Spotify, one of the biggest music services operating in today’s streaming wars, is in the middle of a strange and potentially damaging scandal. An August 2016 report from the website Music Business Worldwide suggested that Spotify enlists producers to make music under pseudonyms, includes those tracks in its playlists, and pays the producers a flat fee for their music as a way to avoid paying royalties.
Since then, several publications have investigated the allegation and reported discovering “fake artists” on Spotify’s playlists. This week, Music Business Worldwide claimed to have found 50 examples of fake artists appearing on Spotify’s branded playlists. Together, these artists account for over 500 million streams.
But according to Variety, which cited “a former Spotify insider, who acknowledges the practice,” the scheme gives Spotify an upper hand in its negotiations with record labels. “It’s one of a number of internal initiatives to lower the royalties they’re paying to the major labels,” the insider told Variety.
Spotify vehemently denies these claims. In a statement to Variety, a representative for the company said, “We do not and have never created ‘fake’ artists and put them on Spotify playlists.”
