Spotify denies allegations it uses 'fake' artists to cut royalty costs:
Last August, Music Business Worldwide reported that Spotify placed its own music tracks into curated playlists as a way to avoid paying royalty fees on tracks the streaming company does not own. The site's sources claimed that the tracks — typically jazz, chill and mellow piano music — appear on Spotify under the names of artists who don't actually exist.
Last week, Vulture brought the issue back into the spotlight, calling out two acts, Deep Watch and Enno Aare, as "fake artists" with millions of streams to their credit. Spotify denied the allegations in a statement given to Billboard a couple of days later. "We do not and have never created 'fake' artists and put them on Spotify playlists," a Spotify spokesperson told Billboard in an email. "Categorically untrue, full stop." Music Business Worldwide has jumped back into the fray to counter Spotify's rebuttal with a new post detailing its logic as well as listing 50 artists it feels aren't real.
Music Business Worldwide stands by its original reporting and argues that if these artists were, in fact, not contracted by Spotify to create the music, we'd be able to see their music on other services, like YouTube and Apple Music. The author also points out that the allegedly Spotify-created tracks have generated more than 520 million streams, which would amount to more than $3 million in royalty payouts. The author quotes a "senior music executive" who says that the strategy, if true, is designed to lower the amount of music on playlists from "legitimate" labels, thereby saving Spotify a ton of money over having to pay royalties to label-backed artists.
Spotify's original statement said that the company pays royalties "for all tracks on Spotify, and for everything we playlist. We do not own rights, we're not a label, all our music is licensed from rightsholders and we pay them -- we don't pay ourselves." While the statement seems unequivocal, there's still room for interpretation, depending on how the company defines a "rightsholder."
"We do not and have never created 'fake' artists and put them on Spotify playlists," a Spotify spokesperson told Engadget in response to the latest Music Business Worldwide rebuttal. "We do not own any rights to songs. We license all music on Spotify and pay royalties to rights holders."