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So someone arbitraged the cost of receiving + uploading a stream against Spotify's payment terms? Would this have made any difference if a person was listening

So someone arbitraged the cost of receiving + uploading a stream against Spotify's payment terms? Would this have made any difference if a person was listening to those streams? The fundamental "problem" for Spotify is that this arbitrage exists. It's unclear if any analogous behaviour would count as fraud. Eg., if a taxi company pays $x/mile, and fares are $y/mile, and f(x - y) is "just right", I can drive around with an empty taxi and make money. It "feels" like fraud because it's free money, which is basically what arbitrage is -- but in most cases we think its the market's problem to fix, not a legal one. If this approach involved paying for lots of user accounts, using those accounts to stream music, uploading that music yourself, generating that music etc... then there shouldn't actually be a problem. You have paid for the songs you've listened to. So spotify should have, in place, some system to stop users listening to more songs than their subscription covers. If they arent doing this, then the law isn't going to help. Their biz model has a clear iteration-to-zero in it.

rvnx 2y ago
It's the same situation as if you built WordPress websites using ChatGPT ("auto blogs"), registered them on Google AdSense and ordered bots to visit your website and click on your ads. It is clear fraud.
- mjburgess 2y ago
  No, because here to listen to music on Spotify you pay a subscription price. You're paying Spotify to download music, they're paying you to upload music. There's an arbitrage in that pricing model which means you can pay less to down load than you earn from upload. There's no reason that should be possible. It's only like that because they're burning investor money to fund it. The answer is for Spotify to properly manage downloading so that people who download music are actually paying for it. If you need 100 accounts to download 1,000,000 plays then whatever Spotify has to payout for those plays has to come from those 100 accounts. Whether those accounts are bots or actual people doesn't change the irrationality and going-to-zeroness in the business model. EDIT: Unless they're using ad-funded free-to-play accounts, which is more of a problem. Specifying exactly what the fraud is here is difficult. They arent providing music deceptively, they arent fraudently downloading it -- it may be against TOS, but spotify isnt being sold anything in that download. If there's some sort of hybrid-way of talking about fraud here, its really across both actions (uploading knowing that users wont listen to ads?) and (downloading without listening to ads?). It comes down to exactly what transaction terms we think are implied in the upload. You're not selling something to spotify. Likewise, when you download, you arent buying anything.
  - jumhyn 2y ago
    You're overthinking this. From the indictment (page 4): > at relevant times to this Indictment, a Manhattan-based music distribution company ("Distribution Company-1 ") [...] required customers, such as SMITH, to "agree not to engage in (or to permit, encourage, enlist, retain, or employ third parties to engage in) [...] any activity and/or method which involves the artificial creation, by human or non-human means, of online or offline plays on audio and/or audio-visual streaming services, where such plays do not represent bona fide end-user listening and/or views initiated by genuine consumers and taking place in the reporting country." Moreover, the arbitrage available here doesn't really have anything to with "burning investor money". Aside from the fact that Spotify has been profitable so far in 2024, this fraud would be possible even if they had been profitable during the whole time the fraud had been carried out: it doesn't require that Spotify's royalty outlays be greater than their subscription/ad revenues in the aggregate. Rather, it relies on the fact that royalties are calculated in terms of total streaming volumes, but subscription prices are volume independent. So while it's possible for a single individual to abuse the system and generate more royalties for themselves than what they pay in subscription revenues, it wouldn't work as a method in the aggregate for Spotify users to en masse produce royalties that exceeded streaming revenues. Even in unprofitable years their revenues greatly exceed their royalty payments. E.g., Spotify reportedly paid out $9B in royalties for 2023, on over $14B of revenue. At that point they were still operating at a loss due to R&D, marketing/sales, and administrative expenses, but that's all quite aside from their royalty calculation system.
    - mjburgess 2y ago
      What a company 'requires you to agree to' is unrelated to fraud. The issue I'm considering is whether the relevant crime is fraud. def., Fraud, "knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment" For it to be fraud, they would have had to relevantly misrepresent themselves in some transaction. The question is whether their actions were misrepresentations. This is unclear. If I upload a song to Spotify I am not promising anything wrt to who listens to it or how. If I stream a song from Spotify I'm not promising to listen to ads, or only to listen to as many songs as are profitable for Spotify. So it's unclear that any misrepresentation has been made. Spotify is well within its rights to terminate these accounts for TOS violations, and there might be some crime in taking payments from spotify.. but this is quite unclear. There's a real problem in saying that whatever BS a company puts in its TOS defines fraud and if you dont do that you're defrauding a company. If that's true, then you're probably defrauding companies all the time, as are many.

