Sony Music Group Chairman Rob Stringer just added his name to the growing number of music industry leaders raising serious concerns over streaming fraud.
During Sony Group Corporation’s annual presentation to investors on Wednesday (May 24), Stringer called for tougher enforcement by digital service providers (DSPs) – plus, potentially, an anti-fraud-minded switch to a new music streaming royalty payout model – to address what many see as a growing problem of illegitimate streams taking revenue away from artists and rights-holders.
“Fraud on key DSPs is a problem that must be eliminated through aggressive enforcement by these DSPs and distributors, or by changing payment methods [i.e. royalty payout models] to better reduce the incentive for fraud,” Stringer said during his presentation.
Stringer’s comments come in the same month that Spotify removed a substantial number of tracks – many created via AI music-making platform Boomy – from its service, citing “potential cases of stream manipulation”.
Via apps like Boomy, streaming fraudsters can create a large volume of cheap-to-produce audio content and upload it to DSPs; they then aim to rack up huge numbers of plays of this content via bot-driven ‘streaming farms’.
According to the Financial Times, tens of thousands of tracks created on Boomy – representing some 7% of the total amount of music distributed from the platform to Spotify – were pulled by Daniel Ek‘s company in its latest anti-stream-fraud move.
In response to the Boomy/Spotify story, MBW argued that the current dominant ‘pro rata’ streaming royalty model is left particularly open to gaming by less-than-scrupulous actors.
Streaming fraud certainly wasn’t the only thing on Rob Stringer’s mind during today’s Sony investor event, which saw a wide-ranging presentation from the exec in addition to a Q&A session with analysts.
Below, MBW runs through five more of Stringer’s key comments/talking points from the day…
1) Getting more money from TikTok
Okay, so he didn’t mention TikTok specifically. But Rob Stringer clearly called for better compensation from short-form video platforms (read: TikTok) for the use of copyrighted music.
Stringer told investors that Sony Music Group was “aggressively leaning into numerous opportunities for our artists and songwriters” with the “largest [of these opportunities] being in short-form video”.
“Young consumers are gaming-first in their entertainment orientation, and highly engaged in creating and viewing massive amounts of content,” he continued. “This translates into heavy use of short-form video, which is amassing total views well into the trillions.
“Overwhelmingly, [young consumers] want music to be part of all these experiences. [Yet] with this transformation, proper compensation of artists and songwriters is required.”
“It doesn’t take a scientist to realize that we are being underpaid by some of these content providers.”
Rob Stringer
Stringer added: “Some of the short-form video providers are relatively new, but we are clearly monitoring their progress, and it doesn’t take a scientist to realize that we are being underpaid by some of those content providers.
“As [our] negotiations go on, that will be our position until we are satisfied that we have been paid properly.”
Stringer offered a suggestion for popular short-form video services: Committing to a subscriber-based music sister service, to which they could then push consumers of free content – similar to the way YouTube Music sits alongside the main YouTube app.
TikTok does have a sister premium-music app, of course – Resso – but right now it’s only available in three markets: India, Indonesia, and Brazil. (Resso recently cut its free tier and went premium-only.)
“The improvements in relationship with YouTube have been extremely positive over the last few years, and we’ve built up a relationship where YouTube agreed to build a subscription model [in music] to match the huge volume of ad-supported content,” said Stringer.
“We would like to see other short-form content providers build a proper subscription model, which values our content appropriately,” Stringer added, one that would allow rights-holders to get “paid in the same proportion as some of the bigger streaming platforms.”
Credit: Tatiana Shepeleva / Shutterstock2) A positive outlook on AI
One of the standout quotes from Stringer’s presentation today came right at the end of his discussion with analysts.
The Sony Music Group boss was asked whether defining new trends in the industry, including AI-assisted music-making, would pose a threat to major music companies in the three years ahead.
“The constant theme [when you run a major in recent years] is [people say] we can’t do something in the next chapter [of the business] – yet we keep proving that we [can],” said Stringer.
“our profit margins are higher than ever; our market share is positive; and we’re having more hits than [we’ve had in any year over] the previous 20 years.”
Rob Stringer
“I completely understand [why some say] that the sheer volume of content [being uploaded] in streaming is a threat to us. Yet our profit margins are higher than ever; our market share is positive; and we’re having more hits than [we’ve had in any year over] the previous 20 years.
“So [whatever disruptions are thrown at Sony Music] I think that we’ll find a way to deal with it. We will not be arrogant, we will be humble about it – like we’ve been over the last chapter. But I believe that our company will find a way of dealing with any threats.”
A slide from Rob Stringer’s presentation to Sony investors, May 24, 2023
One of the most talked-about potential threats to major music rightsholders right now, of course, is generative AI technology.
When questioned about the topic by analysts, Stringer was bullish about its potential positives, while also noting the importance of robust copyright protection in the era of ‘fake Drake’.
Stringer confirmed that Sony Music is currently exploring technology that will enable it to better trace its copyrights, should they be used by AI models – for example – to create replicated vocals of one of its artists.
Said Stringer. “AI promises to provide us tools so that our artists and writers can create and innovate. It also heralds greater levels of insight through machine learning, as well as potential new licensing channels and avenues for commercial exploitation. There is a lot of opportunity in this area to be excited about throughout our company.
