This is The Legal Beat, a weekly newsletter about music law from Billboard Pro, offering you a one-stop cheat sheet of big new cases, important rulings and all the fun stuff in between.
This week: Prosecutors file a first-of-its-kind criminal case against an alleged streaming fraudster who made $10 million with fake songs; the White Stripes file a copyright case against Donald Trump over use of their music; Spotify wins a strongly-worded ruling dismissing a long-running lawsuit filed by Eminem’s publisher; and much more.
THE BIG STORY: Streaming Fraud Finally Goes To Court
When Manhattan federal prosecutors indicted a North Carolina musician named Michael Smith last week, accusing him of stealing $10 million in streaming royalties as part of a “brazen fraud scheme,” they told a story that much of the music industry already knew.
Streaming fraud – artificially boosting traffic for certain songs – has been a growing problem for years. One study found that 1% to 3% of plays in France in 2021 were fraudulent; a 2022 report by fraud-detection service Beatdapp estimated that more than 10% of global streams were fake.
And this isn’t the scam from “Office Space,” stealing fractions of a penny from a faceless tech giant. Because royalties are calculated as a percentage of a finite pie, every phony stream represents real money being diverted away from music that consumers actually played and the artists who created it.
In the first-of-its-kind indictment, the feds say Smith created thousands of fake songs, then used an army of bots to play them billions of times on Spotify and other streamers. At one point, Smith estimated that he could play his songs 661,440 times each day, raking in as much as $1.2 million per year.
Prosecutors say Smith’s plot was aided by artificial intelligence – another growing problem for the industry. When he couldn’t create enough fake tracks to make the scam work, Smith allegedly partnered with an unnamed executive at an A.I. music company to produce grist for his mill, funneling money back in the form of percentage cuts.
For more details go read Kristin Robinson’s stories – on the filing of the charges, and on an AI company with strong ties to the accused fraudster.
Other top stories this week…
“SUES FASCISTS” – The White Stripes filed a copyright lawsuit against Donald Trump for using their iconic “Seven Nation Army” in a social media post, arguing that any association with the president was “offensive” because they “vehemently oppose” his policies and his bid for another term in the White House. In announcing the case, Jack White included a screenshot of the complaint with the caption “this machine sues fascists” – an allusion to Woody Guthrie’s famous use of a sticker reading “this machine kills fascists” on his guitar during World War II. The White Stripes are the latest in a long list of musical artists to threaten or take legal action against Trump over his use of music.
LOSE YOUR CASE – Spotify defeated a long-running lawsuit filed by Eminem’s publisher, Eight Mile Style, that claimed the rapper’s music had been streamed illegally “billions” of times on the platform. Rather than order Spotify to pay, the judge sharply criticized Eight Mile for suing in the first place, ruling that the company had effectively manufactured the lawsuit in an effort to win legal damages. “Eight Mile Style was not a hapless victim,” the judge wrote.
DIDDY DAMAGES – A Michigan inmate named Derrick Lee Cardello-Smith won a $100 million default judgment against Sean “Diddy” Combs in a sexual assault lawsuit — an eye-popping figure that was handed down after the rapper did not show up in court or file any formal response to the case. Following the ruling, Combs’ lawyers strongly denied that the rapper was served with the lawsuit and said he “looks forward to having this judgment swiftly dismissed.”
GUESS WHO TRUCE – The members of classic rock band The Guess Who settled a bitter trademark lawsuit in which two bandmates (Randy Bachman and Burton Cummings) referred to a recent iteration of the group run by two others (Jim Kale and Garry Peterson) as nothing more than a “cover band.”
COPYRIGHT CLAPBACK – Verizon fired back at a lawsuit filed by Universal Music Group, Warner Music Group and Sony Music Entertainment over allegations of “staggering” piracy on its network. The labels claim Verizon “buried its head in the sand” and enabled illegal filesharing, but in a motion to dismiss, the telecom giant blasted the “legally deficient” premise of the case: “When people do bad things online, their internet service providers are not typically the ones to blame. This lawsuit claims otherwise.”