rvnx 2y ago

It's the same situation as if you built WordPress websites using ChatGPT ("auto blogs"), registered them on Google AdSense and ordered bots to visit your website and click on your ads. It is clear fraud.

mjburgess 2y ago
No, because here to listen to music on Spotify you pay a subscription price. You're paying Spotify to download music, they're paying you to upload music. There's an arbitrage in that pricing model which means you can pay less to down load than you earn from upload. There's no reason that should be possible. It's only like that because they're burning investor money to fund it. The answer is for Spotify to properly manage downloading so that people who download music are actually paying for it. If you need 100 accounts to download 1,000,000 plays then whatever Spotify has to payout for those plays has to come from those 100 accounts. Whether those accounts are bots or actual people doesn't change the irrationality and going-to-zeroness in the business model. EDIT: Unless they're using ad-funded free-to-play accounts, which is more of a problem. Specifying exactly what the fraud is here is difficult. They arent providing music deceptively, they arent fraudently downloading it -- it may be against TOS, but spotify isnt being sold anything in that download. If there's some sort of hybrid-way of talking about fraud here, its really across both actions (uploading knowing that users wont listen to ads?) and (downloading without listening to ads?). It comes down to exactly what transaction terms we think are implied in the upload. You're not selling something to spotify. Likewise, when you download, you arent buying anything.
- jumhyn 2y ago
  You're overthinking this. From the indictment (page 4): > at relevant times to this Indictment, a Manhattan-based music distribution company ("Distribution Company-1 ") [...] required customers, such as SMITH, to "agree not to engage in (or to permit, encourage, enlist, retain, or employ third parties to engage in) [...] any activity and/or method which involves the artificial creation, by human or non-human means, of online or offline plays on audio and/or audio-visual streaming services, where such plays do not represent bona fide end-user listening and/or views initiated by genuine consumers and taking place in the reporting country." Moreover, the arbitrage available here doesn't really have anything to with "burning investor money". Aside from the fact that Spotify has been profitable so far in 2024, this fraud would be possible even if they had been profitable during the whole time the fraud had been carried out: it doesn't require that Spotify's royalty outlays be greater than their subscription/ad revenues in the aggregate. Rather, it relies on the fact that royalties are calculated in terms of total streaming volumes, but subscription prices are volume independent. So while it's possible for a single individual to abuse the system and generate more royalties for themselves than what they pay in subscription revenues, it wouldn't work as a method in the aggregate for Spotify users to en masse produce royalties that exceeded streaming revenues. Even in unprofitable years their revenues greatly exceed their royalty payments. E.g., Spotify reportedly paid out $9B in royalties for 2023, on over $14B of revenue. At that point they were still operating at a loss due to R&D, marketing/sales, and administrative expenses, but that's all quite aside from their royalty calculation system.
  - mjburgess 2y ago
    What a company 'requires you to agree to' is unrelated to fraud. The issue I'm considering is whether the relevant crime is fraud. def., Fraud, "knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment" For it to be fraud, they would have had to relevantly misrepresent themselves in some transaction. The question is whether their actions were misrepresentations. This is unclear. If I upload a song to Spotify I am not promising anything wrt to who listens to it or how. If I stream a song from Spotify I'm not promising to listen to ads, or only to listen to as many songs as are profitable for Spotify. So it's unclear that any misrepresentation has been made. Spotify is well within its rights to terminate these accounts for TOS violations, and there might be some crime in taking payments from spotify.. but this is quite unclear. There's a real problem in saying that whatever BS a company puts in its TOS defines fraud and if you dont do that you're defrauding a company. If that's true, then you're probably defrauding companies all the time, as are many.