Why is there so much fraud in music distribution and how do we solve it?

The emergence of DIY music distribution platforms like TuneCore and DistroKid has clearly changed the lives of artists – giving them the opportunity to reach listeners without the traditional restrictions of labels.

However, while democratization has opened the door for countless artists, it has also opened the floodgates to an equally pernicious, unintended by-product: rampant fraud and copyright infringement. For context, Luminate reported that more than 120,000 new songs were downloaded daily in 2023, up sharply from 93,000 per day in 2022. – access to music production resources. This relatively nascent situation has resulted in a dramatic increase not only in the volume of content, but also in the industry’s exposure to unauthorized and infringing material.

Universal music group recent $500 million lawsuit against TuneCore and its parent company Believe highlight the gravity of the situation as well as the turning point. The lawsuit alleges that these platforms are illegally profiting from large-scale copyright infringement, with both the distributor and the unethical user responsible for distributing and monetizing unauthorized intellectual property. Ultimately, this case highlights a broader systemic failure, exacerbated by insufficient monitoring, accountability and oversight guarantees. But the ecosystem has become too big, too unregulated and too profitable for some of its stakeholders to fix it on their own. The reform is late.

Democratized distribution

DIY distribution was originally designed to level the playing field by allowing any artist to release music on platforms like Spotify, Apple Music and YouTube. However, open access has had side effects—most notably, rampant abuse of intellectual property. The sector has become a breeding ground for exploitation; Attackers take advantage of the low barrier to entry by uploading pirated, remixed, or slightly altered versions of copyrighted songs. Collectively, these downloads generate significant revenue, some of which goes to the distributors who host them.

This is far from an isolated problem. With millions of tracks uploaded every year, verifying each song becomes a huge hassle. Although some platforms claim to have anti-fraud systems in place, police enforcement often falls short. The sheer volume of downloads makes scalable monitoring difficult, which in turn creates a hands-off approach that indirectly allows abuses to flourish.

YouTube’s Unique Royalty Collection Challenge

Nowhere is this problem more prevalent than on YouTube, where scale and visibility are inherently even more challenging. Some users deliberately circumvent YouTube’s copyright policies by uploading and sharing pre-made remixes, slow-motion/speed-up remixes, or nearly identical versions specifically to circumvent Content ID. Detection is challenging and most of these violations go undetected. Even if violations are identified, the misappropriated payments cannot be returned. Artists must navigate an opaque and complex system, often leaving their rights unprotected and their income minimized. For many independent artists, YouTube is a key and significant source of income, and copyright scams siphon off that income without much effort.

Industry-wide implications

Inflating volume over quality control creates a system ripe for exploitation, as the current model often benefits the offender. But solving the underlying problem requires more than just more lawsuits. There must be mandatory quality control metrics that are clearly communicated and actively deter fraud while protecting copyright holders. Transparent protocols to ensure that flagged content does not generate revenue for offenders, as well as improved early detection systems, will help standardize accountability and transparency. An enforceable and sustainable guarantee system will:

A. Do not allow infringing content to reach your audience at all.
B. Provide greater transparency when rights are violated and
C. Provide legal compensation to copyright holders.

Closing the knowledge gap and developing industry-wide standards are also essential to making meaningful change. By raising public awareness, creating a forum for artists and copyright holders to report abuses, and mounting pressure within the industry, the path to reform is within reach—and is similar to rules that have been put in place to curb other forms of online piracy.

A call for collective responsibility

Setting clear timelines for reform will hold platforms and distributors accountable while increasing transparency. Essentially, despite volume issues, even mainstream DIY distributors must demonstrate a basic respect for IP and prioritize copyright holders/artists while identifying (and deterring) bad actors who undermine their operations.

Through the collective efforts of the entire industry, digital music distribution can become a sustainable model that supports independent artists while protecting their rights. A system that empowers artists while maintaining integrity is necessary to preserve the value of music and protect it from exploitation.

George Karalexis is the co-founder/CEO of Ten2 Media. His experience as a media executive, strategic consultant and serial entrepreneur spans over 15 years in multi-industry leadership with a focus on music, marketing strategy and tactical team building. Donna Boudica is the co-founder/COO of Ten2 Media. With a degree in finance from the Wharton School and an MBA from USC Marshall, she leads corporate strategy and operations at Ten2 and its subsidiaries.

Ten2 Media is a rights management and content marketing company specializing in asset monetization, audience development and content optimization on YouTube. Ten2’s YouTube expertise and years of experience in the music industry underpin its unique approach to maximizing revenue and marketing music to the world’s top artists and labels.