I think AI will become an extremely positive tool in the artist development process. I think it will help the best creators make excellent content.”
Rob Stringer
“We are greatly aware of the challenges ahead too. We will protect our creators on every level possible whether it be creative, financial, or legal in basis.”
Having called for a “unique new set of artist and songwriter protections industry-wide”, Stringer later reiterated: “We are particularly interested in how we tag our content so that we know when our content is being used in all the [AI] processes involved. We’re excited about this chapter, but also we are incredibly protective of our rights.”
He added: “I think AI will become an extremely positive tool in the artist development process. I think it will help the best creators make excellent content. But right now we’re [mainly] worried about the lowest common denominator, which is [AI’s role in] flooding platforms with endless content of a substandard nature.”
Credit: QuiteSimplyStock/Shutterstock3) A positive outlook on other things, too…
Within his presentation, Stringer made clear that Sony – “consistent with analyst predictions” – is projecting a “mid to high single digit” percentage CAGR (Compound Annual Growth Rate) for annual trade revenues in both recorded music and music publishing over the next four years (2023 inclusive, see below).
Stringer told analysts that he was “extremely optimistic” about the medium-term future for Sony Music Group, following successes in the past few years that have included:
(i) Market share growth in the frontline records business in the US;
(ii) Rapid international expansion in markets like Latin America and Asia; and
(iii) The impressive growth of Sony’s indie artist and label distribution businesses via The Orchard and AWAL.
The latter two of those three successes have partly been driven by two recent nine-figure acquisitions by Sony: The $255 million purchase of Brazil’s Som Livre, and the $430 million deal that saw Sony Music acquire AWAL.
“We were very aggressive with investment during the pandemic,” said Stringer, nodding to the Som Livre and AWAL acquisitions. “We [came] out the other side of that era with a stronger company.”
Stringer’s presentation noted that Sony Music was the No.1 recorded music company in Latin America in calendar 2022 in terms of market share (helped by that Som Livre deal), and the No.1 major music company (vs. Universal and Warner) in India (see below).
Confirming that Sony Music Group now houses 70 separate offices/operations around the world, Stringer said: “I honestly feel that we’re in very, very good shape. I feel, compared to a lot of companies, our portfolio is really strong.”
Stringer pointed to individual artist/songwriter successes for Sony in the previous 12 months that included Harry Styles, Beyoncé, Bad Bunny, SZA, Tainy, and Ashley Gorley.
“you always need hits, and it’s a lot cheaper to grow those hits organically than to buy them as catalog at a later date.”
Rob Stringer
He also challenged comments made by other senior figures in the music business who have questioned the continuing level of investment from major music companies in the so-called ‘hits business’ – i.e. charting frontline repertoire – versus the long-tail of catalog.
Said Stringer: “Despite the fact I read some companies talking about the importance of catalog and that majors spend too much time on hits, I would say one thing which kind of [goes against] that logic: today’s hits are tomorrow’s catalog.
“So you always need hits, and it’s a lot cheaper to grow those hits organically than to buy them as catalog at a later date.”
4) How major record companies battle The ocean of content
Rob Stringer’s presentation came in the same week that US-based market monitor Luminate confirms that 120,000 separate audio and video music files are now being uploaded to digital services each day – a phenomenon partly driven by DIY artists, and partly driven by AI-assisted content creation.
This situation obviously presents a challenge to a company like Sony Music: On the one hand, via distribution and services arms like AWAL and The Orchard, Sony is expanding the number of independent artists and labels it works with (Stringer noted that The Orchard now distributes some 30,000 indie labels); on the other hand, according to Stringer, Sony refuses to work with what he termed the “low-end” of music in terms of perceived quality.
“We are convinced that consumers want the same quality and remain concerned that DSPs are watered down by low quality and meaningless volume which negatively impacts music fans and real artists.”
Rob Stringer
“At Sony Music our attention is on identifying quality, and not purely quantity, as we face competition from many investors and new companies wishing to capitalize on this sheer volume [of music],” said Stringer.
“We are convinced that consumers want the same quality and remain concerned that DSPs are watered down by low quality and meaningless volume which negatively impacts music fans and real artists.”
Stringer added: “I don’t think there’s anything we can do necessarily to downplay the sheer volume of content going up onto the platforms. But we think we have a responsibility to maintain the quality [and] we think the DSP platforms have the same [responsibility], that we need to absolutely make sure that the consumer is getting the best experience possible with the highest quality content.”
5) Streaming services raising prices
Stringer also urged more music streaming services to raise their prices (he didn’t mention Spotify by name, but if we had to guess we’d suggest that was the likely target of his remarks).
While some DSPs such as Apple Music have increased the price of their flagship offerings in the US over the past year, streaming giant Spotify has maintained its monthly individual premium subscription price in the US, UK and key European markets at $9.99/£9.99/€9.99 for more than a decade.
“Last year, the [global] number of paid users of premium services improved by nearly 16%, reflecting the broadening global appeal of these offerings,” Stringer said during his presentation.
“Recently, we have seen price increases from a number of our digital partners that have been long overdue, and we look forward to more DSPs recognizing that the value of music continues to rise.”Music Business Worldwide
