Ted Gioia, in his The Honest Broker newsletter (where he has written several times about the Spotify ‘ghost artist’ kerfuffle), adds some valuable context to the aforelinked Harper’s piece from Liz Pelly:

In early 2022, I started noticing something strange in Spotify’s jazz playlists.

I listen to jazz every day, and pay close attention to new releases. But these Spotify playlists were filled with artists I’d never heard of before.

Who were they? Where did they come from? Did they even exist? […]

Many of these artists live in Sweden—where Spotify has its headquarters. According to one source, a huge amount of streaming music originates from just 20 people, who operate under 500 different names.

Some of them were generating supersized numbers. An obscure Swedish jazz musician got more plays than most of the tracks on Jon Batiste’s We Are—which had just won the Grammy for Album of the Year (not just the best jazz album, but the best album in any genre).

How was that even possible?

How indeed.

They called it payola in the 1950s. The public learned that radio deejays picked songs for airplay based on cash kickbacks, not musical merit.

Music fans got angry and demanded action. In 1959, both the US Senate and House launched investigations. Famous deejay Alan Freed got fired from WABC after refusing to sign a statement claiming that he had never taken bribes.

Transactions nowadays are handled more delicately—and seemingly in full compliance with the laws. Nobody gives Spotify execs an envelope filled with cash.

But this is better than payola[….]

By Gioia’s estimate, Spotify’s CEO Daniel Ek sold over $348 million worth of Spotify stock in 2024, and concludes:

[…] nobody in the history of music has made more money than the CEO of Spotify.

(He includes Taylor Swift in that “nobody” list, but I’m skeptical of that.)

He continues:

I need to complain about the stupid major record labels who have empowered and supported Spotify during its long history. At some junctures, they have even been shareholders.

I’ve warned repeatedly that this is a huge mistake. Spotify is their adversary, not their partner. The longer they avoid admitting this to themselves, the worse things will get.

He calls on Congress to investigate streaming companies, as they did with the payola scheme, and ends with this call to action:

And let me express a futile wish that the major record labels will find a spine. They need to create an alternative—even if it requires an antitrust exemption from Congress (much like major league sports).

Our single best hope is a cooperative streaming platform owned by labels and musicians. Let’s reclaim music from the technocrats. They have not proven themselves worthy of our trust.

I’m not sure calling on the record labels to be part of the solution is the right answer; “futile” might be a massive understatement. While it might be in their best interest to have a streaming solution they (along with musicians) control, I doubt such a service will change who makes the money. In the end, it’s the artists and musicians who may need to build a streaming service they control, and which has their interests at heart.

Deeply researched investigative reporting by Liz Pelly for her forthcoming book “Mood Machine: The Rise of Spotify and the Costs of the Perfect Playlist,” excerpted in the January edition of Harper’s Magazine:

Spotify, the rumor had it, was filling its most popular playlists with stock music attributed to pseudonymous musicians—variously called ghost or fake artists—presumably in an effort to reduce its royalty payouts. Some even speculated that Spotify might be making the tracks itself. At a time when playlists created by the company were becoming crucial sources of revenue for independent artists and labels, this was a troubling allegation.

The challenge for Spotify was how its listeners use the service:

According to a source close to the company, Spotify’s own internal research showed that many users were not coming to the platform to listen to specific artists or albums; they just needed something to serve as a soundtrack for their days, like a study playlist or maybe a dinner soundtrack. In the lean-back listening environment that streaming had helped champion, listeners often weren’t even aware of what song or artist they were hearing. As a result, the thinking seemed to be: Why pay full-price royalties if users were only half listening? It was likely from this reasoning that the Perfect Fit Content program was created.

What a truly absurd justification: half-royalties for half-listening? Can you imagine Spotify being on the receiving end of such inane logic? “I‘ll pay you half your subscription fee because I’m only half listening.” You’d be laughed out of the room, and rightly so, too.

At least Spotify employees recognize this justification for what it is:

In a Slack channel dedicated to discussing the ethics of streaming, Spotify’s own employees debated the fairness of the PFC program. “I wonder how much these plays ‘steal’ from actual ’normal’ artists,” one employee asked.

These “normal artists” are creating works that generate millions of listens—and thus millions in revenue—for Spotify and the “fake” labels, but not the artists themselves:

The musician who made ambient tracks for one of the PFC partner companies told me about power imbalances he experienced on the job. “There was a fee paid up front,” he explained to me. “It was like, ‘We’ll give you a couple hundred bucks. You don’t own the master. We’ll give you a percentage of publishing.’ And it was basically pitched to me that I could do as many of these tracks as I wanted.” In the end, he recorded only a handful of tracks for the company, released under different aliases, and made a couple thousand dollars. The money seemed pretty good at first, since each track took only a few hours. But as a couple of the tracks took off on Spotify, one garnering millions upon millions of streams, he started to see how unfair the deal was in the long term: the tracks were generating far more revenue for Spotify and the ghost label than he would ever see, because he owned no part of the master and none of the publishing rights. “I’m selling my intellectual property for essentially peanuts,” he said.

It feels like Spotify is taking advantage of struggling musicians who don’t fully understand their role in this equation, that they, the musicians, are what Spotify’s listeners are paying for. Imagine if this artist had been able to publish their music themselves, while getting the same level of visibility this PFC program offers. They would make much more money. But this, of course, would require Spotify to pay way more in royalties, which isn’t nearly as profitable for them.

And you can’t have a discussion about the worth of creators today without AI entering the studio:

This treatment of music as nothing but background sounds—as interchangeable tracks of generic, vibe-tagged playlist fodder—is at the heart of how music has been devalued in the streaming era. It is in the financial interest of streaming services to discourage a critical audio culture among users, to continue eroding connections between artists and listeners, so as to more easily slip discounted stock music through the cracks, improving their profit margins in the process. It’s not hard to imagine a future in which the continued fraying of these connections erodes the role of the artist altogether, laying the groundwork for users to accept music made using generative-AI software.

And:

Spotify, for its part, has been open about its willingness to allow AI music on the platform. During a 2023 conference call, Daniel Ek noted that the boom in AI-generated content could be “great culturally” and allow Spotify to “grow engagement and revenue.”

My translation: “We’d make so much more money if it weren’t for those pesky musicians.”

Spotify plays David in its battle against Apple App Store rules, but when it comes to musicians, it’s Spotify who’s the Goliath.