mean we should stop addressing it. But it will be about staying one step ahead in a game of cat-and-mouse - with the objective of making every single manipulation tactic less lucrative, by increasing the cost of the fraudsters’ gaming efforts.

It should be noted that under the #prorata model, fraud might be especially or at least relatively easy. After all, the only thing that matters is maximizing the number of streams, absent any other criteria. For example, you don’t need to maximize the number of listeners, listening time or - in some cases - you don’t need to consider how much your listeners pay for their subscription.?

In the context of implementing a User-Centric model, many activists and journalists have expressed or even promised that this change would put an end to fraud. While - as mentioned above and outlined below in more detail - this would not be the case, it is true that certain manipulation tactics would become less profitable.?

One of the arguably most wide-spread tactics seems to be maximizing streams for a given number of user accounts. Under Pro-Rata, every additional stream brings in an (almost) equal amount of additional revenue. With UCPS, the money attainable per user account is capped at the respective user’s subscription fee. So the amount of revenue you can add per stream quickly decreases until the cost-benefit analysis - even for scalable bot setups - looks unprofitable.?

However, on the flipside, a different manipulation tactic could become much more lucrative under User-Centric. Within this model, what matters is your share of streams for any given user. So with regard to a user that only generates 1 stream in a given month, all you need to do is “get” that one stream, in order to receive all of the user’s subscription fee. Or in other words: if a fraudster could identify - and hack - user accounts that have not streamed once until the end of the payment period (usually a month) they could skim all of the money associated with that user’s subscription with only 1 stream.?

Now that may be easier said than done. In fact, this tactic could prove to be more difficult than the current maximization of streams per account. One could imagine however that the demand among fraudsters could be met with a corresponding supply on the darknet: where extensive lists containing user accounts and login information would be accompanied by real-time data on those account’s current streams since the start of the month. Anyone who provides an attractive service or app to subscribers and convinces them to login with their streaming-account could potentially collect and sell this information (illegally).?

So while this (hopefully) raises awareness for potential manipulation risks regarding alternative payment models including User-Centric, I want to stress one last important point.?

The User-Centric model mostly discussed so far is a very simple version of UCPS. It still utilizes stream count (30 seconds of consumption is enough) as the central payment criteria, whereas a User-Centric approach based on listening time for example, would increase the cost of fraud at least to some extent (fraudsters would need to stream content longer than 30 seconds).??

In addition to that, there are certain rules, criteria or exceptions that you can add in addition to this plain-and-simple version of UCPS - including rules that may increase the cost for manipulation. Just as one simple example: one could introduce a threshold, defining that under User-Centric, a user’s subscription fee will only be paid out once that user generates a minimum of e.g. 50 streams. This would significantly raise the level of consumption needed - and thereby the incurred costs for fraudsters - to obtain a reasonable share of any specific user’s money.

Such a rule, along with other potential additions to an alternative payment model, can make sense for a number of reasons. Any given model has its pros and cons that might need some tweaking. My personal prognosis is that we will ultimately end up with a mix of criteria and rules anyway, rather than landing on a simple and plain model.?

Which leads us to the question of complexity, which I’ll address in my next piece.?

Bottom-line for today: don’t buy into the simple story of pro-rata meaning manipulation and fraud and UCPS bringing an end to it.